Sunday, August 27, 2006


NAIFA Part One

Today was the first day of the exhibit hall at NAIFA's annual convention. My company, 4myBenefits, is an exhibitor at this year's show and is our first time to NAIFA. Thus far I have to say the experience has been fantastic. We typically exhibit at 3 or 4 shows a year. Everyone here at NAIFA is uncommonly friendly and engaging, which is not always the case. Kudos to NAIFA and its members for putting on a great show.

Saturday, August 26, 2006


Blogging from NAIFA

I have the pleasure of attending NAIFA's Annual Conference. This is my first NAIFA conference, which happens to be in San Francisco this year. It looks to be an excellent event with some great speakers and programs. I'll be live blogging from the conference this weekend until Tuesday the 29th. Stop back soon!

Friday, August 25, 2006


Gulf of Misperception

Most workers think of health insurance as benefits they can use on an almost daily basis. But reality is spreading like a bad flu these days, even effecting Fortune 500 companies that traditionally offered the richest benefits for little to no cost. Today's Wall Street Journal reveals how dramatically different today's common perception is from cold hard reality.
For many workers, it is a matter of the premiums employers require them to contribute. Last year, families paid an average $226 in monthly premiums, a quarter of the total, according to the Kaiser Family Foundation, a nonprofit health-policy research group based in Menlo Park, Calif. But many companies are requiring workers to chip in a third or more, or are no longer subsidizing the premiums of spouses or children. In those cases, participation rates drop off even more.

Sarah Landis, a nursing assistant at Children's Hospitals and Clinics of Minnesota, says high premiums are why she opted out of her health plan. While a spokeswoman for Children's, which employs around 4,000, says the not-for-profit hospital system has actually lowered employees' share of premiums to 30% of the total, from 50% three years ago, Mrs. Landis says the monthly payment of $543 is about one-third of her income. (A high-deductible family plan is available for $295 a month, and a middle-of-the road-plan is $359.)

"It's a choice between our house payment and health insurance," says 25-year-old Mrs. Landis, who has two young daughters. Apart from her husband's asthma, which requires the couple to pay $70 in prescription drugs each month, all four are healthy, she says. So when her husband left his job to become self-employed three years ago, the family went uninsured. He may take a law-enforcement job so the family can get coverage again soon. In the meantime, Mrs. Landis says, "we just hope we don't get sick."
Mrs. Landis helps demonstrate how distorted the perception of health insurance has become in today's society. Her family is largely healthy. They can't afford the premium PPO plan, so they decide to waive the insurance. If they can't have the best without having to pay for the best why settle for anything less?

But why would a health family of four need the best possible coverage? I would wager that Mrs. Landis' employer used to offer a similar plan at a substantially lower cost. And I would also bet that while the Landis family is healthy, they used to use that $10 copay a lot. The Landis family did not want the high-deductible health plan because it did not have a high enough cost-to-benefit ratio. The problem here is that the Landis family's perception of cost is tragically skewed. The millions of uninsureds in this country that have a chronic illness would be thrilled to pay $595 a month for coverage. That's because their perception of the cost of medical care matches reality. The Landis families of the world don't have a clue. Health insurance is one of the only forms of insurance that is expected to be used on a whim today, rather than bring piece of mind and protection for what tomorrow could bring.

It is imperative for the insurance industry to start changing this perception. Health insurance is no longer a free lunch. The public needs to be taught how expensive medical care is today. The public need to be taught that health insurance is like life insurance or car insurance - a strategic safety net that protects families in times of hardship. Health insurance is not a magical product that makes medicine cheaper than the average night at the movies. These concepts need to be pounded into the public's head with a 2x4. Ultimately if these false perceptions are allowed to thrive, healthy families will waive their insurance and leave the risk pool. Not only does this create an environment of adverse selection within individual plans, it also means the country will accumulate more uninusureds, who more often than not, don't have the ability to pay their medical bills. If the Landis family thinks $295 a month for a health safety net is expensive, I truly hope the never learn how wrong they are the hard way.

Monday, August 07, 2006


The problem with provider directories

Last week WSJ had an interesting article on errata found in health insurance provider directories.
We did some checking to see how well some major insurers are managing. We searched five insurers' online directories by ZIP Code (a common starting point for searches), then called the offices of the first five doctors on each list to verify the phone number and address, as well as whether the doctor is actually in the insurer's network. In some cases, we called other offices in order to avoid, for example, including two doctors in the same medical practice.

While many of the listings were correct, a good chunk of them were completely wrong. Some were more confusing than inaccurate: A common problem encountered is that multidoctor practices can have many locations, which the physicians may or may not rotate among. So searching by ZIP Code sometimes turns up a location where the doctor in question doesn't actually see patients.
Even though their sample size was not very large, the consistency of errors is interesting. And disturbing.

An agent colleague of mine recently fixed a major claims problem for a client. The client's wife was out of town for quite some time and needed to find a hospital to administer a regular cancer treatment. She went online to United Healthcare's website to look up in network hospitals. Eventually, after having received treatment they received a $10,000 bill in the mail. How could this happen? The website told her the hospital was in network. Even the hospital itself confirmed that it was a network provider for United Healthcare. Apparently the issue was that while the hospital was a UHC network provider, it was NOT in network for the member's particular plan. Physician and hospital networks can and do vary by each product offered by insurers. If you have Plan 550, Hospital A is in network. If you have Plan 600, Hospital A is not in the network.

But UHC's network hospital search requires you to plug in your plan. How could it still get it wrong? That's exactly what her agent spent several days trying to clear up. Ultimately he learned that the only GUARANTEED way of finding out if a hospital or physician is in network is if you LOG IN to your personalized UHC member account. Why the public directory search is not accurate is a mystery to me. Clearly UHC should notify all of their members of this problem or work to rectify the issue.

If you can't even trust the online provider search on your own carrier's website, I think we should take that as a sign that healthcare is a little overly complicated. With over complication comes added costs. You do the math.

Tuesday, August 01, 2006


Let's go Krogering

Kroger, one of the nations largest grocery stores, is in a bit of a fight with a North Carolina Union regarding health insurance costs. Kroger is home-officed here in my hometown, Cincinnati, OH. They have about 300,000 employees nationally and pull in more that $60 billion in annual sales.

One thousand employees from the United Food and Commercial Workers Local 204 are preparing to strike over proposed increases to their health insurance. According to a US Newswire release the NC Kroger health fund has a balance of over $4 million. Driven by "corporate greed" Kroger wants to increase employee cost sharing by $1 million annually.

Sounds like a lot of money right? Let's do some math. Assuming the increases only effect union employees, we divide $1 million by 1,000 employees. That comes out to $1,000 annually per employee or $83 and change a month. So 1,000 employees are going to strike over $83 a month? Certainly it's possible their existing health insurance costs may already be steep. If so they have a valid complaint.

However, in my experience most union members pay little to nothing for their health insurance. For example, take the recent transit worker strike in New York City. It provides a rare look at the total disconnect between the cost of health insurance and employee perception. Prior to the strike the transit workers paid nothing for their health insurance. The MTA wanted workers to pay a whopping 1% of their annual salary for health care. According to KFF's annual survey the average employee cost in 2005 was $50/month for single coverage and $226/month for family coverage. The average pay rate for an MTA bus driver in NYC is $63,000 a year. Essentially the entire Big Apple was locked down because the "average" bus driver didn't want to pay more than the national average for health insurance. (Note: The workers had other complaints and demands, but their stance on health insurance was certainly far fetched)

Whether it's Kroger employees or MTA workers, virtually every day we hear about another union threatening to strike over rising health insurance costs. Human Resources and the insurance industry need to shake things up and bring expectations back down to earth. Is it really too much to ask that employees contribute as much to their health insurance as they pay for satellite or cable? The golden years have passed. If employees want quality healthcare today they just might have to give up HBO and settle for 200 channels of basic cable.

Monday, July 31, 2006


Can HSA's work?

A recent study at Health Affairs is making waves. According to the study HSA's work very well at reducing expenses for the very healthy and the very sick, but actually increase costs for larger middle ground. From MSNBC's analysis:
So can the healthcare industry be reformed to bring down costs for everyone? The study's thoughts are to add more "bite" to HSA, either by increasing cost-sharing or adding more coinsurance. However, that would put consumers at more financial risk.

"It's a trade-off between more cost-sharing and less insurance protection," said Remler. The more you move away from insurance funding, the more vulnerable people are because they'll be spending more out-of-pocket costs. That means less protection for people who get unlucky and end up having serious illnesses."
It's very rare that you can have your cake and eat it too. The paper is available here for a few bucks.


Offshore Healthcare

This weekend's LA Times had a fascinating article on a growing practice of offshore healthcare. Used as another cost containment strategy, self insured employers have begun looking oversees for operations that are very costly in the US.
Carl Garrett of Leicester, N.C., will fly to a state-of-the-art New Delhi hospital in September for surgeries to remove gallstones and to fix an overworn rotator cuff. His employer, Blue Ridge Paper Products Inc. of Canton, N.C., will pay for it all, including airfare for Garrett and his fiancee. The company also will give Garrett a share of the expected savings, up to $10,000, when he returns.

Garrett chose to go abroad rather than have the operations locally, where he would have paid thousands of dollars in deductibles and co-pays.

"I think it is a great thing," the 60-year-old technician said. "Maybe it will drive down prices [of surgeries] here in the U.S."
Certainly globalization of healthcare is inevitable. But will offshoring procedures really help costs and patients?
U.S. hospital operators say that doesn't bode well for them.

"This is not the solution," said California Hospital Assn. spokeswoman Jan Emerson. "In fact, this could make problems worse."

Hospitals must deal with rising costs just like other parts of the healthcare system, she said, and California hospitals lost $6.65 billion last year caring for the uninsured. Hospitals rely on paying, well-insured patients to keep them afloat in the face of costly government regulations and low-paying government programs like Medicare and Medicaid, she said.

Exporting the best-paying patients, she said, "will only add to the woes of the entire healthcare system."
Read the whole thing.


How much is too much?

Today's WSJ asks whether or not aggressive health insurance profits are beneficial in the long run. Last week Aetna shares fell 17% on news of rising medical cost versus premium ratios as well as a 30% cut in their projected participant growth for the remainder of the year.
Last year, the top seven U.S. health insurers earned a combined $10 billion -- nearly triple their profits of five years earlier. The windfall came as insurers raised their prices faster than underlying health costs.

Now the good times may be rolling to a halt. Health insurance has become so expensive that many smaller employers are dumping insurance altogether. If insurers don't do something, they may find their business shriveling. Yet if they restrain price increases, or appear to, they get hammered by Wall Street.
The industry's aggressive stance on pricing is largely due to shifts in overall strategies that now emphasize keeping profits and premiums quite a bit ahead of medical costs. Only now it appears that medical cost inflation is slowing. According to WSJ the average operating margins in the late 90's were around 4 percent in a good year. Today they are much closer to 8 percent. Some analysts are fearful that investors' demands of higher profits will create an environment ripe for adverse selection. Those that need health insurance the most will be forced to continue enduring premium inscreases, while healthy pools will be cherry picked by low cost providers pricing for growth. These conditions create unsustainable pools of risk for insurers, leading to falling stock prices.

I for one would welcome increased competition with open arms and think it would ultimately help, not hurt, the industry as a whole. Certainly in order for there to be new winners, some insurers in the winners circle today will have to lose.

Friday, July 28, 2006


A 95% Failure Rate

A recent article at Insurance Newsnet describes a disappointing situation (subscription required):
In response to the growing consumerism movement in health care, insurance brokers have begun providing wellness and other health management services to employers.

But even though most of the services are available at no cost-brokers offer the services to differentiate themselves-most brokers say they must persuade employers, particularly smaller employers, to take advantage of them.
Drawing from various large brokers' experiences a shocking conclusion is found. In the small to midsize employer market, less than 5% of employers are taking advantage of free wellness programs offered by their brokers. Apparently many brokers are offering free wellness programs to their clients in a bid to stand out from their competition. So why are so few employers taking advantage of a proven method of reducing long term health claims? Money quote:
"The savvy employers, no matter what the size, are seeing it has to be done a different way," (a broker) said. But, for the most part, "we're still carrying the message to the employers as opposed to being asked."(my emphasis)
Wellness programs normally face a difficult, uphill sale. They must justify their existence with strong ROI's and case studies. In other words, most employers don't even understand they have a wellness problem. Why fix what isn't broke? Convincing an employer otherwise requires education and hard work. On top of that, whenever a service is offered for free it cheapens the program's overall value. Take a look at health insurance. How many employees understand how much health insurance costs? How much has that misunderstanding of value contributed to the entitlement mentality we face today? If an employer doubts the value of a wellness program, not to mention even the need for such a program, why would they commit any resources to it? Offering wellness services at no charge may seem like a compelling sales tool, but ultimately only serves to devalue wellness initiates in the eyes of an already skeptical market.

And that brings us to the second problem. Adopting CDHP's or other "consumerism" approaches without undertaking wellness efforts is at best foolish and at worst downright destructive. Brokers advocating consumerism will look to provide their clients with a solid wellness foundation. But selling wellness is hard. Unlike health insurance, wellness programs are not demand products. So why not kill two birds with one stone? Offer wellness as a free, value added program, thereby eliminating cost barriers and adding another bullet to our list of agency provided services? When wellness is one bullet in a list of many it does not command the attention and education it deserves. Coupled with the fact that there is a strong disincentive to give the product away (cost), lackluster results should be expected.

When a pitch fails 95% of the time, shouldn't its merits be re-evaluated?

Wellness is a critical part of consumerism efforts. As such it should not be relegated to an uninspiring value-added program. Additionally, amassing an arsenal of value-added weapons amounts to zero competitive advantage if the dogs don't eat the dogfood. "We're still carrying the message to the employers as opposed to being asked." Well, as insurance brokers it is our duty to advise our clients what they should be doing, not just doing "what is asked." Brokers that successfully advise their clients to implement long term strategies, like wellness programs, will guide their clients to long term success. In doing so, they will overcome their competition and most definitely see a sales rate well above 5 percent.