S&S Benefits.....Opinion, Hearsay & News Review

Why be like everyone else?

One of the after effects of the events of September 11^th is sure to be the further consolidation of the insurance market. Combined payouts for all lines of coverage (including reinsurance) are estimated at $30-$58 Billion. As the reinsurance market was in recovery period anyhow, this will surely affect rates going forward. Most insurance companies lay off portions of their risk to reinsurance. The effect will not only be felt in the property-casualty markets, but also in life insurance and health insurance industries. There is already talk that many more Managing General Underwriters (MGUs) will be losing their paper and going out of business as the re-insurers "pull in their horns" to make up for the losses. Since MGUs market the majority of the stop loss insurance available, the treaty renewals (mostly for January 1) will have a big impact on who can stay in business and find stop loss coverage.

As of September 28^th, Congress had not renewed the Mental Health Parity bill that is set to expire on September 30^th. However, the demise is not expected to be permanent. Before the tragedy, most expected a stronger parity bill to emerge that would have all mental health treated the same as any other illness.

According to Crains, United Healthcare of Illinois will end its participation in the Medicare HMO program in Cook County, Chicago, Illinois at the end of this year. The move will affect more than 30,000 senior citizens in these ill-fated Medicare HMOs. Aetna is withdrawing from regular HMO business in NH to go along with previous withdrawals in LA, RI, SC and parts of GA, IN, MO, CA and PA.

Aetna has announced that it is entering the "defined contribution" market saying that they are the first national player to do so. They must have missed the Unicare rollout of their version for smaller groups. The only new twist is the use of section 105 to set aside money on high deductible plans. The conundrum is, if employers contribute to those accounts in before tax dollars, the money is taxable to employees. Of course, somewhere along the way someone forgot that after tax contributions do not reduce payroll taxes, and thus may increase the cost of these plans to employers. We are finding it hard to believe that the lackluster participation seen in most FSA plans will get much better with 105 plans. Although employees have never been enthralled with "use it or lose it" aspect of FSAs, most have other uses for the money than to fund high deductible plans that are not much less expensive than other plans.

We in the private sector are not alone. Health premiums for federal employees and retirees (9 Million of them) will rise an average of 13.3% next year and premiums are nearly 50% higher than in 1998. The government (you and I) pay about 70-75% of the cost of these programs.

We had to laugh at a Hewitt survey that said 71% of escalated health issues such as claims or billing originated because of errors made by the plan administrator. The survey was done through Hewitt’s participant advocacy services. We could be wrong, but isn’t Hewitt the administrator (through their outsourcing unit) for most of those clients? Good job! And we love the fact that their consultants are so independent in their judgements as to push Hewitt’s outsourcing to their clients who should be expecting unbiased opinions.

Health costs increased by 7.2% on average in 2000, with inpatient and outpatient hospital care accounting for 47% of the increase according to the Center for Study Health System Change (HSC). Rx charges did account for 27% of the increase from 1999 to 2000, down from 41% in 1999. The study also found that self-funded plans were increasing less than fully insured plans and that rising payroll costs were a driver for the increased hospital costs.

Kaiser has found that 80% of Americans are skeptical of "Patient Protection Legislation" which allows new rights to file lawsuits. Kaiser also found that employer sponsored plan premiums rose 11% in the last year and that HMO enrollment fell to 23% from 29%.

The PWBA has extended 5500 form filing deadlines due from Sept.11 to Nov. 30 by 6 months plus 120 days for those in the disaster area or who had providers in the disaster area who were affected.

60% of companies surveyed by Towers permit employees to enroll on-line, more than double last year. Hewitt says that stable value holdings have increased by 57% in 401(k) plans, but over 70% of money still flows into equity. Marsh says that 11% of employers from 500 to 999 employees offer a flexible benefit plan (up 26% from the year before). The NCQA says that quality is up in HMO’s. Could this be due to fewer patients? Managed pharmacy costs are expected to rise 15% in 2001 and account for 18% of HMO expenses.