A May 21, 2012 post/article by Avik Roy on Forbes.com has, for a health insurance professional like me, an interesting title. The article is called - "Putting the 'Insurance' Back in Health Insurance"

The first three sentences state - "We understand that it would make no sense to buy auto insurance after we’ve already crashed our car. We appreciate that it would be strange to buy homeowner’s insurance after our house has already burned down. And yet, when it comes to health coverage, many of us think that it makes perfect sense to wait until we’re sick to buy health insurance."

These words provides some insights on the point Roy wants to make in his informative and educational article. It can be seen here.

http://www.forbes.com/sites/aroy/2012/05/21/putting-the-insurance-back-in-health-insurance/

If a pop up ad appears click the link in the top right corner to stop it.

I recommend this link be shared as widely as possible.


Contact if any questions.

Fixing “Health Care”

This topic has created, over the years, much talking and writing by lots of knowledgeable people. Guess what? They have not come up with one answer on what really should be done.

When one looks at how to fix a problem the normal approach is to look into the situation and seek out/investigate what is causing it. When the primary problem is identified the approach is to then work on this issue.

One interesting and important fact which comes out when looking into the problems in health care is that around 85% of each dollar an employer pays in premium for their medical insurance benefit plan goes to medical treatment expenses. When you look further you also find these expenses have been growing much faster than general inflation for some time. Ok – now we know the primary problem what is being about it. The answer – not a lot. The normal reaction when learning this is – Why not? The answer to that from many – it’s to complex!

What are some of the common comments about what to do?

+ Some advocates think the answer is to get everyone covered.

+ Some suggest spending a lot of money on technology to eliminate paper, which hopefully will also reduce unnecessary or ineffective treatment.

These two suggestion and many others however do not get at the ever increasing cost of medical treatment.

Five individuals Bloomberg Business Week identified as experts where recently interviewed about “fixing health care” for an article in the February 27 to March 4, 2012 issue. The points they bring out are not specific to Connecticut but guess what – they also apply to us. Take a look!

A medical insurance professional I work with, through the National Association of Health Underwriters, who lives in Mass. had a commentary in the February issue of Employee Benefit Advisor about efforts to “fix health care”. He reports on some things being done up there and comments on their effectiveness.


Want to share some ideas on this challenging and very important topic? Send a comment.

John C Parker, RHU. LTCP
www.ParkerHealth.com

This might be a useful aide to help us slow down on eating to much!

One of the things which has a very big affect on the cost of medical insurance is the ever increasing cost of medical treatment. More importantly within the medical treatment "pot" over 70% of these expenses are connected to lifestyle choices. One of the biggest is the fact - we all eat to much. Of course food tastes good, we enjoy it, thus it is hard to change our ways.

Sometimes having a system to help is useful. A system which allows you to to enter things you are doing and makes suggestions on thinks to do. Take a look.

Guess what - its from the US government and not bad.

HSA's becoming more and more effective

A recent research project (1), with more than 14,000 responses, found Health Savings Accounts are "helping employees make better decisions about their own health care."

Some of the findings include:

+ 56% of individuals found "their HSA qualified plan provides an affordable health care option".

+ 75% of individuals indicated "the ability to personally control their own health is an extremely or very important benefit of HSAs".

+ Individuals are doing things such as " engaging in healthier lifestyle choices - researching preventive care programs - shopping for lower priced prescription drugs - plan health care better throughout the year".

+ 82% of individuals reported "the ability to save tax-free money was extremely or very important in selecting an HSA."

+ 79% indicated "having an HSA is valuable to them."


Employers report HSA plans cost less than standard PPO plans:

+ 77% of them believe "their High Deductible Health Plan with a HSA are key in controlling health care costs."

+ 69% contributed "an average of $1,000 for individual coverage".

(1) The survey, created this fall by two Xerox companies, was commissioned by ACS and conducted by Buck Consultants.

The role of Accountable Care Organizations in reform health care

Much of the medical treatment being provided today is done by MDs, Labs, Hospitals and other facilities indpendent of each other. This approach is called a fee for service system and has a lot of inefficiencies. As a way to more away from fee for service the Federal level health reform provided funding to establish what are called Accountable Care Organizations (ACO). This new approach involves a significant change in technology to support the delivery of medical treatment. It will effect not only providers but for you and I as consumers of health care services. When ever a change as significant and expensive as this takes place there will be considerable debate over whether it will be effective. This is certainly the case with ACOs. It is important for employers to understand this change as it begins to evolve, since it may lower the cost of delivering medical treatment. The way a ACO develops will not be the same in all areas. Consumers should also be aware since they will begin to notice changes in the way services are provided as ACOs are implemented over a period of time. I recently became aware of and want to share a report by the Institute for Health Technology Transformation. It details ten useful things to understand about this approach. It provides

some interesting insight into accountable care organizations (ACOs)

.

Things effecting medical treatment

Survey results from a study by the Center for Studying Health System Change of about 15,000 individuals found:

+ A little more than 20% put off treatment because of things such as “long wait-times for appointments and inability to take time off work”.

They had responded to questions such as “Was there any time during the past 12 months when you didn’t get the medical care you needed?”

The study made recommendations, as health reform is being discussed, on ways to eliminate things that cause people to hold off seeing medical professionals including:

+ “Offering night and weekend outpatient services”

+ “ Increasing the se of telemedicine so patients don’t always need to travel to see doctor in-person”

+ “Offering onsite care for people with inflexible work schedules”

What does regulatory review of medical insurance rates do?

Federal health reform implements a provision to require a review of what is called "unreasonable" increases in the cost of medical insurance. Here in Connecticut the General Assembly passed a law in the 2011 session to also review rates. It even included a provision to hold a symposium on proposed increases! If I recall the proposal was to have one of these up to four times a year at an estimated cost over 7 figures. Luckily the Governor vetoed this bill because of the big cost and that it duplicated existing regulations.

Anyway lets do a quick look at what a medical insurance rate review might do?

Background: Over quite a few years 85% of each premium dollar small businesses pay for their medical insurance goes to pay medical treatment costs. Of the 15%, which is for plan administration about 3% is for company profit. Consequently, rates have been going up 10% or more each year because of the rapidly increasing medical treatment costs. Data also is available that connects about 70% of these treatment costs to lifestyle choices such as smoking, eating to many burgers and fires, etc.

Now to reviewing rates: Conn. has regulations that proposed premium increases have to be sent to Connecticut's Insurance Department along with lots of justification. The federal Department of Health and Human Services (HHS) recently issued regulations to implement the federal law. It states a public review must be held for any increases of 10% or more.

The question to be asked then is - What is a public hearing going to do to change peoples lifestyle choices and the increasing amount of dollars going for treatment? Yes no one likes to pay more for medical insurance but folks jumping up and down at a public hearing to complain about all this is certainly not going to change ever increasing medical treatment costs.

One interesting thing about requiring increase reviews it's just a kind of price control and results in what is called a price ceiling, which really becomes a price floor. In other words a medical insurance company might have, for competitive reasons, sent in a proposed increase of 7.5% now can just send in 9.9% and the federal regulators will be happy. Studies of price controls have documented this effect does happen! Again - what did that do for consumers?

There is another purpose for Connecticut's regulations to review rate increases and that is to watch for examples of a company keeping rates low to attract more business when in fact the increase will not cover their treatment costs. This could result in the company becoming insolvent! If that were to happen policy holders and taxpayers (you & I) would become liable for the treatment costs the company could not pay!

Guess what? The federal HHS also provided big grants of about 1 million to each state, including Connecticut, to set up the procedures for these rate review hearings! I raise the point these federal review procedures could very easily conflict with the procedures Connecticut has developed during it's long history of premium review regulations! Who is the better regulator to look for what is best for Connecticut residents. State procedures, which have evolved over time, or federally mandates procedures?

Bottom line - what does all this do to control the cost of medical insurance!

Insights on the high cost of medical treatment

A study in the Philadelphia area provides useful insights on how medical treatment costs are used.

You can change the names and find the same issues happening in Connecticut. In thinking about this one becomes curious about why there is not more media coverage on these real issues! Guess the media just likes to blame medical insurance companies for the high cost of medical insurance vs reporting and educating people about the real reasons.

One factor in government medical plans - costs are higher than they should be!

Many things influence the cost of group and individual medical insurance. One factor is the cost shift that takes place from MDs, Hospitals, and other providers. MedicAID (more so) and MediCARE pay providers significantly less than their real costs. They in turn charge higher rates (cost shift) to the commercial plans with which they work.

Thus, what we have is government medical programs working to control costs by under paying providers! A more effective approach, which would result in higher quality care for patients, would be to work on controlling inappropriate payments!

This video highlights the significance of this issue!


Suggest talking to state and federal legislators and ask - why is more action not being taken to stop this.

Another look at medical treatment costs

Have mentioned before the point - about 85% of each employer premium dollar goes to pay for medical treatment expenses. When we look at this 85% we find that 70% or more are connected to lifestyle choices.

We also know from studies and reports, such as a recent one from the National Institute for Health Care Management Foundation:

+ About 5 percent of the population is responsible for almost half of all health care spending in the United States.

+ About half of the U.S. population accounted for only 3.1 percent of all expenditures.

+ 10 percent of the population hogged 63.6 percent of all health spending.

+ The top 5 percent of the population accounted for 47.5 percent of all spending.

+ The top 1 percent of the population accounted for 20.2 percent.


What does all this tells us? Medical treatment costs are responsible for rising medical premiums not "big bad insurance companies"

What's with all the "Medicare as we know it" talk?

Background: Medicare, implemented in 1965, pays medical treatment expenses on a fee for service basis. Thus, the more treatments performed the more pay the provider receives! This results in over utilization plus the cost for treatments continues to go up at twice the rate of national income. Then too, an ever increasing number of people are turning 65 and being covered, which adds significant costs. The 2011 Medicare forecast shows it running out of money five years sooner than in the 2010 report! It may even be sooner because of some questionable assumptions!

In recent weeks various words have been coming out of Washington DC saying Congressman Ryan’s proposal to fix this would “end Medicare as we know it”. These words are in fact unfounded because federal health reform already ended what we know by introducing two radical changes:

Note: An April 27th WSJ article called the effort behind these words a hoax!

First – When we look around we see more MDs are no longer taking new Medicare patients today because their reimbursements are 20% or more below what private plans pay. Rates are 30% or more less for hospitals. Adding to today's under payments federal reform implements, over the next few years, payment rate cuts for MDs, hospitals, etc. The result - reimbursements will be less than Medicaid in about ten years! Some reports say more than 80% of MDs will not accept Medicare patients if these cuts in the law, which are price controls are implemented.

Second - An Independent Payment Advisory Board was created with the power to recommend payment cuts. This means new medications and treatment technologies, which are generally more costly, may not be approved. Congress then either accepts the boards recommended cuts or develops their own. If not at the same level the Board cuts will be implemented. Interestingly this Board cannot look at cost containing ideas other than cutting fees!

No matter how much some want Medicare to be left alone the cost increase trends are unsustainable and must be fixed. Thus, the question becomes, which approach is the best way to continue these important benefits:

+ Federal health reform, which lowers provider pay and means far fewer MDs to treat people? Some are saying these changes “save health care costs”! Yes the actual dollars being spent will be lower because of the cuts but the effect of this savings is it makes things bad for people and providers!

+ Move Medicare from 1965 to the present! One idea is to change federal policy so individuals now 55 or younger, will be offered, in 10 years when they turn 65, Medicare benefits from private companies. People currently 56 or older and those now on Medicare will use the current system. The idea of using private companies has worked for the Medicare prescription program, which now has costs about 30% less than projected when it started. An approach like this would put people in charge and provide choices. Medicare payments to the company a person selected would cover most of the cost. An additional payment could be included for people with chronic situations like in Medicare Advantage plans. Since expenses go up as we age more premium support could be added for those who are older.

Putting people in charge of how they receive their benefits is certainly a better approach than having a cost cutting board making decisions for everyone on what is covered!

Bottom line, it is important for everyone to look at the real facts about Medicare’s cost situation and consider alternative ways for it’s important benefits to continue.

What’s with all the “Medicare as we know it” talk?

Background: Medicare, implemented in 1965, pays medical expenses on a fee for service basis. Thus, the more treatments performed the more pay the provider receives. This over utilization plus the fact that treatment costs are going up at twice the rate of national income. Adding to this issue is the fact that an ever increasing number of people are becoming eligible, which adds significant costs. The 2011 Medicare forecast shows it running out of money five years sooner than in the 2010 report. It may be sooner because of some questionable assumptions!

In recent weeks various words have been coming out of Washington DC saying Congressman Ryan’s proposal to fix this would “end Medicare as we know it”. These words are in fact unfounded because federal health reform already introduced two radical changes:

Note: An April 27th WSJ article called the effort behind these words a hoax!

First – When we look around we see more MDs are not taking new Medicare patients today because their reimbursements are 20% or more below what private plans pay. Payments are 30% or more less for hospitals. With that in mind along comes federal reform, which implements payment rate cuts. The result - reimbursements for MDs, hospitals, etc. will be less than Medicaid in about ten years! Some reports say more than 80% of MDs will not accept Medicare patients if the price controls in the law are implemented.

Second - An Independent Payment Advisory Board was created with the power to recommend cuts. This means new medications and treatment technologies, which are generally more costly, may not be approved. Congress then either accepts the cuts or develops their own. If not at the same level the Board cuts will be implemented. Interestingly this Board cannot look at cost containing ideas other than cutting fees!

No matter how much some want Medicare to be left alone it’s costs are unsustainable and must be fixed Thus, the question becomes, which approach is the best way to continue these important benefits:

+ Federal health reform with it’s lowers provider pay and thus far fewer MDs to treat people? Some are saying these changes “save health care costs”! Yes payment cuts will lower actual dollars spent but it also results in making things bad for people and providers.

+ Move Medicare from 1965 to the present! One idea is to change federal policy so only those individuals now 55 or younger, will be offered, in 10 years when they turn 65, Medicare benefits from private companies at 65 in 10 years. Using private companies has worked for the Medicare prescription program, which now has costs about 30% less than projected. An approach like this would put people in charge and provide choices. Medicare payments to the company a person selected would cover most of the cost. An additional payment could be included for people with chronic situations like in Medicare Advantage plans. More support could also be added for those who are older. Putting people in charge of how they receive their benefits is certainly a better approach than having a cost cutting board making decisions for everyone on what is covered.

Bottom line, it is important for everyone to look at the real facts about Medicare’s cost situation and consider alternative ways for it’s important benefits to continue.

Connecticut Legislators considering proposals which will increase cost

The Connecticut General Assembly is considering a variety of proposals, which if enacted, would increase the cost of medical insurance. Interesting isn't it in these times when the focus should be on improving the business climate and working on policies to encourage job creation.

Here are the highlights of a couple proposals:

SustiNet is a proposal resulting from a study over the last couple years. SustiNet certainly has some worthwhile goals but the ideas on how medical insurance will be provided are based on approaches, which will not be economical for the state or effective for participants if it were to be created.

Some background on another proposal. Federal health reform includes a requirement for states to develop an Exchange. The idea is to have a central place for individuals or small employers to review different medical insurance options and then enroll. A yet to be developed high tech enrollment system, where a person will enter extensive personal financial information, will be used to determine:
+ If their income level qualifies them for MedicAID, the coverage for low income individuals,

+ If they will be eligible for a subsidy to purchase coverage. It will be available to those whose income is up to 400% of the federal poverty level.

The system will then automatically enroll them in their selected coverage.

The Exchange receives federal funds to help with development but it will have to be self sustaining within one year of beginning operation Jan. 1, 2014. To do that without an unreasonable assessment on participating health plans, which would make them more expensive than plans outside the Exchange it needs to have a flexible and economical operation.

One of the proposals would use lots of government management (expensive), would limit consumer choices, and require more extensive and thus more expensive coverage than planned in federal reform.

Questions? Contact me at (860) 451-9793.

Each of us can help control the cost of medical insurance

There has been and continues to be lots of coverage and discussion on the cost of medical insurance. However, there is not enough discussion about medical insurance being expensive because of the high cost of medical treatments.

For several years analysis has shown, for employer coverage, about 85% of every medical insurance premium dollar goes to pay medical treatment costs. In looking at this we also know 70% or more of this amount is connected to life style choices. Smoking, eating to many big burgers, etc.

The question then becomes - Who is responsible for this? A statewide survey of adults in PA found "93.3% of respondents believe they are more responsible for their personal health than their doctor." However, "32.5% said they do not engage in planned exercise on a weekly basis and 48.7% exercise three or more times weekly."

One interesting fact to me was the survey finding that only one-fourth "said they avoid high-salt foods and less than one-third pay attention to the amount of salt in foods they consume."

The Pennsylvania Medical Society reported they were "glad to see that Pennsylvanians believe they are more responsible for their own health - - but - - there are many hurdles to clear if they want to achieve better health."

Is this human nature and thus can't be changed? Is it something each of us needs to get involved in?

I believe each of us has a big part to play in controlling the cost of medical insurance, which now has an unsustainable growth rate.

Obesity - a key issue in the cost of medical insurance

Obesity is on the rise, with two in three adults in the United States categorized as either obese or overweight, and one in five U.S. children suffering from the same condition.

What can be done? The drastic changes to diet and exercise needed to make changes to improve this condition aren’t easy. Some of the factors, which are required:
+ Behavioral and lifestyle changes that take self-discipline and determination.

+ Education and resources to understand not only what to do but how to make changes safely.

This video may be of interest:


Try this link if the first did not work.

How can SustiNet provide affordable medical insurance?

Connecticut's General Assembly is considering a proposal to implement the SustiNet program. It certainly has various worthwhile goals such as improved medical technology and wellness, however it will do little, if anything, to lower medical treatment expenses. Some points about health reform:

First - Medical insurance rates are high because over 85% of each premium dollar goes to pay for ever increasing and expensive medical treatment. Then too, 70% or more of these expenses can be directly connected to people’s lifestyle choices. Activities such as smoking and the big costs that come from obesity. Consequently, an important focus in health reform efforts in Connecticut needs to be on treatment costs.

Second - There are also important, but unanswered questions on how a public medical insurance plan can create affordable coverage. For example:

+ Some supporters have the perception simply bringing the state employee medical benefits and Connecticut’s Medicaid system (Husky) together and then providing access to more individuals will lower the cost of coverage. Facts tell us otherwise. Actuarial studies have shown creating a larger medical plan by combining groups does not result in lower costs. What usually happens is the kind of organizations inclined to participate tend to have high medical claims, which just creates higher costs.

+ The proposal would also use self insuring, which does nothing to lower medical treatment costs.

+ Individuals on Medicaid have, by federal/state regulations, extensive coverage but because of Medicaid’s very low payments have access to limited providers. A high percentage of providers are also not accepting new patients. State employees are offered several very expensive benefit options and we know from when the Municipal Health Insurance Plan started a few years ago regulations did not allow funds in this benefit plan to be co-mingled with dollars covering people outside this group. How can these two very different plans be managed to lower costs and at the same time develop coverage options for others?

Some other observations about this proposed approach:

+ Lower medical insurance premiums can only be created by getting individuals more involved in their medical treatment or by limiting coverage as was done with the Connecticut Charter Oak plan. It's efforts to offer a low premium were only achieved by limiting benefits to a maximum of $100,000 a year. Federal health reform requires extensive coverage and unlimited benefits so limiting coverage won't work!

+ An important point on Connecticut’s ability to afford a public run medical insurance plan: In a couple years, most of the cost of expanding Medicaid to more people, which the law calls "newly eligibles" will be picked up by federal funds. However, federal law does not allow any of these dollars, except for certain primary care services, to go toward increasing payments to providers. Thus, with Connecticut big deficit where is the money going to be found for a significant increase in provider reimbursement that is needed today so MDs are available to treat those on Medicaid. Then too, many more dollars will be needed in a couple years for all the additional people that will qualify?

+ An important point on how federal health reform will affect SustiNets efforts: The program wants to participate in the Exchange, which will be set up to operate beginning January 2010. However, to participate a health plan must meet requirements such as - be in good standing - be accredited on quality standards – be subject to state insurance regulations and not self funded - to have a state license. How can SustiNet with no history qualify? In addition, Connecticut regulations require a health plan, wanting a license, to have significant reserves. Where will these dollars come from?

A look at a big medical insurance cost driver

Much continues to be written and talked about regarding the high cost of medical insurance in Connecticut. Regretfully little is discussed about the reason medical insurance is expensive, which is the ever increasing cost of medical treatment.

One big driver is the treatment costs, which result from lifestyle related choices. It is not unusual for medical insurance companies to report 70% or more of their claim expenses can be connected to lifestyle choices. This includes activities such as smoking and eating to much for example many big buggers.

In regard to the eating to much issue the slides on this link may be of interest. They show how our population has become bigger - meaning weight from 1985 to 2009!

When the page comes up simply click the button to advance the slides.

The 2011 Medicare health plan annual enrollment period starts today

Medicare's annual enrollment period begins November 15th and runs through December 31st. BTW - next year the annual enrollment will be from Oct. 15th through December 7th.

Some Background: Individuals become eligible for Medicare the first day of the month they become 65. A couple months prior to the 65th birthday it is recommended that an appointment be made with the retirement representative at the Local Social Security office. Each person turning 65 needs to make arrangements to enroll in Medicare's hospitalization coverage (Part A) and for physician and outpatient service (Part B). If a person plans to continue working the SS office needs to know.

What coverage is available?
Part A pays for hospital expenses using Medicare's rates except for the $1,132 deductible during 2011. There is not cost for this coverage if an individual has worked 40 or more quarters.

Part B pays 80% of Medicare's allowed amount for various types of outpatient related treatment. Part B's monthly premium will be $115.40 for individual who enroll during 2011. If someone elected to receive Social Security early this amount will be deducted from their monthly payment. It they plan to wait until eligible for full retirement benefits at age 66 the Part B monthly premium can be paid on a quarterly basis.

Once enrolled in Part A and Part B many people also enroll in additional coverage to cover the treatment costs Medicare does not fully pay. One option is a Medicare Supplement plan and another is a Medicare Advantage plan. Additional information on these options can be found on my web site - http://www.ParkerHealth.com/individuals.htm

Additional coverage is needed in one more area - outpatient prescriptions. This is Medicare's Part D. Medicare developed a base amount of coverage and most private companies that offer Part D plans provide more than the base coverage.

Now to the annual enrollment period (AEP). Each year a person enrolled in Medicare A and B can change their supplemental coverage or prescription plan during the AEP. Any changes, which are made, will be effective January 1st and stay in effect until the next years AEP.

Small Business Tax Credit – not really what’s often reported!

P PACA, as the health reform law is being called, created a tax credit of up to 35% for small employers, which provide medical insurance coverage for their employees. The law indicates an employer here in Connecticut may qualify if:

+ It pays no less than 50% of the employee’s premiums.
+ It has less than 25 full-time employees.
+ The average wages of its employees must be less than $50,000 per year.

Note: Owners and family members in the business are not counted as employees for the tax credit.

This credit can be claimed on the organizations annual tax return for 2010 through 2013. The 35% maximum credit becomes 50% in 2014.

When reviewing the actual P PACA provisions we find:
+ The 35% maximum tax credit is only available for employers with 10 or fewer employees and whose average salary is $25,000 or less.
+ Firm’s with up to 25 employees whose average wages is up to $50,000 may qualify for a credit, which will be considerable lower. Firm with 25 employees & average salary of 50k will not receive any credit. Media coverage often implies the full 35% is available to firms with 25 or fewer employees.

Lets look at how this really works:

+ When an employer offers medical insurance they normally take a business deduction for the part of the premium they pay. IRS guidance however, indicates employers are not eligible for a deduction and a tax credit on the same amount.

+ The actual calculation to determine the credit has many details but at a high level the firm, at tax time, will add all their business info into the income tax software, the amount spent on employee medical insurance is included as a deduction, and the button to calculate tax due is hit. The software is opened again, the medical insurance deduction is removed, the button is hit again, and a higher tax amount is produced. The software would be opened again, the tax credit would be entered, the button is hit again to learn the tax due.
Note: One of the tax credit calculation details is the allowable annual premium is limited in Connecticut to $5,419 for single and $13,484 for family coverage. This could impact firms whose average age is about 50 or higher.

Bottom line - the real value, if any, to an employer will just be the difference to their tax obligation using the credit vs the tax due if the business deduction is used.

Will I find more affordable coverage in health reforms new Exchanges?

Various media reports have been bringing out people will have access to affordable coverage when the new Exchange starts in Connecticut in 2014.

Regretfully actual provisions in the new health reform law, on how the state based Exchanges will operate do not say this will happen. What the reform law, which is being called P PACA, does say is:

+ An insurance company that decides to participate must offer the same premium for the same plan whether it is purchased through the exchange or out side. Thus, where does the idea, medical insurance through the Exchange will become affordable, come from?

+ An insurance company has to combine their medical treatment claims from exchange plans with plans outside. What this says is - if four companies participate on Jan. 1, 2014 and each is covering 50,000 people the first person who goes to the Exchange and enrolls will join a "pool" of 50,000 - NOT a "pool" of 200,000. Thus, how does the person who creates the publicity, which says it will be affordable because it is bigger, think this is going to happen?

+ There is no requirement for a insurance company to offer all their current plans in the exchange. Plans available in the Exchange will be in four groups - Platinum - Gold - Silver - Bronze. Each of these will have different maximum out of pocket limitations. Thus, where does the idea people will have more choices than they do now come from?

+ P PACA gives states money to start up the Exchange - BUT the law also says the Exchange must be on its own with no money from the state after one year. Insurance companies may have to give the exchange some funds because of the work they do for marketing & enrollment. The big question then becomes - where will the additional money to run this extra layer come from?

+ P PACA does include complex provisions on how people, based on income level, will be able to receive financial assistance. The question becomes - where is the money going to come from to provide this assistance? More taxes for everyone?

It is important to understand the people who wrote P PACA do not really understand how the medical insurance market works. Consequently, I recommend anyone who sees media coverage about Exchanges having more affordable coverage and providing more choices to write a letter to the editor to challenge this. You may want to ask - how will more affordable plans and more choices really be accomplished?

Insights on new health reform law communications!

There has been considerable information coming from Washington DC in recent weeks on the new health reform law. However, much of this "PR" includes considerable "spin" on the actual provisions in the law.

For example, fact sheets and other releases contain frequent mention of "affordable and more choice" when referring to the new Exchanges, which start to operate in each state in 2014. However, the new law, which is being called P PACA, tells us:

+ Each medical insurance company is to have the same rates for a specific plan in the Exchange as they do outside the Exchange.

+ Each company is responsible to maintain one pool of medical treatment expenses for all their plans in and out of the Exchange. What this says is if say five companies are participating the Exchange will not combine the medical expenses of five companies into one big pool. Thus, an important question becomes - What about the exchange makes rates affordable!

+ There are no requirements for companies participating in the Exchange to offer all their plans in the Exchange. Thus, another important question becomes - What about the Exchange gives a person more choice than they now have.

+ People, based on level of income, will be able to get financial help when they buy medical insurance through the Exchange. The problem is there is no free lunch so someone is going to have to pay the extra cost to determine a persons qualification and more importantly when financial help is given to someone, someone else will have to pay more.

Bottom line - it is important for everyone to seek out the real facts and not accept all the PR and other media about what this new law will do. It certainly is a big change but one which will cost everyone more.

Please contact if questions about the new health reform law.

A look at some reasons medical insurance is expensive!

How much is spent on medical treatment vs admin? Medical insurance companies in Connecticut now list, often on the enrollment form, what their medical loss ration (MLR) was during the past year. This number tell us the percent of each premium dollar paid to them that goes to pay medical treatment expenses. Most small group medical insurance companies here in Connecticut have a MLR of about 85%.

Note: The new health reform law will require companies in the small group market to have a MLR of at least 80%. The MLR of most medical insurance companies here in Connrcticut have not had excessive administrative expenses.

Why have medical treatment costs been increasing so rapidly? There are many reasons including new and more expensive procedures plus over utilization of treatment. All the reasons together mean medical insurance companies have been required to charge ever increasing medical insurance premiums so they can pay ever increasing treatment expenses.

A look at some over utilization specifics! Studies tell us, when looking at this from a high level, between 20% and over 30% of the tests/treatments a person receives when they have a medical problem are considered unnecessary! In addition to increased costs for all of us extra treatment also increases our risk of a negative side affect. Examples of extra treatment:

+ Over use of antibiotics: MDs tell patients to take an antibiotics for a cold when it is not the most effective since a cold is a virus vs an infection!

+ Stomach acid: A study found over half of 100 million or more prescriptions, such as Nexium, were given to people with this condition who did not need such a powerful medication!

+ Back pain: This is reported to be the most over treated condition. It is not unusual for patients to be asked to get repeated MRIs! Why? Extra test are done in an effort to try to pin point the problem the person is reporting when in fact they would have gotten better without the test!

What can we do about this? A couple ideas to control treatment cost and risk to your health:

+ Talk to your MD and seek out more information about effective treatment. For example, the Mayo Clinic has a very informative page on their web site, which I link to on my site. It’s easy to use and has lots of information about numerous medical conditions.

+ Look for the cost of any suggested procedures. Why? There is considerable variation even in small areas in what providers charge for certain medical treatments. When you enter your city and state at the top of this site, then select a procedure, the cost at various providers will be shown.

Questions about all this – send a note.

Why medical insurance is so expensive

My note is to share some facts about why medical insurance is so expensive:

+ Medical treatment costs e.g. MD visits, hospitals, out patient treatment, prescriptions, etc. have been increasing much faster than inflation since 1988!

+ Over 85% of each dollar that goes to pay medical insurance premiums is used to pay for the ever expanding amount of medical treatment people are receiving. A breakdown of how a dollar is spent is shown on this chart.

+ Here in Connecticut one of our health insurance companies has reported over 70% of treatment dollars are connected to conditions resulting from life style choices e.g. smoking.

What is being done in Connecticut's General Assembly or in Washington DC to respond to the things that have caused medical insurance to be so expensive? The answer - not much if anything at all! !

All most all health reform efforts have focused on getting access for more people and other things such as pooling. All the state and federal efforts, if they were to accomplish anything, would just affect costs which are a part of the 15% of the premium dollar that goes for administration.

Update on COBRA and Conn's mini COBRA

The federal level COBRA changes, signed into law Feb. 17th, continue to create questions for employers as they implement the new requirements. Finding answers is not simple.

Some suggestions:
+ The DOL's model language published in mid March includes an error employers need to correct. The law's intent was to give a person, who has a COBRA qualifying event, 60 days from the last day of coverage to elect COBRA. The language in the model continuation coverage notification says 60 days from the date of the notice.

Thus, since many employers give or mail affected employee(s) notification and enrollment forms before the persons coverage terminates using the model letter language does not give them the correct date by which they must apply.

+ Don't just copy the model language and give it to a COBRA eligible employee. Why? There are numerous places in the 12 pages of model notices and forms where changes need to be made to make it fit the employers situation. This applies not only in the two notification pages, but in the pages with Q&A guidelines, and in the two forms a person needs to complete to enroll.

+ Some insurance companies want the person, who elects to continue coverage, to make the check out to their former employer. Thus, the employer has extra administrative work vs just sending the continuation check along with their check for the active employees.

+ The model letter for Connecticut's continuation coverage program was published by the DOI and it also needs to be modified to fit each employer.

Observations on the impact of implementing guaranteed issue on individual medical insurance plans in Connecticut.

The Connecticut General Assembly is considering legislation, in Senate Bill 1022, to require individual medical insurance plans to accept applicants without regard to their medical condition.

The state of New Jersey did this several years ago together with a requirement for individuals of all ages to have the same premium. Today there are only three companies offering individual medical insurance plans remaining in the marketplace. Their April 2009 monthly premium for single coverage on a plan with a $1,000 deductible followed by 80%/20% cost sharing is:

$ 2,544 - Aetna
$6,009 - Celtic
$ 3,457.97 - Horizon BCBS

Note: All available individual major medical plans in New Jersey and their monthly rates can be seen here:


The guaranteed issue and community rate experiment in New Jersey is proof of two things:
+ First - when younger folks end up with huge increases in their medical insurance there is a mass exodus from the market, which in turn puts significant upward pressure on the medical treatment loss ratios of the insurance companies and thus much higher premiums are required for the remaining older and sicker individuals.

+ Second - when a person can apply for medical insurance without regard to their medical situation they simply wait until medical treatment is needed. This is called adverse selection and thus the medical insurance plans find they only have the sickest individuals.

Is this what we want for individual medical insurance in Connecticut when rates are currently very high?.

What to do? Reforming the individual medical insurance market should begin at the federal level. Having just returned from a March 30 through April 1st conference in Washington DC I can state Congress, as part of the federal level discussion on health care reform, is actively considering significant changes.

One highly effective recommendation, developed by the health insurance professionals association, is a 10 point proposal to improve the individual medical insurance market so every person could obtain an individual medical insurance plan. Some recommended points:

+ The practice of evaluating health risks and the use of pre existing condition exclusions would be dropped.
+ Individual plans would still consider rating factors such as age and location, would give discounts for involvement in wellness programs, and increase rates for smoking.
+ To make this approach work and avoid high rates, such as in New Jersey, a way must be developed so everyone has medical insurance. The requirement to have coverage may for example be phased in such as starting with children.
+ Provisions must be included to provide financial assistance for those with lower income, through a government based program such as a refundable tax credit or perhaps premium assistance or both.

The health insurance company association also supports dropping health risks and pre existing condition exclusions when there is a requirement to have coverage.

Bottom line – when everyone has coverage rates will be lower.

What's really behind the cost of medical insurance?

Written and other media frequently blame the high cost of medical insurance on the compensation of company executives. These reports however do not bring out medical insurance premiums are simply a reflection of the high cost of medical treatment. Just as auto insurance companies charge more to cover a Jaguar vs a Honda Civic continually increasing medical treatment costs cause medical insurance premiums to go up.

Repeated reports, and there are many, about something that is not a real factor and which are constantly brought up, tend to be perceived as true. Thus, I want to bring out some of the real facts from a December 2008 survey.

+ For some years different organizations have reported 85% of medical insurance premiums go for costs associated with medical treatment. This new survey indicated it was 87%!

The survey also found:

+ Physician and clinical services accounted for 33% of all medical treatment expenses.

+ Hospital inpatient costs were 20% of the premium dollar

+ Hospital outpatient costs were 15% of the premium dollar

+ Prescription drugs amount to 14% of the premium dollar.

+ Other medical services were 5% of the premium dollar

+ Government payments, compliance costs, claims processing, and other
admin costs account for 6% of the premium dollar.

+ Consumer service, provider support and marketing were 4% of the
premium dollar

+ Insurance companies pocketed just 3% of the premium dollar.

A couple points about the just 3% finding:

+ Would any venture capital firm give financial support to a new business that said they planned to make 3%? I do not think so!

+ If some action were taken to change the 3% profit would it solve the problem of increasing medical insurance premiums? I certainly don’t think anyone would say yes.

The survey brought out the real issue behind medical insurance costs with words to the effect - continually increasing utilization of medical treatment plus new, more expensive treatment and increasing costs for current treatments are the things that have been the real cause of higher medical insurance rates.

Bottom Line: I want to encourage everyone who hears a statement – my medical insurance rates went up because of executive compensation – to say. What is really going on is people are using more medical treatment and the cost of these services have been increasing much faster than normal inflation.

Everyone is also encouraged to talk to medical treatment providers about the importance of making the real cost of their services available. Why? Only when we have what is called price transparency will we begin to have real competition among medical providers and thus achieve lower costs.

For example, in one part of the medical treatment world – laser eye surgery, which is normally not covered by medical insurance but is very open about treatment prices these rates have been falling. Proving that competition in the medical treatment field will work.

Employees laid off Sept.1st or after can receive COBRA & mini COBRA coverage for 35% of the rate.

In summary new federal regulations will:

+ Allow individuals, laid off September 1st or after, to receive COBRA or Conn mini COBRA coverage for 35% of the normal rate.

+ Mean individuals enrolled in the new COBRA option will make their 35% payment to their former employer.

+ Enable COBRA employers, 20 or more employees, to be reimbursed for their 65% of the premium by taking a deduction from their next payroll tax payment.

+ The reimbursement for individuals enrolled in Conn mini COBRA will be done by the employers medical insurance company.


Some frequent questions:

+ How long can coverage for 35% be obtained? Nine months.

+ When can an individual start to receive coverage for 35%? March 1, 2009.

+ What if the laid off employee did not elect coverage when it was offered? They will receive a new notice of eligibility to elect coverage.

More details will be released soon by the Department of Labor.

Federal changes may mean parents using Husky can receive premium assistance so the kids can be on their employer plan

Recently passed federal legislation to extend the program, which provides funds for Connecticut's Husky B plan also made some changes.

There is a premium assistance program in the expanded plan. A couple points:

+ Funding can be given to Mom or Dads employer plan to cover the cost of enrolling children in their plan which has lots of providers vs being on Husky with its limited providers.

+ The employer plan must meet certain qualifications such as paying 40% of the premium.

More details will be provided as they become available.

Reforming "healthcare"

Healthcare reform has been talked about a lot in the last couple months. However, there has been little, if any, coverage or discussion about the real reason medical insurance is expensive - medical treatment is expensive.

One big reason medical insurance is expensive is the fact that 70% or more of medical claim costs can be connected to individuals lifestyle!

Looking at some details on medical treatment cost I think some points from the CEO of a medical insurance company in Mass. are very important. I can also confidently say the same points applies here in Conn. James Roosevelt, Jr., president
and CEO of Tufts Health Plan, advocates for "eliminating wasteful spending".

He brought out in an article that the New England Healthcare Institute (NEHI) has" identified "five sources of wasteful practices that, if eliminated, would offer dramatic cost savings." They include:
+ "wide variations in patterns of care"
+ "medical mistakes,"
+ "overuse of hospital emergency departments for non-emergencies"
+ "underuse of drugs and other therapies to manage chronic conditions"
+ "overuse of antibiotics for viral infections."

In his article he also recommends improving "strengthening the primary-care system" and putting "an emphasis on health rather than healthcare".

Will plan to comment more on the importance of working on medical treatment and medical claim costs since these are solutions vs. all the "talk" about access and things like bringing small groups of individual together which will have little affect.

Consumers are looking for more than getting

Want to share the info from a new survey that indicates - "Many American consumers want more from their health care system than they’re currently getting – including greater online connection to health care providers and medical records, customized insurance coverage and wider access to emerging innovations such as retail clinics."

The Deloitte Center for Health Solutions, part of Deloitte LLP conducted the survey, which brings out useful information.


One insightful point from the survey which is a good cost containing step - "84 percent prefer generics to name-brand drugs"