Despicable Insurance Sales Idea...

And no, that’s not redundant. Most agents, and most companies are not inherently evil, although a lot may be shortsighted. According to dictionary.com, despicable means: “worthy only of being despised and rejected.” And to which nasty practice do I refer? This one:

"Dear terrorists, new firman issued. Kill 10, take a branded T-shirt and be best terrorist in the group. Jehad begins from July 18-20 – Osama bin Laden.’’

It is creative minds at work at ICICI-Prudential Insurance Company, exhorting local agents to go for a ‘sales kill’. The new strategy was aptly named ‘MissionJehad’.

In a meeting of the company’s agents on Tuesday night, employees were asked to adopt the “binLaden strategy”, ie, one terrorist killing 10 people.

Here, though, jehad meant sale of insurance policies.

As I said, this is absolutely the most disgusting insurance idea I have EVER seen. And in over 20 years in the biz, I've seen a few.

Now, according to A M Best, the “Prudential” in this case is Prudential plc, a British company, and not “the” Pru. Of course, our own Pru has been accused of its share of questionable sales practices over the years, but nothing that approaches this level of depravity.

Does it matter that this took place in (faraway) India ? No. Some home office “leader” saw and approved this, and it reflects poorly on the industry. In fairness, it’s not a story that’s gotten a lot of play in the press (yet?), but I have no doubt that at least some carriers here know about it. I would certainly hope that it is condemned in the industry press.

What causes a presumably successful company to engage in such a practice? Obviously, we don’t know. But I would hazard a guess that it’s a result of a corporate culture of greed. That is, when sales become more important than integrity, abominable ideas such as this begin to surface. Now, that may mark me as naïve, but it doesn’t change the veracity of the statement.

Interestingly, the carrier is called ICICI-Prudential, and it’s a joint venture between a bank and an insurer. Perhaps that’s the root of the problem.

We're STILL with you...

UNION, JACK!

Risky Business, Part 1...

Some 30 states currently have High Risk Pools for those who are considered uninsurable for medical coverage.

And so, you ask?

Well, the Ohio Department of Insurance recently received a rather hefty grant to study whether or not such a plan should be implemented here. In this post, we’ll review how High Risk Pools work in other states, and in Part 2, we’ll look at the results of Ohio’s study.

According to the National Association of Health Underwriters, High Risk Health Pools (HRP’s) “provide an important safety net for people with catastrophic medical conditions who do not have access to employer-based group health insurance, such as early retirees, self-employed individuals, and employees of businesses that do not offer health insurance coverage. In addition, in most states, high-risk pools serve as the guaranteed-issue purchasing option for individuals who wish to exercise their federal group-to-individual health insurance portability rights as provided by the federal Health Insurance Portability and Accountability Act of 1996.”

Currently, if an Ohio resident is uninsurable, there are few choices. If one is a Federally Eligible Individual, or one has been declined for individual medical coverage, there is a state-mandated “Open Enrollment” (guaranteed issue) plan. This plan comes in two flavors: mediocre but expensive, and expensive but mediocre. Your choice. There are also some guaranteed issue/limited benefit plans, and some non-insurance alternatives. None of these are adequate substitutes for real, comprehensive major medical insurance.

An HRP seems like a good solution to this conundrum. For one thing, the plans available in HRP states offer coverages that are comparable to what’s available on the open market, and many offer PPO plans to help bring down the cost of care. Apparently, some also offer prescription drug and maternity benefits, which seem to me to be self-defeating, in that these would help drive that cost back up. Of course, those purchasing insurance through such a mechanism will pay more, but the amount of any surcharge is usually capped at something that approaches a reasonable amount.

One item which seems to be under the radar, but is vitally important to the success or failure of such a plan, is how pre-existing conditions are treated. If there’s no waiting period before such conditions are covered, we’re back to buying insurance in the back of the ambulance on the way to the hospital. But if there is some reasonable (there’s that word again!) period of time that one must be covered before such conditions are eligible, then the system at least has half a chance.

But at what ultimate cost?

According to Communicating for Agriculture, in the 32 states which have HRP’s in place: 181,411 people were enrolled in these plans. Total premiums of $793 million were paid in, while over $1.2 billion in claims were paid out.

Ouch!

It's estimated that the administrative costs of the plans totaled about $75 million, leaving a $540 million deficit. In short, each participant actually costs about $3,000 to insure; their premiums cover about 60%, which means the average monthly premium is about $150. Hmmmm. The remaining 40% shortfall is covered by the states "using various methods" (I.e. taxes or carrier assessments. Or both).

Does this mean that the idea lacks merit? No, I don’t think so. But the figures cited indicate that each state’s pool is (on average) only covering about 5,000 or so people. That doesn’t seem like a rousing success. While the concept of HRP seems valid, I’d be interested in seeing how this really makes a significant dent in the number of uninsureds, which is estimated at about 40 million nationally, or about 800,000 per state.

One other interesting factoid is that a number of HRP states have now expanded their plan options to include HSA’s. As we learned from the HSA/HRA series, this type of plan seems very attractive to those folks currently without coverage. Perhaps this is what’s necessary to make significant inroads.

In Part 2, we look at the results of the study.

Tuesday Update...

Grand Rounds is up over at AggravatedDocSurge. The Doc did a particularly good job with this weeks 'Rounds -- recommended.

Okay, Just One More on HSA and HRA...

Recently, I received this email from a colleague, whose nom-de-plume is smansfield. He’s graciously allowed me to share it with you:

I love the concept of the HSA, but it appears that the QHDHP's [ed: Qualified High Deductible Health Plan] for both individual and group don't seem to offer any real savings. I can't help but think that these carriers have the pricing structure all wrong
for these plans.

I just met with a 13 person group.

They have a plan with UHC that was/is a $1,500 deductible. The renewal came in June and they decided they were going to go with a higher deductible to save on premiums. The new plan they decided on with UHC was an HSA plan with a $2,850/$5,600 deductible (although they had no idea it was an HSA plan they switched to). The new premium, $7,200 per month. They actually thought they were getting a plan that paid 100% for doctor visits. I kindly explained to them that they had no benefits until the deductible was met. So they hurriedly switched back to the $1,500 deductible prior to the end of June (renewal month). Now the premium is just over $9k per month.

So I simply show them a similar plan with another carrier for under $7k per month. My point is, they get a $1,500 deductible with dr. copays, prescription copays, etc for less than the QHDHP with a $2,850 deductible. If only the original writing agent had serviced this account, he wouldn't be losing it.

Until carriers can price these plans so that the individual or employer can see a tangible benefit, they will only have limited success. I'm not saying that the plan has to be so inexpensive that the difference in premium fully funds the HSA, but they have to get it lower.

Just my 2 cents.

Well said, and Thank You!

Wow! Now *That’s* Getting Results…

Over at Health Business Blog, proprietor David Williams recently excoriated the Bush administration for it’s underwhelming commitment to VA funding.

That was two weeks ago.

Today, the Wall Street Journal had this to say:

"Less than two weeks ago, the administration asked for an extra $975 million for this summer. Now the VA estimates it needs another $300 million prior to Sept. 30 and as much as $1.7 billion -- on top of the president's budget request -- for fiscal 2006."

The VA system is one which doesn't get a lot of play in the blog world (well, at least in my little corner of it). David's post is important, in that it heightens our awareness of that system. Thanks, Dave!

Lagniappe: I Stand Corrected (Sorta)

In the first post of my recent HRA-HSA series, I stated that there were no hard numbers identifying just how many HSA plans had been sold to date. That statement was made based on an exhaustive search of relevant government sites, but I failed to take into account the resourcefulness of my own industry.

To wit: America’s Health Insurance Plans (the carriers’ association and lobbying group) has completed a survey of their membership, and found some surprising information. According to AHIP’s report, more than a million Americans are covered by HSA-eligible medical plans. This represents a more than two-fold increase over the number of such folks only 8 months previously.

Even more remarkably, the study indicates that some 37% of those purchasing these plans were previously uninsured; that’s one good way to lower the overall number of uninsureds. And over a quarter of the group HSA plans were sold to employers who had not previously offered medical coverage.

Another common misconception with High Deductible Health Plans (HDHP) is that they’re only attractive to young, healthy individuals. But the study showed that almost half of the purchasers were over 40 years old (not exactly Medicare-fodder, but not quite spring chickens, either).

These are, of course, numbers reported by carriers, and not the gummint, so they may or may not reflect the true picture. But they’re instructive, nonetheless. My only real beef is with two numbers that are not reported:

First, there’s no breakdown by income level. This is important, because one of the objections to MSA/HSA has been that they appeal primarily to the affluent, and are typically rejected by “Joe Sixpack.” It would be nice to test the accuracy of that claim.

Second, while there are plenty of premium figures tossed around, there’s no way to tell the difference between what a group paid last year for their generic co-pay plan and how much they save (and are putting into accounts) by switching.

If and/or when those numbers become available, I’ll let you know.

HSA and HRA: Some Conclusions...

Well, that was certainly an interesting exercise: I’ve never done a 3-parter before. Any feedback is, of course, quite welcome.

Given the lengths of the previous posts, I’ll try to be brief in summation. First, it seems to me that the most important lesson to take away from this whole “debate” is that one needs to ask questions. Lots and lots of questions. Ultimately, whether you’re an employer or an employee (or self-employed, in the case of HSA), you’re going to have to live with the decisions, and its consequences, for a while.

Second, it’s critical that one avoid confusing the benefits and drawbacks of each program. The HSA certainly has an appeal to the employee, in that – by staying healthy, and exercising good judgment in health-care purchases – said employee stands to collect a nice windfall. On the other hand, an employee covered under an HRA can look forward to generally lower gross out-of-pocket expenses.

From the employer standpoint, both programs seem pretty equally matched. The HDHP that is the hallmark of the HSA can result in substantial premium savings. But the HRA obviates the need to set up funded, vested accounts for employees. And, in many ways, it’s a simpler plan to understand.

At its core, the biggest drawback to the HRA is that it seems to reward those employees who experience larger (or more frequent) claims. That is, the only way to access the extra funds that now reside in the employer’s pocket (i.e. the savings enjoyed from upping the deductible, etc) is to have a large claim, or more smaller ones. I’m not convinced that this is a positive.

My biggest beef with the HSA is the carriers really don’t price it effectively: there should be a much more dramatic difference between the High Deductible plans and the generic co-pay plans they’re designed to supplant.

Thanks for patiently slogging through all these posts, and a Special Thank You to Joe Kristan at Roth & Co for the nice links.

In case you missed 'em: Part 1 here, Part 2 here, Part 3 here

Monday Update...

Grand Rounds is up at Shrinkette's site. Check it out.

“Real Life” with HSA and HRA…

[UPDATE: I've corrected some of the numerical assumptions in the HSA section]

Okay, enough with the theory, let’s talk turkey. One of my small group clients asked me about changing their plan to an HSA. Let’s review some basic information of how this group’s plan currently works:

A small professional practice, 8 people work at the XYZ Company. Their current plan is relatively rich, with $10 office visit co-payments and a modest $500 annual deductible per person for “the big stuff.” Once the deductible’s met in a given year, the plan pays 80% of the next $5,000 of covered expenses, leaving any one person with a maximum exposure of $1,500 in a year. There’s a family maximum of two on the deductible and co-insurance. This means that, even if all 4 members of a particular family have major claims in a year, the family’s only responsible for $3,000, not $6,000.

There’s also a prescription drug card, with $10 co-pays for generics and $20 for brand names. All in all, a decent enough plan, maybe a little benefit rich, and therefore pricey, but you get what you pay for. The current monthly premium for this group is a little over $3,100.

Now, to keep things manageable, we’re going to be looking at only two alternatives. The first is the HRA; simply by increasing the deductible to $1,000, and the co-insurance participation to $1,250, the employer would save over $300 a month, or about $4,000 a year, in premiums; each covered person would have an additional $750 of potential claims participation (subject, of course, to the two per family maximum).

In its simplest form, an HRA would obligate the employer to pay (or help pay) the additional $500 added to the deductible. There are eight employees, and an additional 4 or 5 dependents (spouses, children) in this group, so we’re talking a total of a dozen or so warm bodies to be covered. On average, maybe 4 of them will have claims exceeding $500 (the original deductible) in a given year, so the employer could conceivably pocket about $2,000 in savings in this scenario. And the employees still have their office and drug card co-pays.

With the HSA, we’ll need to make more substantive changes. We’ll be bumping the individual deductible up to $1,250, and the family deductible to $2,500. We’ll also be doing away with the office visit co-pays and prescription drug cards. In other words, pretty much everything medical will be going toward the deductible until it’s satisfied. On the other hand, we’re also getting rid of the 80/20 coinsurance: once that deductible is met, the plan pays 100% -- nice. This part alone is worth the price of admission, because no one understands co-insurance.

One interesting “twist” on that deductible: a “family” is defined as two or more covered people (could be husband and wife, or single parent, or whatever), and they kind of “pool” the deductible. That is, whatever expenses any one of them has goes towards it, until the $2,500 is hit. Could be one person with a heart attack, or 3 with broken arms. Once the $2,500 threshold is met, everyone’s at 100%. The group’s premium for this plan is about $2,500, representing a $7,000+ annual savings for the employer.

Well, sorta.

Each employee is actually decreasing his potential claims exposure by $250 a year, and each family by $500. However, this comes at the expense of the 1st dollar benefits (office and rx co-pays). In order to mitigate this, the employer could contribute $50 per month for each "single," and $100 for each "family". This group has six with individual coverage, and two with family. So the employer would be contributing up to $3,600 for the singles (6 x $600), and $2,400 (2 x $1,200) for the families. This reduces the net savings to $1,000 per year.

That’s money he’ll have to spend, and which the employees would then “own.” Not necessarily a bad thing, but it changes the equation. All of a sudden, that $7,000 savings starts to go away. Granted, he doesn’t have to be that generous; he could, for example, choose to contribute less to to the accounts. But still…

Next time, some conclusions, and suggestions.

We're with you...

UNION, JACK!

OT, but important...

In Ohio, the law says that, in an emergency, one should go to the nearest facility, regardless of whether or not it’s in-network. In fact, the law says that one’s insurance carrier must cover the treatment in such a case as if it was in-network, even if it’s not.

“Emergency” is defined under the “prudent layperson” rule: “a prudent layperson is someone with average knowledge of health and medicine.” In other words, even a rocket scientist could be a prudent layperson, as could I.

The definition continues:

“An emergency is a condition of such strong pain and severe symptoms that a prudent layperson could reasonably expect that a lack of immediate attention would

- Place the person’s health in serious risk;

- In the case of pregnancy, place the baby’s health in serious risk;

- Cause serious damage to bodily functions; or

- Cause serious damage to an organ or other body part."

In such a case, one’s “managed care plan [HMO, PPO, etc] must pay your medical bills for that emergency, no matter where you receive the services…In an emergency, you should go to the nearest hospital, even if " it’s out of network.

Pretty straightforward: If there’s an emergency, you go to the nearest facility, get treated, and pay as if you’re in-network. On the one hand, it doesn’t mean the care is “free:” you might still have deductibles, co-pays, etc. But you’re not subject to out-of-network penalties, either.

Or so I’ve understood for lo these many years. But I received an email today from a carrier, which shall remain anonymous (for now), which seems to fly in the face of long-established health care procedure and knowledge. Because this carrier has been unsuccessful in coming to terms with several local hospitals, it has decided to punish its own customers. To wit:

“When a member receives emergency care at an non-contracted hospital, [Carrier X] will pay for the services at the in-network level subject to a maximum allowable amount…If a non-contracted hospital charges the member more than this amount, the member will be responsible for the difference.”

[note: I am deliberately withholding the url until the matter is resolved]

See the problem here? Me, too.

One thing that I have never been called is a shrinking violet (or shrinking anything, really). So I just had a nice conversation with the helpful folks at the Department of Insurance, who were also quite concerned. I've forwarded this email to them so that they can look into the matter with a bit more “ammo.”

I’ll let you know how things turn out.

HSA’s and HRA’s, Part Deux…

So what, exactly, is an HRA? Well, it’s a tax-advantaged Health Reimbursement Arrangement that allows an employer to reimburse employees (and/or their dependents) for some of their medical expenses. In this regard, it’s similar to the Health Savings Account (HSA), because it means that the employer can help the employee by cushioning the blow on a major claim. And, the same kinds of expenses that are approved for reimbursement on an HSA plan are okay for HRA, as well.

So what’s the difference? It really comes down to who contributes the money for reimbursement, and who ultimately owns that money.

In an HSA, either the employer or the employee (or both) can contribute to the “rainy day” account, but – no matter what – the employee “owns” whatever money is in that account, and is free to spend it however he chooses (subject, of course, to potential wrist-slapping if the funds are misused). Whoever makes the contribution gets the tax deduction (again, could be both). The type of insurance plan that can be used with an HSA is dictated by the government, so there’s not much flexibility in plan design. And, of course, HSA’s are available to both groups and individuals.

With an HRA, though, only the employer can contribute the funds. The employee doesn’t ever own them, because it’s not an “account,” it’s an “arrangement.” That’s not splitting hairs, because the point is that the employer decides (“arranges”) what claims will be reimbursed, as opposed to just dumping money into some bank account. HRA’s are available only to groups, not individual plans, and offer a lot more flexibility. For one thing, there’s no governmental regulation over what kind of plan is used, so an employer has more choices. For another, HSA plans require that, if the employer is making a contribution, he has to contribute like amounts to everyone in the pan. There are no such rules for HRA’s.

In Part Three, we’ll look “under the hood,” to see how each plan works in real life.

July 4th Update...

Lest anyone fret, I'm taking some family time over the long weekend.

InsureBlog will be back on Tuesday the 5th with a new installment on HSA's vs HRA's.

Have a great 4th!

Thoughts on HSA’s & HRA’s...

One of the hats I wear says “Continuing Education Provider” on it (not really; it’s a metaphor, okay?). In preparing for an upcoming class, I’ve had my own learning opportunity:

Sometimes, a cat is a dog.

There’s been a LOT of press in recent months about how much more successful Health Savings Accounts (HSA’s) have been than Medical Savings Accounts (MSA’s) ever were. It seems that everyone’s talking about them, and they’re selling like hotcakes.

Except that they’re not (and no, I can’t back that up with hard numbers; no one can - yet. But I’ve got pretty good instincts on these things)

Turns out, a LOT of folks -- particularly employers who offer health coverage – are asking about HSA’s, but precious few are actually installing them. Why is that?

Well, it helps to know that HSA’s aren’t free. That is, just because the employer may save some premium dollars (and not as many as one might think), it doesn’t mean that he gets to keep them. By the time one adds in the actual contributions an employer has to make to the savings account to make it attractive (or even palatable) to employees, the savings don’t amount to much. Then, add in the admin costs, and all of a sudden they’re not so great a bargain.

Don’t get me wrong, I am still a tremendous advocate of the concept; I just have some issues with the execution of it. The problem is that HSA’s really aren’t about saving money; they should be about empowering the health care consumer to make better decisions (however one chooses to define “better”).

In any case, what I’m finding is that more often than not, when employers talk about HSA, they really mean HRA.

What’s an HRA? It’s a Health Reimbursement Arrangement (notice the “A” here is not for “Account”). With an HRA, the employer still offers a plan with a higher deductible, for example, but offers to subsidize said deductible. In other words, instead of just handing out dollars willy-nilly, the employer can control to whom the dollars go, and can actually look forward to potentially saving real money.

Next time, we’ll look at an actual case.

Tuesday Update...

This week's Grand Rounds is up over at Health Business Blog.

Enjoy!

A Radical Idea?

Joe Kristan at Roth & Co, tipped me off to a rather interesting forum recently held in our nation’s capital. The panel included members of the President’s Advisory Council on Federal Tax Reform, and included folks from The Heritage Foundation and the Galen Institute.

In fact, the representative from Galen, a Ms Turner, opined that “the tax code contributes to employees' ignorance about the costs of health insurance, leading them to demand more expensive health insurance from their employers and raising healthcare costs.”

Robert Moffit of the Heritage Foundation added that "(i)f you want to reform the health insurance markets, you must reform the tax system." He went on to advocate the elimination of the tax-free status of employer-provided health insurance.

Right problem, woefully wrong answer. If one frames the dilemma in those terms, then the only fair, equitable, and reasonable answer is to make health insurance premiums deductable for everyone, not just those covered under a group plan. That would solve a lot of the affordability problem simply and rationally.

It also blithely ignores the rising impact of qualified reimbursement plans, such as HRA and HSA. These serve several purposes, not the least of which is empowering insureds to be more proactive in their healthcare, and raising their awareness of what coverage and services really cost.

As one could imagine, this issue has caused quite the kerfluffle in several areas of the blogosphere, including insurance and tax related sites.

Over at Tusk & Talon, Chad posits that “(t)here would be a massive amount of social upheaval if the employer based system were scrapped either in favor of socialized medicine or free market individual health insurance.” He’s concerned that the costs of transitioning to a system where these tax breaks are absent would be staggering. He’s also concerned about how such a change would affect availability and quality of coverage.

We’ve been here before:

Back in April, we dissected an article by Dr Greenburg of George Washington University in Washington. He also proposed this course of action, believing that this would make the coverage even more attractive. As we stated then, and restate now, the tax advantages of employer-based coverage are, if anything, a minor issue.

Let’s review for a moment the underlying raison d’etre of this tax deduction: During the 2nd World War, private sector wages were frozen. Employers still needed to attract employees, though, and so lobbied Congress to let them offer benefits tax free. This seemed like a good idea at the time, and it has now become enshrined in the pantheon of worker bennies.

So, would eliminating the deduction really cause widespread panic?

Conversely, would such a measure resolve the issue of the uninsured?

No, on both counts, because the whole issue of group insurance deductability is a straw man. The real issue is benefit configuration, guaranteed insurance and portability. That is, group insurance (typically) covers more things than individual, e.g. maternity expenses. And, because group coverage is by law guaranteed issue, folks don’t have to worry about being declined for coverage, or having pre-existing conditions excluded.

Neither of these area are even remotely addressed by eliminating tax advantages. If anything, such a move would highlight the very real benefits of availability and portability, and underscore how very little the tax break figures into the equation.

The good folks over at T & T express the understandable concern that they’d “likely be out of a job if (this) proposal were to become law.” While I won’t pretend to offer vocational advice, I’m less sanguine about this possibility. From the time I got into this racket some 20 odd (or these odd 20) years ago, I learned that when Social Security was first proposed, life insurance agents panicked, convinced that their business was doomed. And in the mid-60’s, when Medicare came into being, the health insurance industry reacted in much the same way.

Of course, history teaches us that neither eventuality occurred.

Who knew?!

One of the fun things about blogging is being able to relate true (but potentially boring) stories, in an entertaining way. Well, hopefully entertaining.

Insurance carriers each do things their own way. For instance, some carriers charge for each child they cover, while others charge a flat rate, regardless of the number of progeny involved. The latter case is a good deal for large families, but not such a bargain for smaller ones.

Case in point:

Another nice lady calls in to discuss health insurance (this tends to happen in cycles, so I don’t keep the little “Take A Number” sign out all the time). Her group coverage at work is getting expensive, and she’s looking for ways to trim the budget. So far, so good.

She is married, and they have one child, a teenaged son. Her contribution toward the group plan is about $230 a month for herself and her son, plus another (whopping) $600 for hubby. That’s over $800 a month that she pays out of pocket (I didn’t ask how much her employer contributes, because it didn’t seem relevant).

She asked me to price an individual plan for her family, so I began – as I usually do – by asking questions. Turns out that she and her son are healthy, but hubby has some blood pressure and cholesterol issues. Okay, that adds to the rate, but nothing too bad. Plus he’s too short for his weight. Again, this doesn’t help, but it’s not a huge deal (no pun in 10 did).

But wait, he’s also on anti-anxiety meds. And he’s “borderline diabetic.”

Oy.

At this point, I stop her, and we go back to square one, which is a more detailed breakdown of her premiums. It occurs to me that, given that hubby’s uninsurable in the individual market, maybe we can find a different solution.

It turns out, a policy on her son is about $75 a month. But if we write it, and take him off the group plan, they save over $200 a month. How is this possible? Remember how we saw that some carriers charge a flat rate, no matter how many kids one has? Well, she’s actually paying for 3 kids worth of coverage now, and we can reduce that substantially, while keep coverage for her husband intact (vitally important in this case).

So, it really does come down to just asking questions.

Lots and lots of questions.

Unintended Consequences…

It is axiomatic that demand drives price. That is, if there’s a particular item that is greatly sought after, the price of that item will (almost) inevitably rise.

At least until something better comes along.

At which point, the cycle starts again.

And so it is with health insurance, as well. Sure, there are risk factors and market pressures, underwriting issues and pre-existing condition exclusions. But by and large, insurance is subject to the whims of the marketplace.

Until now:

“Gov. Mitt Romney doesn't just want to make health insurance universal. He wants to make it compulsory.” In fact, he goes further: "Everyone must either become insured or maintain an adequate savings account to cover their medical expenses." (fop cit)

Now, this may sound like a good idea, but let’s examine the consequences of such draconian measures. When something becomes mandatory by law, it has several effects:

First, people do vote with their feet. Those that rebel at the notion that the gummint is once again intruding into what should be a personal buying decision may well just pick up stakes, and vamoose.

Second, if something becomes mandatory, then the demand is, of course, going to go up. Given that that are a finite number of carriers, with a finite capacity for new business, prices will start to climb, and eventually become even more onerous than they are now.

Third, what about those that either don’t want to purchase, or can’t qualify for, insurance. Well, then, they’ll have to post a bond (or demonstrate that they have sufficient assets) to cover their medical expenses. Which is fine if we’re talking about the flu or a broken arm, but becomes problematic when we’re talking stroke or MS.

Fourth, and perhaps most critical is: “Or else what?” It’s one thing to mandate that folks buy coverage (or put aside funds), but where are the teeth? Is he proposing jail-time for “offenders?” Maybe a fine for those who underfund their accounts? Without some enforcement mechanism, such a law is worse than worthless: it’s a step backward.

Mr Romney would do well to remember that old admonition: Be careful what you wish for…

Transparency…

Merriam-Webster defines it as “free from pretense or deceit...easily detected or seen through...readily understood." In the context of this post, any of those work equally well:

“Continuing his efforts to improve access to health care for Illinois families, Gov. Rod R. Blagojevich today signed the Illinois Health Care Consumer’s Right-to-Know bill, which makes health care price and performance information for outpatient procedures available to all Illinois consumers.”

The Illinois Department of Health will publish the average charges for as many as 30 common outpatient procedures. “It is important that information be obtained on all surgeries to get a more accurate picture of this component of health care,” said Dr. Eric E. Whitaker, state public health director.

According to a recent survey, 85% of Prairie State voters said that such information would “affect their decision” in health care matters, and 75% agreed that such disclosure would “create competition, lower prices and improve quality.”

Okay, I’m done laughing now.

Since when is the price of a surgical procedure the overriding consideration? When was the last time anyone ever called to get 3 estimates for their gall bladder surgery? How about having that tumor excised? Are we really expected to believe that silly measures such as this, full of feel-good nanny-state “disclosure” will somehow affect the quality of care? Hardly.

There are three populations of potential patients who are affected by this law:

First, those that have private insurance (i.e. group at work or their own individual medical plan) already have discounts built into their plans, and a 3rd party which is paying a good chunk of the bill. It’s doubtful that price-shopping their next surgery is going to be a priority.

Second, those who are covered by government programs (e.g. Medicare, Medicaid, etc) are unlikely to have ready access to the information in the first place, and also have a 3rd party paying a good portion of the bill in the second. Again, they’re not out scouring for surgical “bargains.”

The last (and least, in terms of numbers) group, those without any insurance or government aid whatsoever, is perhaps the least interested of all. If they have no means to pay for these procedures, what difference does it make what they cost?

The only folks who benefit from superficial, silly legislation like this is the political class, which can be seen as “caring for the little guy,” but actually accomplishing nothing.

Interestingly, I noticed that the bill doesn’t require the publication of success rates. In other words, one could find out the cheapest place for a given procedure, but not necessarily the best place. Remember, though, you get what you pay for.

And one more thing: nowhere in the press release does it say how much this little project is going to cost the Illinois taxpayer. I wonder if they’ll pass a law that requires government agencies to publish how much they spend implementing these things.

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"Don’t Hang Up!"

The nice lady called about 4:30 on a Tuesday afternoon (and no, the sky was NOT “dark and gloomy.” Sheesh). She was calling, she said, to find out about health insurance for herself and her family.

She’s self-employed, and her husband wants to quit his job to come work with (for?) her, but they’re loathe to give up his benefits.

It’s then that she literally begged me “please, don’t hang up.”

As one would expect, I was a bit puzzled by this. Why would I hang up on her? Well, "because everyone else has” once she disclosed that she’s a Type I diabetic. I simply responded “well, you just weren’t talking to the right agent.”

One of the first things one learns in this business – and then most of us promptly forget – is to ask a lot of questions. Which I proceeded to do. It turns out that she’s actually on several meds, including self-administered insulin injections, and she has some other problems, as well. She and her husband desperately wanted to be in a position for him to quit his job, but were faced with job-lock due to her condition.

Sometimes, things seem hopeless, because you’re too close to the problem, and because you just don’t know about alternatives. It’s an agent’s job to inform prospects and clients about these options.

Turns out, there are several guaranteed issue plans that may be of value to her, and she’s eligible for COBRA, which offers an avenue to longer term coverage, as well. In fact, the COBRA option may be her best bet:

By electing COBRA continuation, and keeping it for the full 18 months (for which she is eligible at this point), she fulfills the critical test for a HIPAA guaranteed issue plan. Assuming she’s still uninsurable at the end of COBRA (which, let’s face it, she will be), she can then transition to another plan, one which will continue to cover all her pre-existing health problems. None of this is cheap, of course, but I submit that it’s still less expensive than going “bare.”

In this case, procrastination is “a good thing.”

Oh, and since her husband is quite healthy, it’s no problem setting him up with his own major medical plan. Problem(s) solved.

ADDENDUM: This is an example of why it’s so important to work with a local, independent agent, as opposed to one of those online services. The anonymous person at the other end of the 800# or email has products and knowledge geared toward the “normal” case. Throw any curveballs (such as diabetes, or thyroid conditions, etc) at such a service, and the most likely response is “Sorry, can’t help you.” Granted, they are unlikely to hang up on you, as apparently happened to this woman. But they’re not going to be much help, either. A knowledgeable pro will know about guaranteed issue plans, HIPAA and COBRA issues, and even non-insurance alternatives.

‘Nuff said.

Congratulations, Class of 2005! Now about that insurance…

As the father of a recent high school graduate (with Honors, no less!), I can begin to look forward to the next phase: college. For those that have a recent college grad, however, there’s an additional consideration:

Most group insurance plans cover your post-teen progeny only until they graduate. That is, if they’re not full-time students, they’re not covered. This is of no small concern, because there are a few options available, and it’s important to pick the right one.

Your first stop is your group insurance certificate of coverage (which is actually a booklet). It will outline when your grad’s insurance stops – sometimes it’s the end of the month following graduation, sometimes it’s that very day. At that point, there are really three basic choices, and which one you choose depends a lot on your grad’s post-grad plans:

If he’s headed to grad school, you may be able to keep him on your plan. Check your certificate, or call your HR department. If he must drop off, and he’s in good health, and you KNOW he’s starting back to school in the fall, then a Short Term Medical (STM) plan may be appropriate. The advantage of these plans is that they are inexpensive, easy to buy, and you pay only for the time you (think) you’ll need the coverage. Check with the grad-school to see what options are available once school starts.

Likewise, if your grad is headed into the “real world,” and has a job already lined up (WooHoo!), be aware that there is usually a waiting period between when the job starts and when the coverage begins. The STM is appropriate in this case.

If your grad is unsure about future plans, a better idea would be to purchase an individual major medical plan, preferably one with a $1500 or higher deductible. These plans are underwritten, and generally cover (disclosed) pre-existing conditions. And there’s no “expiration date,” so they’re more flexible if there’s a continuing need. They are typically more expensive than STM plans, but are the better choice for needs longer than, say, 3 months or so.

If your grad has a serious health condition, and doesn’t qualify for the major med plan, then check to see if your company is subject to COBRA. If there is a serious condition, you really don’t want to go the STM route, for a variety of reasons.

If your company is subject to COBRA, by all means elect it for your grad. Yes, it can be expensive, but it will cover the pre-existing condition(s), and offer more long-term options.

This is by no means an exhaustive list of options. For more detailed information, especially if you have unusual needs or circumstances, your best bet is to consult with a professional, independent agent, with 5 or more years experience in the health insurance field (oh, like me). Meantime…

Congratulations!

Oy, Canada!

Sorry for the pun, but I couldn’t resist. The last few postings here have dealt with some of the shortcomings of our health care delivery and finance system, and the temptation is to look northward at “free” healthcare.

As the saying goes, though: “TANSTAAFL” (There Ain’t No Such Thing As A Free Lunch). While our system definitively needs work, our brethren to the north have some problems of their own:

“The Supreme Court on Thursday struck down a Quebec law banning private medical insurance in a decision that represents an acute blow to the publicly financed national health care system."

The reason that this is significant is that Canada’s much-vaunted nationalized health care system has quite a few problems, not the least of which is long waits for even simple procedures, and often fatal waits for more critical ones. The problem is exacerbated by a law which made it illegal for desperately ill patients to seek care outside the system, even if they could pay for it themselves.

Sometimes, it helps to put a human face on the problem:

Baruch Tegegne, now 61, has advanced kidney disease caused by diabetes. He undergoes dialysis four times a week, and is deteriorating. He's on a waiting list for a kidney transplant, and a private donor has been found. The problem is that the Montreal hospital which would do the actual procedure is refusing to do so, on "ethical grounds." But that's a subject for another post. The point here is that another hospital, in Toronto, is apparently willing and able to do the transplant.

But in Canada, the "free healthcare" isn't portable across provinces, so the system won't pay for the procedure if it's done in Toronto. The implications of such a system here are pretty scary.

An Israeli hospital has offered to do the surgery, at a reduced rate, and fund-raising efforts are underway to make this happen. But the real tragedy here is the impersonal and unbending system that has placed someone in this position. And I’m sure that Mr Tegegne isn’t the only Canuck who faces this problem, but his story is illustrative of a system which is not, IMHO, an appropriate replacement for our own.

So, what’s the connection? Well, a clue is found in this passage from the Times article: “But in recent years patients have been forced to wait longer for diagnostic tests and elective surgery, while the wealthy and well connected either sought care in the United States or used influence to jump medical lines.”

Once there’s rationing, then the system itself encourages folks to seek alternatives. As it stands, those best able to afford treatment get it, somewhere. And those least able to afford such alternatives languish or, in many cases, die in line.

Something to consider when our political class – of either stripe – propose drastic governmental solutions.

For a somewhat different perspective, I recommend Dr John Ford's take on this over at California Medicine Man.

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Who’s YOUR Beneficiary?

Several years ago, I had a client who apparently longed to win a Darwin Award: while riding his motorcycle, he decided that it would be fun and/or prudent to play “chicken” with a Ford Explorer.

CareFlight scraped up the bits, and flew them to the local trauma center, which proceeded to perform over $20,000 of medicine on said bits. Needless to say, this was of little efficacy.

The client had $15,000 of term life through the group health plan. The employer, and premium payor, was his folks’ small business. And they took responsibility for making – and paying for – the funeral arrangements (which, given the circumstances outlined above, was no small thing). Naturally, I helped them file the Death Claim, and we awaited the check.

Which came to me payable not to the deceased’s parents, but his ex-wife. As you can imagine, this took both his parents and me by complete surprise.

Now, as an aside, I should have known this would happen, being the agent. This took place about 15 or so years ago, and I really don’t recall why I was blindsided. I’ll plead ignorance, and move on.

In any case, this story did not have anything like a happy ending, except that I learned the hard way that folks need to KNOW who their beneficiaries are. How many people still have former spouses listed as the beneficiary on their group insurance? How many newlyweds have policies taken out by their parents when they were but wee folk, and whose parents – not their new spouse – are still the beneficiary?

The point here is that, if you haven’t checked your policies lately, it’s never too soon to make sure that you’ve obligated the company to make sure that the right person gets the cash.

A Glimmer of Hope?

While there is some disagreement as to the exact number of folks without health insurance, the number most commonly bandied about is 45 million. And, of course, this is a “fluid” number in that, in any given month, it is not the same 45 million. And, of further course, absence of health insurance does not equate with absence of health care. Nonetheless, this is a serious problem, and merits serious consideration. While our politicos – elected and otherwise – jockey for position(s) on addressing the problem, a disparate group of organizations, companies, and institutions have been meeting to brainstorm from a more broad-based perspective.

So, who makes up this broad-based collation? You may be surprised:

“(R)epresentatives of trade and professional groups, such as the American Hospital Association and the American Medical Association; labor organizations, such as the A.F.L.-C.I.O. and the Service Employees International Union; business groups, such as the U.S. Chamber of Commerce; industry interests, such as the Blue Cross and Blue Shield Association and Johnson & Johnson; government alliances, such as the National Conference of State Legislatures and National Governors Association; and political-advocacy groups, such as the liberal Families USA and the conservative Heritage Foundation.”

Representatives of these groups have been meeting since last October and, not surprisingly, haven’t yet solved the problem. But at least they’re trying.

What’s promising here is that these groups recognize that simply pointing the finger of blame solves very little; indeed, the fact that there is cooperation from both the private and public sectors may be what finally resolves many of the underlying issues.

An encouraging sign is that “(T)he group is leaning toward incremental solutions…an approach that might disappoint purists on the political left and right. But increments -- substantive increments -- offer the best short-term hope for progress at a time when partisan dissension, especially in Washington, has caused political paralysis on health care.” Couldn’t have said it better m’self.

This effort is only about 6 months or so old, so it’ll be interesting to see what, if any, recommendations are forthcoming. As a fan of the free-market, I would prefer to see solutions coming from broad-based coalitions such as this, as opposed to some monster thought up by our political class.

We shall see.

Late Spring Housecleaning...

First, the good news:

I've added the Haloscan commenting and trackback system.

Unfortunately, this process deleted all the previous comments -- Ooops! PLEASE don't take this personally...I really enjoy the comments here.

Have a great weekend!

He Ain’t Heavy…

Well, actually, he is. And to his credit, he wants to do something about it: he wants to undergo weight-loss surgery in order to treat his morbid obesity. Which is commendable, if drastic.

And he wants his insurance to pay for it.

Which is unrealistic.

By and large, carriers do not cover weight-loss surgery. Or stop-smoking programs, infertility treatments, or growth-hormone regimens.

There’s actually a very good reason for this: they are not issues which should be covered by medical insurance. Look at it this way: do we expect our auto insurance to cover oil-changes or transmission repairs? Do we rely on our homeowners insurance to pay for leaky roofs (I’m talking about ordinary wear-and-tear, not hail or tornadoes) or cleaning out our chimneys?

Insurance is expensive enough without adding even more overhead to plans.

Is it discrimination against obese folks?

Yes, but discrimination is not, in and of itself, a bad thing. We all discriminate: Wendy’s over McDonald’s, steak over chicken, Honda over Kia, the list goes on. Carriers discriminate against smokers and diabetics, males and females, teenagers and seasoned citizens. Risk-management means that certain classes of folks are higher risks than others, and certain medications, treatments and procedures won’t be covered, because covering them would make plans so expensive that NO ONE would buy them.

My erstwhile client directed me to ObesityLaw.com, which is “the first and premier advocacy practice devoted to representing the interests of morbidly obese persons in health care and discrimination matters.” While the site is heavy on the “sue the bastards” rhetoric, it does offer some ideas about different procedures and resources, as well. And there is apparently a pretty large grass-roots effort toward legislation to prohibit discrimination against the obese.

Nationally, there are currently 25 different bills in congress that deal with obesity issues. So it’s not easily dismissed.

My friend Bob Vineyard has pointed me to an article which really explains what bariatric surgery is - and isn't - and some of the other issues surrounding this controversial procedure. It doesn't settle the debate, but it certainly sheds additional light on the subject.

I tend to be somewhat of a purist when it comes to insurance: it’s about managing risk, and that means defining what should and shouldn’t be covered from an economic, rather than a social, viewpoint. Now, before the flaming begins: I am aware that it seems oxymoronic that an insurer won’t pay for bariatric surgery, but it will cover the resulting heart-attack and quadruple bypass.

I never said that insurance had to make sense.

But think about it: there’s no way to exclude a heart attack that’s specifically caused by morbid obesity. This is a systemic issue, and there’s no way to appropriately (and legally) word such an exclusion. Not to mention, there’s little chance that said heart attack was caused solely by the obesity; there are almost always other factors, as well.

Just food for thought.

UPDATE: Once again, a big InsureBlog Welcome to our Grand Rounds visitors. Please feel free to leave a comment, and to look around at some of the other posts here.

It’s a Weird, Weird, Weird, Weird World…

A few weeks ago, I wrote about international travel and medical insurance. And that was an interesting situation. But this one’s better. In some ways, this case encapsulates the future of the global economic model.

Imagine, if you will:

A nice, normal, middle class suburban family. Dad works in IT, Mom’s a homemaker raising their three young children in Midwest Suburbia. Dad’s a contract employee at a local firm, which contract is up at the end of the month, and he’s off to the next one.

And so, you may ask?

So, this family moved here from Ireland several years ago, and Dad’s new job is in Germany, so naturally he’s leaving for France in a few weeks to look for a house. About a month after Dad leaves, Mom and the kids “will cross the pond" to join him.

Keep in mind, none of these nice folks is an American citizen. But Dad’s employer provided health coverage while they were here, and will pick it up again after they’ve settled down in their new home in France. Meantime, though, he’ll be without coverage for a while after he leaves the US, and the family will lose theirs once he’s gone.

Following this? Me either.

Thankfully, it really is much simpler than it appears: we need one type of policy for Dad, and a similar – but different -- one for Mom and the kids. Both plans will provide coverage for a month.

The total tab for this little adventure? A little over $400 for the works. Not too bad, after all.

And people complain that insurance isn’t any fun!

It’s All in the Genes…

UPDATE: Welcome Grand Rounds visitors! Please take a look around, and feel free to leave a comment (or three).

Recently, the debate about using genetic testing in underwriting has heated up. Newswise is an online news aggregator, a sort of Lexis-Nexis wannabe. In their most recent release, they found that “40 percent of people already undergoing genetic testing are worried that participation might affect their future insurance coverage.”

Now, at first glance, this would seem to be a pretty significant problem, and an issue which the insurance industry should address.

But things aren’t always what they seem. The poll asked participants whether or not they agreed that: “(g)enetic testing is not a good idea because you might have trouble getting or keeping your insurance.”

The problem is, the question is useless. First, there is a difference in how life insurance is underwritten and renewed, and how health insurance is underwritten and renewed. So to ask about the generic “insurance” is to miss a key point.

Second, “getting” insurance and “keeping” insurance are two different animals. The “getting” part is called underwriting, and in Ohio, companies are forbidden – by law – from using genetic testing in underwriting health insurance. The “keeping” part is irrelevant, since a carrier can’t cancel your health insurance except for very limited reasons (including fraudulent claims, misrepresentation on the application, and non-payment of premiums). There is no provision for changing or canceling a plan based on the results of any genetic tests.

Life insurance underwriters may take genetic factors into consideration. Obviously, a family history of cancer, for example, is going to play a part in that process. But it is merely one tool, and – unlike health insurance – there is so much competition in the life insurance field that even if one carrier says no, there’ll be more than a few others waiting to say yes. That’s the “getting” part. The “keeping part” is irrelevant: life insurance is also a unilateral contract, and cannot be cancelled by the carrier except for those limited circumstances previously described.

But that’s Ohio. What’s happening on the national scene? Well, the Changes in Health Care Financing and Organization program, part of The Robert Wood Johnson Foundation, discusses this in their April issue. They point out that “earlier this year, Congress weighed in with proposed legislation in the Senate and the House prohibiting discrimination on the basis of genetic information with respect to health insurance.”

Senate bill S 306, introduced by Olympia Snowe, prohibits discrimination on the basis of genetic information with respect to health insurance and employment. It would apply to small group plans, individual medical, and medicare supplements. Currently, the bill is “held at the desk,” which means that it’s waiting be matched up with its House counterpart.

And speaking of the House, H.R. 1227 is the Genetic Information Nondiscrimination Act of 2005. Sponsored by Rep Judy Biggert of Illinois, it pretty much matches up with its Senate cousin: health insurers would be barred from using genetic testing results in setting premiums, and couldn’t require applicants to undergo such testing. This bill has been referred to sub-committee, and will eventually be paired up with S 306.

So far, I’ve outlined the technical and legislative aspects of this issue. But there’s more here, on a personal level. As an agent, I represent the carrier, but I work for my clients. This is a fine line, and one which is often obscured in the flurry of paperwork that is the application and underwriting process. I understand that carriers want and/or need as much information as possible to correctly price a given risk. But I also think that there is something Orwellian in the use of genetic testing to decide whether or not someone should pay more for their insurance, or even be covered at all.

Just my $.02

Anthem & Premier…A Lost Hope

A while back, I wondered what would happen when United’s contract with Premier came up for renewal. Would the two sides reach an acceptable deal, or would Premier find itself cut off from BOTH of this area’s largest carriers?

Well, now we know: United and Premier have inked a deal seven months ahead of schedule. And this one’s a doozy – a 5 year contract, instead of the typical 3 year deal. This means that United customers who use Premier providers can breathe a little easier, knowing that they won’t find themselves in the same boat as Anthem insureds. And having such a long-term agreement in place means that the stress on everyone involved is put to bed for quite a while.

Well, not for everyone. Now that this deal is in place, it would appear that United is in position to take a good chunk of business away from Anthem. Why, you ask? Well, because United’s contract was due to expire this year, there was apprehension that they’d be in the same boat as Anthem, vis-a-vis Premier. Why jump out of the frying pan into the fire? But now that those fears are put to rest, employers can feel comfortable looking to United for coverage.

And there’s this: in the months since Anthem and Premier parted ways, more and more insureds are finding that they are affected by the split. The latest brouhaha involves emergency care. In theory, under Ohio law an emergency (defined by the “prudent layperson" test) must be covered as in-network, even if services were rendered by an out of network provider. But that’s not what’s happening:

"When chest pains scared Sharon Smith into Miami Valley Hospital's emergency room, it was less than a month after her cardiac stress test had found an abnormality in her heart.
It was also four days after Miami Valley's contract with her insurance company, Anthem Blue Cross and Blue Shield, had expired after failed negotiations.
But this was an emergency. Anthem had assured customers that emergency care would be covered at network rates. In Smith's case, Anthem also approved using Miami Valley for more expensive treatment.
The bill: nearly $15,000. Anthem sent her a check for $4,520.82.
About 100 Anthem customers a month are getting similar surprises after ER trips to Miami Valley or Good Samaritan Hospital, according to officials with Premier Health Partners. Premier is the parent organization over Miami Valley, Good Samaritan and Middletown Regional hospitals."

Anthem says that Ohio law doesn’t apply in this case; they maintain that they’re regulated under federal law, not state. Premier disagrees, and has filed a complaint with the Ohio Department of Insurance.

It’ll be interesting to see how that plays out.

Empowering Ourselves...

For many of us, health insurance is provided by our employer, so we have little opportunity to access typical Consumer Driven Health Care (CDHC) products. High Deductible, catastrophic plans and HSA’s are not often available, and not every company has a knowledgeable HR person (or even any HR person) to answer questions or address concerns we might have.

But there are ways to empower ourselves and take advantage of at least some of the benefits of CDHC. Most cafeteria plans now include a high-deductible option, or one with higher co-pays for office visits. Some even offer plans with no office co-pays, where one pays a percentage (typically 20% to 30%) of these smaller claims, in return for a lower premium. By choosing one of these plans, we realize savings that can go toward paying the smaller, routine claims, but maintain the safety net portion of the plan for those unexpected “big ticket” items.

Years ago, before HIPAA, I sold quite a few MSA (Medical Savings Account) plans. Of course, these were what we’d now call “non-qualified,” which means that there were no tax benefits. But that also meant no government intervention or “gotcha’s;” one could spend the money however one chose. Folks without access to an HSA can accomplish much the same thing by diverting the premium savings into a passbook account. Or even a mutual fund, although I’d recommend choosing one that concentrates on growth, and has a conservative risk profile: this is “rainy day” money, and is likely to be needed right away if needed at all.

Another area where folks can save premium dollars is in dependent coverage. For convenience’ sake, a lot of people choose to cover their spouse and children under the company plan, even though they may have to pay most (or all) of the premium. While this may make sense for some (especially young families who think they need maternity coverage, or those who have severe medical problems), there may be substantial premium savings in opting out of the employer-based coverage for dependents, choosing instead an individual major medical plan.

It's worth exploring some of these options -- after all, it's your money!

A Penny for Your Thoughts, Doc?

My last post looked at a new reimbursement model – well, maybe a “tweak” of the current model would be more accurate. In a recent New York Times item, Dr Thomas Gross suggests still another:

“The current medical reimbursement system pays by the job performed, not by the time spent…Your family doctor receives the same reimbursement for diagnosing a sinus infection in 6 minutes as he does if he takes 30 minutes…In our current system, there is no way to buy an hour of your doctor's time just to talk.”

First, in fairness, one most likely COULD purchase an hour of the doc’s time; it would just be VERY expensive, and not a covered expense under one’s medical plan. But I see Dr Gross’ real point, which is that medicine has become outcome-based, as opposed to health-based. And that this is at least partly a result of the current medical insurance system.

In previous posts, I discussed Consumer Driven Health Care (CDHC). The primary goal of CDHC is to empower patients/insureds in taking a more active role in their own health care. We talked about coupling catastrophic medical plans with tax-advantaged savings accounts.

But HDHP’s and HSA’s are not the only way to engage in CDHC (there, is THAT wonkish enough for you?). We’ll look at some alternatives next week.

So, How Much Do You Tip Your Doctor?

We routinely tip our waitress at the local diner, and our barber…er, uh Hair Stylist, even the pizza delivery guy. But how much do we tip our physician when we’ve recovered from the surgery, or just stayed healthy?

Of course, I ask this with tongue firmly in cheek, but I was prompted to bring this up because of an article over at Fox News. Apparently, physicians who participate in the “Bridges To Excellence” program are eligible for cash bonuses based on the health of their patients.

The idea is that, if docs can keep their patients healthy, they’ll lower overall health care costs. Which makes sense. Of course, it hearkens back to capitation plans (e.g. staff model HMO) which actually penalize physicians who have negative outcomes. This approach has had mixed success; apparently sticks don’t work as well as carrots.

As one can imagine, not everyone who learns about this arrangement is a fan:

"It's disturbing that the only way we can get physicians to do the right thing for their patients is by paying them money."

So says Arthur Levin from the Center for Medical Consumers, a non-profit advocacy organization active in both statewide and national efforts to improve the quality of health care.

I find this kind of naiveté refreshing, if misplaced. Last I looked, physicians are human (well, excepting EMH, for all you Voyager fans), and respond well to financial incentives. What difference does it make “why” a given doctor is motivated to keep his patients well? What’s important is that his are.

There is one valid concern mentioned in the article, but it seemed as if it was an afterthought, and wasn’t fully explicated: “Critics fear an incentive program may encourage doctors to treat only the healthiest patients in order to get the financial reward.” Isn’t that the same argument, though, that critics have lobbed at Consumer Driven Health Care? I’m not saying it isn’t true, but I would love to see some facts to support the thesis.

Interestingly, Medicare is testing this out, as well. That’s promising: anything that would potentially help lower the costs of Medicare can’t be all bad.

Interesting idea, and I’ll be keeping an eye out for more information on it.

UPDATE: Welcome Grand Rounds visitors! Please take a look around, and feel free to leave a comment (or three).

Anthem vs Premier: I Told Ya So…

Way back in February, I wrote a series of posts about the Anthem Insurance versus Premier Health issue. Briefly, Anthem is this area’s largest health insurer, while Premier encompasses the most actual healthcare providers. Their contract expired, and as a result, folks covered by Anthem who see Premier docs and use Premier facilities must pay a much higher rate for services provided.

At the time, I predicted that “more and more folks (will) have to switch docs, leaving Premier’s physicians with a shrinking customer base.”

Well, lo and behold, this week’s issue of the Dayton Business Journal brings us this news: “Five months after Anthem coverage ended, Premier-owned physician practices are feeling the squeeze. Doctors are expected to lose 10 percent of their salaries this year as patients go to other doctors who take Anthem or delay appointments, which can complicate patient care. Doctors across the group are opening to new patients, some for the first time in years.”

Business is apparently so bad that at least one Premier provider, Premier HealthNet (a group of primary care docs) is offering a discount of up to 30% for their Anthem patients, to help cushion the blow.

I had observed at the time that, while the two Premier hospitals could probably weather the storm, I had my doubts that the physicians, with much shallower pockets, could bear the long-term brunt of this painful situation.

On the bright side, I must applaud Premier for taking the unusual step of contacting their Anthem patients, encouraging them to urge their employers to switch to a carrier that included Premier. I can report, though, that I have yet to be called by any Anthem clients who wish to change carriers due to this circumstance. And I haven’t heard from any colleagues that they’d been asked, either.

But as always, the big loser is the patient. As one Premier doctor observes, “Healthy patients can transfer to another doctor with little problem. But the chronically ill, elderly or mentally impaired suffer most.”

This is kinda cool…

A long-term client (and friend) recently referred his brother and sister-in-law to me for their life insurance needs. Aside from the fact that this is one of the best compliments one can pay an agent (any referral is terrific, but a relative is the highest kudos), this was an interesting case on its own merits.

An aside: I try to update this blog every few days. This past week, though, I hit an intellectual dry-spell. Thank you for your patience as I get back up to speed.

My client’s brother (whom I’ll call “Tom”) is a private pilot. But he is not an amateur pilot: he flies a corporate jet for a (presumably wealth) family. They travel extensively overseas, including England and Europe. While traveling, his employers pick up the tab for all his expenses (food and lodging, entertainment, etc). I think I’m jealous.

Tom’s wife also has an unusual vocation: she’s a free-lance news reporter. I must confess that, although I’ve insured media folks before, this is a new niche for me.

Tom and his wife had decided that they need additional life insurance. Because of his job, this promised to be somewhat challenging. I’ve written a few pilots before; carriers tend to make offers that include a choice of:

1) Increased premiums or

2) Aviation exclusion

This means that he could have coverage for all risks, including a plane crash, but pay a substantial premium for the privilege. Or, he could have “standard” rates, but no coverage in the event that his plane took a dive. This would be understandable, perhaps, for a weekend pilot with limited experience. But he has over 10,000 hours logged, which seems to take him out of the “amateur” category.

I called Tony -- a good friend and colleague – who is also a private pilot, although without Tom’s extensive history. He suggested a carrier that he’s used. And indeed, the quote I received from them was okay. Pricey, but acceptable.

I called Tom to go over the numbers, and he agreed with my conclusion. But he then mentioned that he had read, in one of his industry journals, of another carrier which specialized in this type of risk. One of the benefits of being an independent agent is the ability to take on new carriers for specific cases; this carrier offered a quote, based on Tom’s info, that included neither an excessive rate nor an exclusion. WooHoo!

The case is now with the underwriter. One of the best things about this business is the opportunity to meet interesting folks, and to tackle challenging cases. This experience satisfied both.

Some Thoughts on the Uninsured…

I’m often bemused by politicians and hucksters (but I repeat myself) who try to equate “uninsured” with “unable to access health care.” To add insult to injury, there’s a perception that most – if not all –- such folks have little or no opportunity to purchase health insurance, or cannot afford it.

For the most part, of course, the poorest among us – who I believe we do have a duty to at least try to help – already have access to health coverage and health care, through the auspices of Medicaid (Medicare’s another can of worms). I was pleased to find that I’m not way out in left field in this:

According to the National Underwriter, “(m)any uninsured American adults are healthy, and many who are uninsured do appear to be getting some kind of medical care.” According to the article, over ½ of all uninsured adults (excluding those on Medicare) are free of chronic conditions. On top of that, almost ¾ of such folks who ARE chronically ill have accessed needed medical care in the previous 12 months.

The article goes on to say that such adults “are far less likely to get any care at all, or care from a 'usual source of care,' than adults with health insurance.” Tellingly, no numbers are given for THIS conclusion, which indicates to me that it’s far less of a given than the authors would have us believe.

So what does all of this mean? Well, for one thing, it’s pretty clear that there’s no health care “crisis” here in the good ole US of A. Sure, there are problems, and the cost of insurance is one of them. And the toll – in dollars and hours – attributable to illegal aliens; sorry, undocumented foreign guests -- is immense. Finally, the burden of cost-shifting from the government onto the private sector is staggering.

But those who need care generally get care, even if it’s not from their traditional family doctor. Of course, the rest of us pay for this, but that’s another post.

But wait, there’s more! According to the Employee Benefit Research Institute in Washington, “(t)he number of high-income individuals without health insurance may not be increasing as fast as government statistics suggest .” In fact, those who earn at least $50,000 a year account for almost 1/5 of the total uninsured.

Now, $50,000 a year is not “rich.” But it is not “poor,” either. Certainly there are folks in this income range who have enormous debt…but by and large this is not a sector of the economy which one would characterize as “poverty-stricken.” There are inexpensive safety-net health plans available that are tailor-made to ensure that someone in this income range doesn’t lose his house to medical bills. Whether or not that someone chooses to purchase such a plan is, of course, another matter.