THCB

Categories

Tag: Insurers

HEALTH PLANS/POLICY: RAND shows that HDHPs will only havea modest impact

• 2

There’s an important article out in Health Affairs showing that, as has been suggested on THCB many times, contrary to some (and it is only some) of the HDHP/CDHC advocates rantings, the move to lower premium higher deductible health plans even with premium subsidies for the poor will have relatively little overall impact, and certainly won’t change the uninsurance numbers much. Here’s the Press Release and the money quote:

Price subsidies have only modest effects on overall participation in the individual health insurance market, RAND Corporation senior economist Susan Marquis and coauthors report in a Health Affairs Web Exclusive published today.

“A 20 percent [premium] subsidy would increase the number of subscribers in the individual market by 5-11 percent and decrease the number of uninsured people by 1-3 percent,” the researchers report. That comes from 1-2 percent more potential purchasers deciding to buy insurance and about 15 percent fewer current enrollees dropping coverage, as a result of the 20 percent subsidy.

I’ll be back later when I’ve read the article.

UPDATE: Damn, didn’t even get a chance to read this and I’ve already been interviewed about it. I must be getting famous. Wealth surely to follow?

HEALTH PLANS: Is this the top?

Here’s my FierceHealthcare editorial today. You’ll notice I’m a little more fair and balanced in this one than some of you might expect!

 Life has been good–very good–for the stockholders and executives of the nation’s health insurers in the last few years. Many, if not most, health insurers ended the 1990s with red ink all over their income statements after they "bought" market share and fought providers over price. The early 2000s were a period when insurers got back to basics. They assessed risk, mended their fences with providers, and put up prices to their customers. More than that, the industry reduced its medical loss ratio–the share of premium that it passes onto providers–from an average in the 80 percentage points range down to the low 70s. In other words they put up their prices to customers faster than they increased their payments to providers. Then on top of all that they got a large bonus in the 2003 Medicare Modernization Act which increased payments for their Medicare enrollees and gave them a whole group of new customers in Medicare Part D plans.

But of course Wall Street cares little for past glories. This week Aetna reported that medical loss ratios were heading up. Its stock plummeted 20 per cent, dragging the sector as a whole down with it. Meanwhile compensation controversies dog UnitedHealth Group, and WellPoint stands accused of cancelling members contracts illegally. And of course employers are in general very unhappy with what they’re paying for health care. Private health insurers need to concentrate on proving where they add value to the system, or their future environment may be less friendly than that which they’ve been enjoying recently.

HEALTH PLANS: It’s blood on the streets today; but is the ride over?

Here’s the news from my FierceHealthcare newsletter on insurers’ stock prices today

Today’s earnings announcements from health plans and insurers don’t look too bad. WellPoint reported a 20 percent surge in profits yesterday, a gain that the company attributes to an increase in membership and decreased medical costs. Aetna also posted good earnings, with first quarter profits up 3.2 percent, but reported a first quarter medical cost ratio of 79.4 percent in its main commercial business. That was up from 77.9 percent a year earlier. Meanwhile, PBM Express Scripts had first quarter earnings of $104.7 million compared with $85.3 million for the same period a year ago.

Wall Street wasn’t having any of it. Aetna’s stock was down over 20 percent today as the company’s CEO Jack Rowe hands over the reins to Ron Williams and CFO Alan Bennett makes plans to retire in 2007. Express Scripts stock is down nearly 10 percent, and the rest of the health plan and PBM sector is down heavily too.

– read the article about WellPoint from the Los Angeles Times– see this Houston Chronicle article about Aetna’s stock slide – read this article from MarketWatch for more about Express Scripts

So is this finally it?  Have the plans been found out? Will we see MLRs head back into the mid-80 percents?  Should we all have shorted UNH and AET in January. Well I myself have believed that health plans have been overvalued forever….but if I’d gone short when I started saying that a few years back (like in this April 2004 column), I’d be living in a cardboard box under a freeway now. Look at what’s happened to their stock since then (the bottom orangel line is the S&P 500). Even with their recent declines they’re all up at least 50% since then and Humana is close to being up 200%:

Hi

 

HEALTH PLANS: Blue Cross of California looks like its hand was in cookie jar

• 3

There’s more from the LA Times about the Blue Cross of California case where benefits were retroactively denied. For some reason, although the case has been sealed, the Times was able to report on testimony of four BC employees.

A California Blue Cross employee testified in secret last year that the state’s largest health-plan company routinely canceled policies of sick members after looking for inconsistencies — not fraud — in their applications. Experts say, however, that state law allows only deliberate omissions or misstatements as grounds for canceling health coverage.

Given that the lawyers obviously combed through these cases, and found people like the woman denied coverage for obstetric care 2 years into her policy, this starts smelling worse and worse for Wellpoint. Health insurers are in a very vulnerable position right now. Their profits are sky-high, and far more of the premium is sticking with them than their cleints or the genreal public understands—medical loss ratios are down in the low 70s. Not to mention certain executives with their multi-million or billion dollar pay outs.

Wellpoint would be well advised to do what they can to make this case disappear very quickly. Otherwise they might start realizing that they’re in an election year and health insurers are only just above the oil and tobacco guys in the popularity stakes.

POLICY/INDUSTRY: WHCC2006 Employers and plans

• 1

I’m at the WHCC as the official blogger! First up is a session with big employers and their vendors from the plan world (although apparently George Halvorson from Kaiser had a minor heart attack and has been replaced by Jay Crosson from Permanente)

Ivan Seidenberg, CEO Verizon, wants portable affordable insurance, and more IT use in healthcare. Broadband will save the day! (In Virginia, Inova is using their broadband to run its eICU), and this will end up in the home, in his vision. And we should have EMRs for all, personally managed but available to all providers. Verizon is going to provide a PHR for its employees, with coaching et al.

The senate has passed legislation to help promote EMRs, and he wants more from the government on this! And he applauds those who have looked “beyond” employer mandates, and he thinks that consumers will demand the information and disrupt the marketplace.

Michael Critelli, CEO Pitney Bowes, heads a company that’s (somewhat famously) looked closely at chronic care. They have avoided cost shifting by changing the infrastructure costs. They created on site medical clinics for routine needs of employees. Services and Rx are free. The average costs of those in the clinics is lower than the rest. Their spend was 20% lower than those they benchmark. In 2000 they got a big rate increase, and so then tried to figure out what was happening? The biggest problem was people not taking their meds because of cost. So they moved to expanded coverage for generics, and lowered the cost for first line Rx, and got rid of costs for preventive services. Added costs are the main reason for people skipping coverage, plus high health costs are hitting earnings in Corporate America. So we still need to do more.

Critelli: The workplace is not necessarily the best place to reach people…perhaps the broadband approach might work (as Seidenberg said)

Jay Crosson thinks that high deductibles have incentives in the wrong way. 1%  of Kaiser patients run up 40% of the costs. He likes the Pitney Bowes concept.

H Edward Hanway: Worried that the perception that CDHP is just a cost shift. Corporate CEOs may be interested in behavior change and are interested in spending their money in different ways. A perception that they’ll have to work hard to dispel!

Jay Crosson; Financial responsibility is OK, but just imposing large deductibles is a blunt tool.. KP trying to create a clinically driven high deductible plan

Seidenberg—verizon supports a mandate to change something. Current system has run its course. Verizon wants to participate in that redesign, but wants to get out of the health care business. We don’t buy houses, buy cars, why should we be in the business of buying health care? We need to get out the language of shifting cost, to that of “shifting responsibility”. America must be ready to tackle the overall issue.

Hanway–Information and health coaching works no matter what the financial incentives, so far based on what they see from their data, even if their financial responsibility increases. But it cant just be “stick a HDHP on them”.

What about Romney care? The audience mostly think it’s a good start (only 25% think it’s terrible and 1% think its a real solution)

Jay Crosson—hopes that employers won’t leave health care coverage. But we’re in a lifeboat and everyone’s got to pull on the oar, or we run the risk of all this going in the wrong way.

Seidenberg—we want to get out of the business of wholesale subsidies. We found that people were buying drugs and not taking them. Should there be financial incentives to providers to make them do that. Also he supports vouchers and ways to buy into the system. But he thinks that competition across plans will help

Hanway—Mass will prevent insurers from creating affordable insurance, but the direction is encouraging.

Crosson-individual mandate is one way to get everyone in the game, which we need.  But will there be insurance available to buy? Where will the money to come from to subsidize care for those who cant afford it? Where’s the mechanism for restricting costs?

 —————————————————

This is my first notes of an interview with Michael Critelli, CEO Pitney Bowes. Definitely one of the CEOs in America who’s thought most about this topic. Most of the questions were submitted from the audience in rather interesting system from VisionTree.

What about the cost that are from the most significantly disabled/sick people?

By the time that they become disabled, no choice but to manage their condition in conjunction with them. CDHC is a long term investment to prevent significant disabilities, it’s a piece of a solution but not so appropriate when you get to significantly disabled people. At that point you are trying to get them to take charge of their conditions… but there are many things they can do even then (diet, exercise, following treatment)

What about the role of insurers?

Insurers are working to improve the outreach, but some more enlightened than others.  Some do better than others. some are better at collecting data, others better at identifying high quality providers, but overall a mixed result…

Why cant health insurers push harder to get transparency?

There’s a range of behaviors by consumers. Some prefer simplified pricing, others like to buy a la carte…saying that everyone wants standard pricing ignores the fact that restaurants don’t all offer prix fixed meals. The best solution would be a combination of simpler and more complex pricing.

Why is PB an outlier in its health strategy?

Too many employers looks at this as a cost item year to years rather than a long term investment-when you’re cost driven you have the perverse outcome. There has been a lack of leadership in benefit and HR functions. Could we have had this ten years ago? Yeah and there were equally stupid business leaders then (direct quote!)….in their own business (mail services) procurement people don’t look at life cycle costs over procurement. People are very scared of factoring in real consequences of decisions. When PB built the clinics they took a leap of faith that it would save on absenteeism, but they couldn’t precisely quantify that, and the people running health care internally wouldn’t give it credence but he overruled them…luckily

Are PBMs a help or hindrance?

Can be used for positive or negative results. If they monitor usage for compliance or drug reactions it’s a positive. PBMs also a source of information as to whether they’re using rescue drugs rather than preventative drugs. In the wrong hands can just be a tool for cost shifting.

Are the major PBMs saving employers money?

Given their growth I assume that there must be doing something right. The people who run them are pretty sharp

Is it too much to ask that employers partner with employees?

Employer/employee partnerships improve outcomes, productivity, quality. Always a benefit to the employer doing that for the spin-off effects….even if not providing health insurance there is still be a benefit to doing that partnership

Is health care IT going to save money?

The portable PHR is going to be a significant part of the solution. To get physicians online needs a comprehensive IT program that is top down driven. Providers are not going to invest in IT unless there’s a network effect. Providers don’t want to put a lot of money into supporting the systems, needs to be some part of a larger universe. Government and industry (tech vendors) have to come together on common data standards (need UPC equivalent) Will take a long time. PB has been at it in  postal reform for 11 years. If 10 years from now we had PHR standards that would be a success.

Health plan profits are at record highs—are they providing value?

Employers not happy. Got to have the sense that the money they’re paying in is being reinvested to improve outcomes. Some plans are doing better than others, but overall the position is mixed. The one area that more needs to be done is to use traditional marketing segmentation tools to identify the diverse populations that they cover and see what works

 

 

HEALTH PLANS/POLICY/POLITICS: Geography-lock–Why can’t you move individual insurance to another state?

• 8

This is how the cause of universal health care wins the hearts and minds….damn slowly and one by one. So I get an email exactly like this:

This is not something I have seen addressed anywhere and it pertains to the plight of the individual insurance plan holder. I have been enrolled in the same medical plan through a high profile insurance company since 1989. About 15 years ago I added my husband and later a child. Our premiums are larger than many people’s mortgage payments and we have $2500 deductibles and a host of out of pocket costs. We nonetheless are grateful to have insurance.

However, I naively thought that our coverage was nationwide…In fact, my original policy made repeated reference to the fact that our coverage was good in “50 states.” We relocated to another state a couple of years ago. We could not get new coverage without re-application and underwriting. However my husband was (successfully/surgically) treated for localized prostate cancer in recent memory and has moderate hypertension. It appears that this alone would cause us to be denied coverage and force him at least into a high risk pool and none exists in the state we moved to. So we were forced to return to the state where we have health coverage…

Why is it that HIPAA or coverage portability is limited to people in group plans? This seems so patently discriminatory to me. I have paid over $100,000 in health premiums alone with no interruption of coverage for 17 years as a self employed individual. And I have received NO tax credits for same. I am not able to change my location and improve our quality of life and am feeling increasingly desperate about the increases in our premium costs and our ability to even hold onto coverage which we have.

If you can explain this phenomenon I would be grateful. But more importantly, is there any medical watchdog group available to lobby on behalf of the individual? Would anything be served by a lawsuit? I have no confidence in legislators.

So I reply

The problem with the “coverage in 50 states” thing is that it’s OK for your state-based insurance company (and they all are as they’re state regulated) to cover you if you travel outside their state. But they are restricted from offering the insurance of one state to someone in another.  This is actually what the whole AHP argument is about, otherwise states which impose certain regulations on their carriers (e.g. New York) would find that a plan setting up in Guam or Montana or wherever) could offer much cheaper insurance in New York by using Guam’s rules. Of course when you move from one state to another you are switching insurance companies even if the corporate parent of that company is the same. And of course they will take that chance to underwrite you.

The only way around this for an individual is never to move (as you are finding out) or get an employer who’ll cover you in their group, or (most appropriately) to campaign for universal health insurance.

And my correspondent retorts

Honestly though, what can be the justification for ensuring that group policies are portable, yet individual policies are not? I am not sure what the parallels are in other avenues of industry, but if we can deregulate banks, why not insurance companies? Or perhaps it is another issue… This is evocative of a monopoly, replete with price fixing, bad faith, and discriminatory practices. I have no protection nor am I treated equally under the law–other than the fact that the insurance company cannot cancel me as long as I pay my premiums (and reside in the service area).

My premiums are basically whatever they say they are.  I know that individual policies are a fraction of their business but I am paying top dollar for the privilege. If I have uninterrupted service I don’t feel I should be treated as a different class by HIPAA.

We are healthy people for the most part who eat well, don’t drink or smoke. But hey, we are older, and between the Scylla and Charibdys of private insurance and Medicare. In the 10-15 years we have prior to Medicare eligibility we will spend a couple hundred thousand *more* dollars, and having done the math on what we have cost the insurer to date, we have more than self funded our own medical care. They have easily captured more than 75% of what we have spent.

They use age banding, tiering, and geographical/demographic data and god knows what else to determine the cost of the premiums, so I know they are not doing this for free…

When I pay my taxes I pay the employee and employer side. I don’t object to paying taxes or medical premiums actually. I know that medical costs are through the roof and that individuals and employees in group plans have to shoulder more of the burden. But again, this means we should receive equal treatment. Anyway, I would be more than willing to be the poster child for changing this process. But I think it has to happen through the courts. Is there any move afoot in Congress to level the playing field?

So I pull out the nuclear arsenal and start explaining the ERISA launch code sequence

The problem is that self-insured group plans are regulated by a Federal law (called ERISA) while individual plans are regulated by individual state laws. It makes no sense. Welcome to America.

Incidentally, group plans are no bargains either…but in terms of geographic coverage so long as the corporation can stay self insured, they avoid having to obey state mandates and therefore can offer similar benefits across the country. Because you are not a beneficiary of a corporation, you are subject to the individual law of each state and hence are starting afresh after a move.

I’m not sure what a court could do. ERISA has been to the Supreme Court and won. If Congress passes the AHP law it would allow an insurer to  offer insurance in a different state, but no one’s going to offer cheaper insurance to your family because they will underwrite you because of your husbands condition. The only solution is for a universal insurance nationwide risk pool–that’s what Medicare is. And that needs a political solution

And in the end we’ve at least got one more small business owner on board.

Thank you. At least I now understand the issues. I did vote for universal health insurance in the last presidential election so to speak but my guy did not win.

Now if we could only get the rest of the NFIB to see sense. But that won’t happen, so this frog will continue to boil one degree at a time.

HEALTH PLANS: More on buying individual health insurance, update on the Blue Cross cancellations

• 20

This is turning into pretty serious doodoo for Wellpoint.

Yesterday, WellPoint’s Blue Cross of California and its subsidiary BC Life & Health were sued for canceling policies retroactively. Of course the only policies they’ve been canceling were ones that they had to pay out on. Now health plans are in a bind in the individual market. Because we don’t have a universal risk pool, they are bound to be adversely selected against. (I explain why in my  Yin and the Yang article over at Spot-on)

But speaking as someone who just went through the rigmarole of filling in lots of application forms to get my own individual insurance, it’s clearly impossible to put your whole medical history on the form. The whole process, as I described a while back, is a complete disaster. In my case, having filled in exactly the same information on several places on the same identical (but separate) forms for both HealthNet and Blue Shield of California, they both wanted "more information". HealthNet sent me yet another form asking for exactly the same information as they’d asked for on the previous form. I put it on there and sent it back with a strong note telling them that they already had that information and that this was a waste of money. The good news is that they approved me at the underwritten rate (despite my gout and knee surgery history!).

Blue Shield instead wanted to go to the source. They wanted permission to get medical records from a doctor I’d seen last 18 months ago. I gave it to them, or rather to a unit they had subcontracted to. Apparently they have asked twice and haven’t got them yet. All that doctor did was write me a Rx for the gout medication which I declared on the form. The real joke is that Blue Shield was my insurer then and therefore already has this information in its own system somewhere, plus I put it in the application form. I haven’t seen that doctor since–for all he knows I could have terminal cancer.

The suits also accuse Blue Cross of using a vague, confusing and
ambiguous medical history questionnaire in an effort to trick
applicants into making mistakes that the company can use later to dump
them.

Too bloody right! The application process is so screwed up that there is no way that either the insurer won’t miss things, nor that someone who has a lifetime of medical records scattered all over the place won’t innocently miss something either. And you can be damn sure that the attorneys will find the best looking cases. And so they have. Pregnancy as a pre-existing condition? Oops.

Blue Cross also allegedly canceled coverage for
Laura Khatchikian of Los Angeles when she became pregnant with twins —
more than a year after she began paying monthly premiums.According to the suits,
each patient filled out the application honestly, was accepted for
coverage and paid premiums for months before being diagnosed with a
serious condition of which the patient was previously unaware. Yenny Shu of Los Angeles, for instance, says her coverage was canceled
after she was diagnosed with breast cancer at 46. In its letter
rescinding her coverage, Blue Cross allegedly told her that she failed
to disclose her exposure to the hepatitis B virus when she was a child.Other patients say they had, in fact, disclosed the information Blue Cross accused them of omitting. Dawn
Foiles of Riverside, for instance, says Blue Cross dropped her after
she had back surgery to replace a disc. Blue Cross, according to the
suit, rescinded her coverage because she purportedly failed to disclose
a history of back problems and previous surgery. But Foiles said she had listed a 1997 herniated disc operation on the insurance application in 2003.

The suits accuse Blue Cross of operating a "retroactive review
department" that systematically cancels policies that result in large
claims. It also claims that that Blue Cross looks for innocent
misstatements on applications to use as pretext to cancel coverage.

Now the state regulators are getting in the game, and by the way, it’s now a nasty big out of state insurance company that they get to have a go at!  California state insurance commissioner John Garamendi, who regulates BC Life & Health, and the Department of Managed Health Care, which regulates Blue Cross, are involved in the investigation. Garamendi, who has a history of handing out large fines, said "If we see a pattern with Blue Cross Life & Health, they are in deep trouble."

Of course given the popularity of health insurers, if it’s shown that they actually have a unit dedicated to retrospective policy cancellation, as the plaintiffs allege, Blue Cross can’t be looking forward to a jury trial either.

After all, once the jury understands the concept of a medical loss ratio, and how the insurers have been keeping a bigger and bigger percentage of the ever increasing premium dollar over the last five years–something that even I hadn’t noticed until Jonathan Cohn pointed it out to me recently–this could get really ugly. There’s plenty of evidence of very aggressive underwriting behavior by the biggest players, and Blue Cross has a history of being uglier than most. Plus Len Schaeffer came right out and explained that pricing and underwriting is how they make their money and the most important part of their operation. If I was the plaintiff attorney I’d be salivating for the chance to read that section of the McKinsey interview to the jury.

Something tells me that Wellpoint and the rest of the insurance industry should figure out where this can end up, and that they’d better get back on board with a policy initiative that gives them a role in the future. Remember the Clinton plan? After all Schaeffer, Glasscock, Rowe, McGuire and the rest of them have made their money (and plenty of it), but the next generation of execs and employees of these big insurers might well want to have a future. And this kind of story pours lots of flame on the single payer fire. The odds that there will be no insurance industry in 10 years time just got shorter.

POLICY/HEALTH PLANS: Shalala and the janitors update

Looks like the power of Health Care Renewal (and THCB) is proved again. (Ok, OK kissing…) But after featuring the story about Donna Shalala and the Univ of Miami janitors who didn’t have health insurance, apparently the university has caved. Correspondent JC reports:

Well, Shalala finally came to her senses (actually, her political senses). In addition to providing a 25% pay raise to the janitors (they are technically still not formally organized), they have agreed to offer health insurance coverage for $13 a month to employees. The janitors are to become effective 4/1.  If interested, I’ll let you know how it goes.

The interesting thing, is the publicity has put pressure on other entities.  A couple of other local universities (public and private) are beginning to feel the pressure to provide coverage to hundreds of uninsured low-wage workers. It is a positive ripple effect.

PLANS/TECH/POLICY: WSJ finds a slight flaw in options awards

• 2

A while back there was a boring argument interesting exchange in THCB on whether the options awards to a certain health plan CEO were really part of compensation or costs to the company (and hence to its shareholders and customers). I suggested that option grants that were “in the money” certainly were. Of course if you really want to play the option and stock trading game really well, you’re better off if you are transported back in a time machine and you could then place bets on a game of which you already knew the result. OK, if you haven’t mastered time-travel, you could just be allowed to backdate the timing of your option grants (and hence the strike price) to the lowest closing price of the year. And the WSJ has a rather interesting article showing that apparently both the certain health plan CEO and the CEO of the largest Medicaid technology outsourcing company did just that. Nice work if you can get it. But of course none of this is costing us —the suckers paying premiums and the taxpayer paying the tab for Medicaid—any money, is it?

Below the jump are the graphs about UnitedHealth’s McGuire and ACS’ Rich:

Continue reading…

assetto corsa mods