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

Why be like everyone else?

TWo insurance companies have said good-bye since our last visit. Allmerica has announced is is pulling out of the group business and hopes to have found a purchaser and have closed the sale in March 2000.

GEneral American Life Insurance has been gobbled up by Met Life due to some missteps General American made in the financial markets. There is speculation that parts of the health business will be sold to other companies, since Met exited the health business a number of years ago. The Met reps have been sniffing around General American for large life, dental and disability cases that are their forte.

SPeculation now exists as to how Private HealthCare Systems (PHCS)will survive. Major shareholders Great West and Humana have pulled their contracts and contracted independently with the doctors and hospitals of PHCS, leaving PHCS without the income from their contracting efforts. Aetna has moved NYLCare PHCS groups to their contracts. CNA is out of the health business. Trustmark and Guardian survive along with Coresource and a few other TPAs, but the critical mass may not be there to keep the contracts in place on the provider side.

DEntal PPOs continue to grow according to a BI article which says that expected 1998 enrollment figures should show a 30%-35% increase in enrollment. In 1997 dental PPOs grew by 32.63% according to the Natl. Assoc. of Dental Plans. Dental HMOs have grown about 5-8% in 1998 and total enrollment figures will be less than PPOs. Much of the growth is due to dental costs rising by 12% in 1997 and the same expected in 1998.

HMO’s showed a combined $490 million in losses during 1998 according to a Reuters report, with 56% of the companies in the red. This follows $768 million in losses in 1997 according to Weiss ratings which covered 576 HMOs out of 656 in the country. The study showed that 100 HMOs failed to meet minimum risk based capital guidelines.

PRescription drugs continue to be a driving cost in medical care. Standard cost assumptions show the Rx is usually 10% of claims on a group. However, it is acknowledged that advertising is driving costs and demand up for certain drugs. One recent study showed that retail Rx sales increased 20% for those that pay out of pocket, but have increased 156% for those who have insurance coverage. Rx costs are expected to continue to increase by 16% annually. Many plans are moving to three tier co-pays, with the highest copay for drugs outside of a PBM’s formulary.

SOlvency requirements for HMOs for risk based capital are expected to become more regularly implemented to meet NAIC guidelines. These guidleines are expected to be adopted by states so that HMOs have similar solvency tests to those required of insurers in each state. If so, our speculation is that more mergers and failures will follow.

PPO’s have continued to grow according to one recent Texas news article. The same article quotes KPMG as saying the average PPO premium was $142 verses $130 for HMOs. However the article doesn’t tell if that is a per employee or per member premium. In any case, PPO enrollment in 1998 jumped to 98.3M verses HMOs at 79M.

NCQA (in BI) reports that those HMOs that regularly report quality data have higher quality than those HMOs which do not. How would they know? The study is based on 410 HMOs and POS plans covering 70 million people. The study was based on 12 of the 50 measures NCQA uses to assess quality. The study also reports that those HMOs that survey members are likely to have higher member satisfaction and quality. Most of the measurements used were percentages of various screenings for health problems. The logic of whether members engaged in these screenings and created quality escapes us. Did people choose to be screened or were they forced (sic)? Did some HMO members choose not to be screened and does that mean the HMO did a bad job? This ought to be more interesting as NCQA begins to evaluate PPOs.

HOspitalist usage is expected to grow in Chicago. A Crain’s article says that the 25 known to be in Chicago will double this summer and that in the three years since the practice name began, the ranks of hospitalists has grown to 3000 in the U.S.A. These professionals are supposed to get more done quickly with more quality than PCPs taking care of patients in hospitals, due to their internal knowledge of how the hospital works and their regular contact with patients. If you have one while you are in the hospital, hopefully your health plan has a contract.