Maryland May Allow Small Group HRAs

IN THIS ISSUE:



  •  Maryland May Allow Small Group HRAs


  •  AMA Calls on FTC to Investigate Insurance Industry Concentration


  •  NY Times ? Bush Reinventing Medicare, Medicaid


  •  Fortune — Upcoming Labor Negotiations to Focus on Health Benefits


  •  Overutilization Overstated ? Marmor & Sullivan


  •  Third Party Payment Induces Rationing


  •  Consumerism Means More Than Cost-Shifting


  •  Milwaukee Employers Consider the Return of Fee Schedules


  •  VENDOR?S CORNER

Maryland May Allow Small Group HRAs


On February 12, I testified on HRAs before the Maryland Senate Finance Committee. Maryland is unique in having a ?Health Care Access Commission? that defines what benefits will be allowed to be offered in the small group market. The powers-that-be in Maryland (including the couple of major insurers that control most of the market) are quite happy with this arrangement. Publicly they argue that having standardized benefit plans is good for consumers because it makes it easier to comparison shop between plans. In fact, it impedes competition and innovation, so the major players can continue dominating the market without having to work very hard. A few years ago the Commission decided to allow MSAs to be sold in Maryland, but added so many bells and whistles to the already complicated federal rules, that few if any have every been sold in the state. The legislation I was testifying on would have required the Commission to allow small employers to set up Health Reimbursement Arrangements. There were quite a few misconceptions among the Senators. They seemed to assume that an HRA must involve a high-deductible insurance plan. I tried to clarify the issue in my testimony.

SOURCE: http://www.galen.org/news/021303a.html



AMA Calls on FTC to Investigate Insurance Industry Concentration


American Medical News ran an editorial calling for the Federal Trade Commission to investigate this sort of market domination. It cites a recent AMA report on ?Competition in Health Insurance? that found as few as two plans hold 90% of the market in places like Dayton, OH and Pensacola, FL, and 61 out of 70 metropolitan areas are ?highly concentrated.? It says that in 20 of the markets, a single plan held at least half of the HMO/PPO enrollment and that barriers to entry for new competitors are daunting. The editorial concludes, ?The FTC needs to investigate, and act forcefully as needed, when a managed-care machine starts pushing people around.?

SOURCE: http://www.ama-assn.org/sci-pubs/amnews/amn_03/edsa0303.htm


NY Times ? Bush Reinventing Medicare, Medicaid


This kind of market domination makes it easy for the single payer crowd to argue for governmental programs. If there is no meaningful competition, what is lost when a government agency replaces a private monopoly? That is precisely the nut the Bush administration is trying to crack in developing Medicare and Medicaid reform proposals, as well as Social Security, according to Robin Toner and Robert Pear in the New York Times. They write, ?The administration?s vision for Medicare and Social Security moves away from the notion that everyone should be in the same government-managed system with the same benefits. It promises individuals more choices?? The ability of individuals to make choices is a fundamental dividing line, according to the article. It quotes Former SSA Commissioner Robert Ball as saying, ?(The Bush) proposals are a major departure from the principles that have governed the social insurance system from the beginning.? Those principles include, ?that all working Americans pay into the same Medicare system; that the healthy and the sick, the rich and the poor, end up in the same program; and that all have the same core benefits when they retire.?

SOURCE: http://www.nytimes.com/2003/02/24/politics/24AGEN.html



Fortune — Upcoming Labor Negotiations to Focus on Health Benefits


Writing in Fortune Magazine, David Stires says, ?You don?t need a crystal ball it see it is a fight waiting to happen.? He is referring to the coming round of labor negotiations where health care will be at the very tippy-top of the agenda. The tone has been set by the two-day walk-out by General Electric workers and the earlier 44-day strike at Hershey Foods. The GE workers were resisting adding from $200 – $400 per year in out-of-pocket costs, and the Hershey workers ended up taking lower pay increases to offset added health care costs. The article says that corporations, especially in manufacturing, are reaching a breaking point. While prices went up in the services industry by 3.2% in December (over the year before), in manufacturing prices actually dropped by 1.5%. Meanwhile health care costs are soaring, rising by 44% since 1999 at GE. SBC Communications is even worse off with health costs jumping by almost 50% since 1999, for a total outlay of $2.5 billion for 343,000 active and retired employees — $7,829 per person. The Big Three automakers have total health care liabilities of $92 billion ? 50% greater than their combined market capitalization of $66 billion. Though strikes are likely, they could also kill off the economic recovery. The article says the West Coast dock strike last year, ?was the single biggest influence on the fourth quarter?s sharp drop in national output? and cost the economy $2 billion a day. There isn?t much optimism in the article. While GE?s senior vice president of human resources is quoted as saying the company was passing on just 10% of its health care increases, the president of the union, Edward Fire says, ?We?ll fight to the bitter end,? if the company tries to get workers to pay more of their health care spending.

SOURCE: http://www.fortune.com/fortune/articles/0,15114,423756,00.html


Overutilization Overstated ? Marmor & Sullivan


With dynamics like that, consumer-driven health seems an awfully thin reed to pin our hopes on. Theodore Marmor and Kip Sullivan argue in the St. Paul Pioneer Press that the whole premise is wrong. They see a giant conspiracy by corporate America to mislead the public into thinking health care inflation is the fault of over-insured patients. ?There is no credible evidence that American received a lot more medical care in the past few years,? they write. The real culprit is, ?the market power of insurers, drug manufacturers, hospitals and other suppliers of medical services.? They argue that underuse is every bit as prevalent as overuse. ?Advocates of medical savings accounts? know they have no solution for underuse and that their practices will almost surely aggravate it.?

SOURCE: www.twincities.com




 


Third Party Payment Induces Rationing



The Orange County Register points out that one of the reasons health care costs rise faster than other sectors of the economy is because it is more heavily regulated than other sectors. ?The best way to arrest the cost increases in health care, or even reverse them, would be to reduce the role of government and increase the role of the private, voluntary sector.? It adds, ?when third parties pay and recipients perceive services as ?free,? the tendency is to demand more than is really needed, which drives up prices or induces rationing.? (Hence, the ?underuse? that Marmor and Sullivan worry about, except people are rationed out of appropriate use by third parties, rather than making their own decisions)

SOURCE: www2.ocregister.com


 


Consumerism Means More Than Cost-Shifting



Michael Prince writes in Business Insurance that, ?Cost-shifting is only a temporary solution.? What is really needed is, ?a fundamental change in employees health care mindset.? The article quotes Jack Mollen of EMC Corp. as saying, ?We can never solve the 15% compounded growth problem without focusing on the long term.? The article goes on to say that a successful long term approach, ?involves instilling a consumer mentality,? including cost awareness and better information. Keith Peden of Raytheon said 3,000 of their employees have signed up for Definity?s consumer-driven plan. He reports there has been no adverse selection. At Coors Brewing, 14% of employees signed up for the plan when it was first offered. But Mr. Mollen added that consumerism does not have to mean adding a consumer-driven plan. ?Consumerism is getting the employee to be an effective decision-maker. It?s about making the right choices.?

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=12351&a=a&bt=cost-shifting



Milwaukee Employers Consider the Return of Fee Schedules


Employers in Milwaukee are looking at reinstating fee-schedule payments, according to Joe Manning in the Journal Sentinel. ?The idea is high on the agenda of the Business Health Care Group of Southeast Wisconsin,? which includes most of the area?s larger employers. The group has employed Mercer Consulting to study whether the idea could be part of the solution. Humana?s Larry Rambo says his company has also been looking at the feasibility of a fee-schedule product. And Richard Blomquist has been looking at price variations in the area and setting up a fee-schedule program under Blomquist Benefits. He has found hospitals charging from $2,736 to $6,268 for vaginal childbirth. His feeschedule would pay slightly more than $3,800. Fees for a colonoscopy range from $743 to $2,552 and for a coronary artery bypass from $21,250 to $43,567. The article raises the concern about higher payments for more complicated situations, and the need for patients to know about quality and safety along with prices.

SOURCE: http://www.jsonline.com/bym/News/feb03/118760.asp


VENDOR?S CORNER


Evolution Benefits says its debit card can double FSA participation. It says with higher cost-sharing, employees will need ?a convenient, reliable source to fund those benefits.? The card reduces paperwork and administrative expense, and by encouraging greater FSA enrollment, employers can save on FICA costs. One client, ?saw total contributions jump from $6 million to $9 million,? and saved $225,000 in FICA payments as a result. The company says its debit card can also be used with HRA programs, with or without an FSA. The company performs electronic adjudications to ensure only qualified expenses are paid from the HRA. For more information go to http://www.EvolutionBenefits.com


Optate, Inc. has announced a new online decision support tool called HEALTHCAREoptimizer. The company release says, ?it helps the employee construct an estimate of health care utilization for the coming year, and optimizes how that utilization would affect out-of-pocket costs across all plan options.? For mare information contact Rebecca McDermott at 734-794-4022 or rmcdermott@optate.com


Mercy Health Plans, Inc. has contracted with HealthTrio to serve 200,000 enrollees in Illinois, Missouri and Texas. The company says members will be able to enter personalized health information and access their own personal health records and educational material. Mercy CEO Tom Kelly says, ?we will be able to move past the cost shift issues inherent in consumer-driven health plans and concentrate on on improving the health status of our members.? For more information, contact William Bennett at 314-214-8123 or wbennett@mhp.mercy.net



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About the author

IN THIS ISSUE:



  •  Maryland May Allow Small Group HRAs


  •  AMA Calls on FTC to Investigate Insurance Industry Concentration


  •  NY Times ? Bush Reinventing Medicare, Medicaid


  •  Fortune — Upcoming Labor Negotiations to Focus on Health Benefits


  •  Overutilization Overstated ? Marmor & Sullivan


  •  Third Party Payment Induces Rationing


  •  Consumerism Means More Than Cost-Shifting


  •  Milwaukee Employers Consider the Return of Fee Schedules


  •  VENDOR?S CORNER

Maryland May Allow Small Group HRAs


On February 12, I testified on HRAs before the Maryland Senate Finance Committee. Maryland is unique in having a ?Health Care Access Commission? that defines what benefits will be allowed to be offered in the small group market. The powers-that-be in Maryland (including the couple of major insurers that control most of the market) are quite happy with this arrangement. Publicly they argue that having standardized benefit plans is good for consumers because it makes it easier to comparison shop between plans. In fact, it impedes competition and innovation, so the major players can continue dominating the market without having to work very hard. A few years ago the Commission decided to allow MSAs to be sold in Maryland, but added so many bells and whistles to the already complicated federal rules, that few if any have every been sold in the state. The legislation I was testifying on would have required the Commission to allow small employers to set up Health Reimbursement Arrangements. There were quite a few misconceptions among the Senators. They seemed to assume that an HRA must involve a high-deductible insurance plan. I tried to clarify the issue in my testimony.

SOURCE: http://www.galen.org/news/021303a.html



AMA Calls on FTC to Investigate Insurance Industry Concentration


American Medical News ran an editorial calling for the Federal Trade Commission to investigate this sort of market domination. It cites a recent AMA report on ?Competition in Health Insurance? that found as few as two plans hold 90% of the market in places like Dayton, OH and Pensacola, FL, and 61 out of 70 metropolitan areas are ?highly concentrated.? It says that in 20 of the markets, a single plan held at least half of the HMO/PPO enrollment and that barriers to entry for new competitors are daunting. The editorial concludes, ?The FTC needs to investigate, and act forcefully as needed, when a managed-care machine starts pushing people around.?

SOURCE: http://www.ama-assn.org/sci-pubs/amnews/amn_03/edsa0303.htm


NY Times ? Bush Reinventing Medicare, Medicaid


This kind of market domination makes it easy for the single payer crowd to argue for governmental programs. If there is no meaningful competition, what is lost when a government agency replaces a private monopoly? That is precisely the nut the Bush administration is trying to crack in developing Medicare and Medicaid reform proposals, as well as Social Security, according to Robin Toner and Robert Pear in the New York Times. They write, ?The administration?s vision for Medicare and Social Security moves away from the notion that everyone should be in the same government-managed system with the same benefits. It promises individuals more choices?? The ability of individuals to make choices is a fundamental dividing line, according to the article. It quotes Former SSA Commissioner Robert Ball as saying, ?(The Bush) proposals are a major departure from the principles that have governed the social insurance system from the beginning.? Those principles include, ?that all working Americans pay into the same Medicare system; that the healthy and the sick, the rich and the poor, end up in the same program; and that all have the same core benefits when they retire.?

SOURCE: http://www.nytimes.com/2003/02/24/politics/24AGEN.html



Fortune — Upcoming Labor Negotiations to Focus on Health Benefits


Writing in Fortune Magazine, David Stires says, ?You don?t need a crystal ball it see it is a fight waiting to happen.? He is referring to the coming round of labor negotiations where health care will be at the very tippy-top of the agenda. The tone has been set by the two-day walk-out by General Electric workers and the earlier 44-day strike at Hershey Foods. The GE workers were resisting adding from $200 – $400 per year in out-of-pocket costs, and the Hershey workers ended up taking lower pay increases to offset added health care costs. The article says that corporations, especially in manufacturing, are reaching a breaking point. While prices went up in the services industry by 3.2% in December (over the year before), in manufacturing prices actually dropped by 1.5%. Meanwhile health care costs are soaring, rising by 44% since 1999 at GE. SBC Communications is even worse off with health costs jumping by almost 50% since 1999, for a total outlay of $2.5 billion for 343,000 active and retired employees — $7,829 per person. The Big Three automakers have total health care liabilities of $92 billion ? 50% greater than their combined market capitalization of $66 billion. Though strikes are likely, they could also kill off the economic recovery. The article says the West Coast dock strike last year, ?was the single biggest influence on the fourth quarter?s sharp drop in national output? and cost the economy $2 billion a day. There isn?t much optimism in the article. While GE?s senior vice president of human resources is quoted as saying the company was passing on just 10% of its health care increases, the president of the union, Edward Fire says, ?We?ll fight to the bitter end,? if the company tries to get workers to pay more of their health care spending.

SOURCE: http://www.fortune.com/fortune/articles/0,15114,423756,00.html


Overutilization Overstated ? Marmor & Sullivan


With dynamics like that, consumer-driven health seems an awfully thin reed to pin our hopes on. Theodore Marmor and Kip Sullivan argue in the St. Paul Pioneer Press that the whole premise is wrong. They see a giant conspiracy by corporate America to mislead the public into thinking health care inflation is the fault of over-insured patients. ?There is no credible evidence that American received a lot more medical care in the past few years,? they write. The real culprit is, ?the market power of insurers, drug manufacturers, hospitals and other suppliers of medical services.? They argue that underuse is every bit as prevalent as overuse. ?Advocates of medical savings accounts? know they have no solution for underuse and that their practices will almost surely aggravate it.?

SOURCE: www.twincities.com




 


Third Party Payment Induces Rationing



The Orange County Register points out that one of the reasons health care costs rise faster than other sectors of the economy is because it is more heavily regulated than other sectors. ?The best way to arrest the cost increases in health care, or even reverse them, would be to reduce the role of government and increase the role of the private, voluntary sector.? It adds, ?when third parties pay and recipients perceive services as ?free,? the tendency is to demand more than is really needed, which drives up prices or induces rationing.? (Hence, the ?underuse? that Marmor and Sullivan worry about, except people are rationed out of appropriate use by third parties, rather than making their own decisions)

SOURCE: www2.ocregister.com


 


Consumerism Means More Than Cost-Shifting



Michael Prince writes in Business Insurance that, ?Cost-shifting is only a temporary solution.? What is really needed is, ?a fundamental change in employees health care mindset.? The article quotes Jack Mollen of EMC Corp. as saying, ?We can never solve the 15% compounded growth problem without focusing on the long term.? The article goes on to say that a successful long term approach, ?involves instilling a consumer mentality,? including cost awareness and better information. Keith Peden of Raytheon said 3,000 of their employees have signed up for Definity?s consumer-driven plan. He reports there has been no adverse selection. At Coors Brewing, 14% of employees signed up for the plan when it was first offered. But Mr. Mollen added that consumerism does not have to mean adding a consumer-driven plan. ?Consumerism is getting the employee to be an effective decision-maker. It?s about making the right choices.?

SOURCE: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=12351&a=a&bt=cost-shifting



Milwaukee Employers Consider the Return of Fee Schedules


Employers in Milwaukee are looking at reinstating fee-schedule payments, according to Joe Manning in the Journal Sentinel. ?The idea is high on the agenda of the Business Health Care Group of Southeast Wisconsin,? which includes most of the area?s larger employers. The group has employed Mercer Consulting to study whether the idea could be part of the solution. Humana?s Larry Rambo says his company has also been looking at the feasibility of a fee-schedule product. And Richard Blomquist has been looking at price variations in the area and setting up a fee-schedule program under Blomquist Benefits. He has found hospitals charging from $2,736 to $6,268 for vaginal childbirth. His feeschedule would pay slightly more than $3,800. Fees for a colonoscopy range from $743 to $2,552 and for a coronary artery bypass from $21,250 to $43,567. The article raises the concern about higher payments for more complicated situations, and the need for patients to know about quality and safety along with prices.

SOURCE: http://www.jsonline.com/bym/News/feb03/118760.asp


VENDOR?S CORNER


Evolution Benefits says its debit card can double FSA participation. It says with higher cost-sharing, employees will need ?a convenient, reliable source to fund those benefits.? The card reduces paperwork and administrative expense, and by encouraging greater FSA enrollment, employers can save on FICA costs. One client, ?saw total contributions jump from $6 million to $9 million,? and saved $225,000 in FICA payments as a result. The company says its debit card can also be used with HRA programs, with or without an FSA. The company performs electronic adjudications to ensure only qualified expenses are paid from the HRA. For more information go to http://www.EvolutionBenefits.com


Optate, Inc. has announced a new online decision support tool called HEALTHCAREoptimizer. The company release says, ?it helps the employee construct an estimate of health care utilization for the coming year, and optimizes how that utilization would affect out-of-pocket costs across all plan options.? For mare information contact Rebecca McDermott at 734-794-4022 or rmcdermott@optate.com


Mercy Health Plans, Inc. has contracted with HealthTrio to serve 200,000 enrollees in Illinois, Missouri and Texas. The company says members will be able to enter personalized health information and access their own personal health records and educational material. Mercy CEO Tom Kelly says, ?we will be able to move past the cost shift issues inherent in consumer-driven health plans and concentrate on on improving the health status of our members.? For more information, contact William Bennett at 314-214-8123 or wbennett@mhp.mercy.net



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About the author