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Major Insurers Cant Keep Raising Prices with Employers Baulking

March 25, 2008

Analysis of:Health insurers take a dive on WellPoint's warning | www.marketwatch.com

    Ongoing healthcare inflation at 200-400%/yr of  CPI has surpassed the point where employers can easily compete with international products and services.  We are already seeing growth in Scheduled Medical Benefits, which are a poor substitute - but do substitute for traditional major medical insurance where employers want to offer a gift of insurance.       Providers are actively suing insurers for their billed charges, and insurers are actively moving to the Medicare fees schedule to lower their costs - some successfully and others not.  The Medicare Advantage (PPO, HOM, POS and PFFT) plans with and without Part D pharmacy have many carriers attempting to develop new markets.       The 10-15% fall in the stack market will cause increased pricing of insurance because of poor insurance company investment returns.     The biggest wild card is forecasting what commercial class of insureds our government will subsidize in the new Presidency.

Marsh, Aon, Willis, Gallagher, Acordia, Zurich, Ace and all big brokerage houses hard pressed to beat earnings

March 7, 2008

Analysis of:MMC Sees 4Q Net Income Drop 62% | www.propertyandcasualtyinsurancenews.com

The reason Marsh is struggling is because of poor leadership ending up with $850,000,000+ in fines from NY, IL and CT for bid rigging and prohibited contingency fees.  Future profitability & growth for these brokerages is anything but certain and likely to grow very slowly because they are no longer able to take undisclosed profit sharing - ie. contingency fees that used to comprise significant profits.  Therefore smaller brokerage houses that niche the very profitable Property and Casualty commercial lines will win more quotes against them now that commission means total commission and not partial commission disclosed to the customer.

Rewarding Doctors Good Medicine to Beat Earning Forcasts

March 4, 2008

Analysis of:Managed-care company sees benefits of pay-for-performance | www.tennessean.com

The plans that figure out how to get doctors to self manage best of breed chronic care will certainly spend less money treating their insured lives.  For example, preventing a colon cancer, cervical cancer, heart bypass, transplants, premature infant, stroke or MI saves big bucks.  It saves lives and is a better way to practice medicine.  The key is getting doctors to assume both financial and medical management of the patient by enforcing agreed upon standards of care.  The goal is better outcomes in terms of patient satisfaction and lower cost.  General Motors spent $3 billion in 2004 into its retirement health trust fund or three times earnings.  They buy insurance for 450,000 workers.  Clearly, this is not sustainable and employers and government are acting to stop the bleeding. 

CMS Leaves American Healthways & Rocks Disease Management

February 5, 2008

Analysis of:Medicare Proghram End Hurts Healthways | www.forbes.com

     The apparent abandonment of American Healthways DM by CMS is a big deal.  DM is one of the very few promising techniques available to curve costs, and yes, even improve wellness by preventing onset of disease attack.  The premise of limiting "admissions" is what population based management began on.  It has blossomed into real real prevention.  Quantifying the admissions that did not happen is "subjective-soup".  Inherently, the management of senior diabetes to prevent coma, renal failure,stroke and MI saves big bucks.  Inherently, managing child asthma, prenatal, neonatal, bariatrics medicine, hypertension are very good ideas.  Prepaid population based medicine v. competing fee for service medicine at least has something to incent (pay) doctors to manage health and not just provide procedures AFTER disease onset. We tried to get AH to buy reinsurance for their "fees at risk" program several times without success.  For their sake, we hope they bought it from someone.

Beauty like Quality in the Eye of the (Patient) Beholder

January 22, 2008

Analysis of:WellPoint patients to review doctors online | www.healthcarefinancenews.com

Somebody really smart once said, "Sleep, riches and health to be truly enjoyed must be interrupted."  However flawed P4P, EBM, TQM, critical pathways, centers of excellence, and outcomes measurement are, they at least attempt to define QUALITY. The argument rages and usually ignores the most obvious critic - the patient.  We discussed this at length 20 years ago, and the best definition of quality was defined by whether the patient was returned to their state of health prior to onset of health attack.  If the patient was surveyed about quality after being returned to their previous state of health then quality = good.  If the patient was not returned to their previous state of health = quality  bad - however egregious to the inspired or offending physician using the latest and greatest technology.  Weighting patient sentiment is essential to accurately evaluating outcomes.  The rub is it requires treating the whole patient and not just delving a procedure. 

Individual Market is Sexy But Wears Glasses

January 14, 2008

Analysis of:The New Insurance Frontier | www.healthleadersmedia.com

    MiniMed aka Limited Medical aka Scheduled Medical Benefits are not new.  They derive from the disease specific plans of old.  The article suggests that the uninsured have been ignored which is incorrect.  Many major players have rushed this market niche to find out the premiums are low and the turn over is high - making the marketing costs a poor value and an expensive mistake in money, and especially fragmented focus.  However, there are some winning plans that appeal to both the 47,000,000 uninsured (some estimate at over 80,000,000), AND to insured people with high deductible health plans aka CDHP's, HSA & HDHP's.      The well-heeled individual market is a wholly different game, and is aggressively being sought by most carriers looking to underwrite Major Medical risk.  But that is Major Medical expensive insurance and not Scheduled Medical Benefit plans.     The most likely governmental action is to subsodize this niche, so getting in front of the ball presents opportunity.

Wombs for Rent - Organs for Buyers.

January 4, 2008

Analysis of:Outsourced Wombs | warner.blogs.nytimes.com

Wombs for rent and organs for purchase is not new news, but it certainly is a growing business.  Aside from the obvious effect on a reinsurer profits for allowing very expensive transplanted vessels to be eligible for reimbursement, there is the larger issue of if it is right to allow.  Barren couples clamoring for a blessing of offspring would certainly argue their right as would dying people. The harvesters of organs and surrogate woman would argue for their right to meet market demand.  Advocates for the unrepresented poor see need for rules to protect those unable to protect themselves from unethical treatment of for-profit enterprize.

World Health insurance at 30,000 feet is quite different from emerging market eutrepeneuring

January 4, 2008

Analysis of:To your health: diagnosing the state of healthcare and the global private medical insurance industry | www.swissre.com

The authors comments are accurate for a multibillion dollar multinational reinsurer looking down from 30,000 feet.  The US spends about $1.6 of the estimated $5 billion.  Identifying emerging trends in foreign lands will take a wary eye.  It is highly unlikely that the type of risk giant reinsurers are interested in taking - ie catastrophic risk excess of $50,000 US, and in blocks excess of several million of premium is very different from products that are very affordable and do not offer access to things like cardiology, cancer, and services requiring intensive care nursing.       American Re now called Munich Re, AIG, ING, Lloyds and Swiss are established reinsurers of medical risk among others.        

Practice valuations going at a premium and buyers abound

November 26, 2007

Analysis of:Guaranty Insurance Services Announces Acquisition | www.insurancenewsnet.com

Good article, and method.  Growing an agency is quite challenging today.  Its always a good idea to tie the buying price to longevity of the book and create an incentive to keep current clients renewing during the transition.       The smaller agencies may actually have a better chance today than last year to win new business away from the larger brokerage houses because the larger houses are now prohibited from accepting undisclosed contingency fees that were (and in some cases cases still are) hidden from the client.  Additional concerns about what the federal government will do with health insurance creates deeper issues about if the health insurance business has future legs to stand on.       That said, many agency brokers are looking hard to find $1M-$5M books to buy, but the buying prices are all over the board, and the market is strong for buying them.

Entitlement v. Commercial Insurance: Place Your Bet.

November 19, 2007

Analysis of:Should Doctors Own Hospitals? | www.businessweek.com

Many risk assuming entities are available to doctors and hospitals courageous enough to believe they have the talent to manage their local healthcare market. Some 10-12 years ago we saw the market go nuts for Physician Practice Medical Groups (PPMGs), Group Practices without walls (GPWW’s), Independent Practice Associations (IPA), Physician Practice Organizations (PHO), Provider Sponsored “Medicare” Plans (PSO’s) under Medicare Part C, and leaving the best for last – Provider Sponsored Health Plan joint ventures between physicians and hospitals aka Private Label plans. Columbia/HCA raised 5 billion in 2 years and started applying competition to many hospitals used to not worrying about competition. The market knew that the most efficient model has physicians actively directing care and being financially rewarded or penalized accordingly.

Substantially More Federal Insurance in the Future

November 15, 2007

Analysis of:New Urgency in Debating Health Care | www.nytimes.com

     The market response to healthcare inflation running at 200%-300% of the rest of the economy will force federal action to fund care as an established precedent and "access" to care. We have surpassed the price point where many individuals and small employers now elect not to fund their insurance. Likely federal and state action will come in the form of increased Medicaid entitlement eligibility, pre-Medicare eligible and lower income tax credits to buy commercial insurance. The rate of change will be significantly faster than past years.      The looming question is, "When will large employers (5000 ee+) decide they are not able to compete against product priced without employee benefits." When that happens, doctors and hospitals will find themselves asking if they can sustain a practice without being a contracted network provider in a "single payer dominated" system. Let us hope doctors and hospitals figure out a better way of working together and soon.  

Medical Tourism - What a Country. Equador for Your Front and Brazil at the Rear

November 8, 2007

Analysis of:American's Gamble for Bargain Surgery Abroad | www.medpagetoday.com

The deals abound for care abroad.  The perceived risk is always of infection or complications a long way from home.  But the tremendous differences between costs for dental work, to lithotripsy, to plastic surgery attract the medical tourist for many procedures.  Where complex care is needed for survival, forign providers offer  underinsured people an option to step out of the domestic charitible waiting line, and get the surgery needed before the patient's health deteriorates beyond hope.

Medicaid Market Attractive, But at Cost to Commercial Underwriting

November 8, 2007

Analysis of:Bush vetoes bill on children's health care | www.reuters.com

    Public policy is clearly moving towards more transparency of medical cost and outcomes. All the leading democratic candidates say that national health care is part of their agenda. Bush has relented from his veto position, and is considering lowering the poverty level for increased child-Medicaid eligibility. Politically, the republicans will be hard pressed not to pass new entitlement for children when they are demanding 100+ BILLION Iraqi funding requests. These factors make it clear that businesses who carefully focus on Medicaid will prosper in the coming years. The same can be said for business focusing on Medicare - especially given the 80 million new beneficiaries coming on line soon.      

Simplified Hospital & Physician Ranking Key to Market Share Hold or Gain

November 6, 2007

Analysis of:Cigna reaches deal on doctors' rankings | news.yahoo.com

    Entities that simplify ranking of hospitals and physicians will move market share and revenue.  More importantly, these providers will attract the educated and well informed (80,000,000 soon to arrive Medicare), and commercially well insured commercial customers.  The key is ranking in a way the common person can digest.  Fairly adjusting for  co morbidities and mortality remains daunting.  The biggest bone of contention is fairly reporting outcomes where the patients are poor, very sick, and seeing the doctor the first time at the onset of serious disease.  Many (ie.  ranked heart programs) have already cried foul. Public policy is clearly for greater transparency, governmental oversight, and reporting.  Pennsylvania and Florida are at the forefront of hospital reporting. Physician reporting remains unessessarily fragmented, but holds promise to incent behavior if ranking is by local peers.  Public policy is clearly pointing at transparency, and state and feds are funding it.

Savvy Clients Should Pay, but Typically Do Not

October 26, 2007

Analysis of:N.Y. Giving Big Brokers Green Light To Accept Service Fees From Insurers | www.propertyandcasualtyinsurancenews.com

Savvy CLients will rarely pay for underwriting help from their broker.  Additional service fees above the disclosed commission for underwriting analysis that some agents are looking to capitalize on will be a tough sell to most policy holders who feel the commission already compensates the agent.     

Agency Entrepeneurs - A Horse of Many Colors

October 24, 2007

Analysis of:Local insurance agency network's profits grow slower | www.news-journalonline.com

    A very old agent once said, "I have learned that in this business you need to specialize." Somebody else once said, "Get a high tolerance for ambiguity, you will be a lot happier." That is good advice for agency entrepreneurs. It definitely takes a horse of many colors to successfully manage an agency over the long term, so anyone thinking about doing it needs to prepare themselves for getting good at things they have never done - and very quickly.

Remaining above the "apprearance of impropriety" being policed by the state

October 15, 2007

Analysis of:N.Y. Giving Big Brokers Green Light To Accept Service Fees From Insurers | www.propertyandcasualtyinsurancenews.com

    Great points about brokers being required to place business to maintain appointments, and also the increased costs associated with licensing compliance of a large stable of agents. Regrettably, neither of these carrier costs can me passed on legitimately in a "service fee" the broker bares.     

Undisclosed fees In NY, IL & CT are prohibited. Ohio is suing now.

October 15, 2007

Analysis of:N.Y. Giving Big Brokers Green Light To Accept Service Fees From Insurers | www.propertyandcasualtyinsurancenews.com

Anyone would agree that bid rigging is criminal. Even that water gets murky if a broker purposfully targets bids to a preferred carrier, and then to other carriers already known to be denying new business.  The same can be said if a broker intentionally bids carriers already known to be super high priced.  Any good broker knows which carriers are the most competitive, but selecting who get to compete is in the hands of the broker.

Underwriting services can help with hard barganing, but the Marketing Underwriter position poses carrier concern

October 11, 2007

Analysis of:N.Y. Giving Big Brokers Green Light To Accept Service Fees From Insurers | www.propertyandcasualtyinsurancenews.com

The  Marketing-Underwiter or Broker-Underwriter balances selling with competitive rating.  Many carriers have learned the hard way that it tends to win a lot of underpriced business.       The issue of independent brokers being compensated by the carrier above the disclosed commission to rate risk can be a valuable bargaining tool.  However, most carriers feel rating the risk is their business.  

Not a chance Disclosed "Service Fees" will match prohibited US "Service Placement Fees”

October 4, 2007

Analysis of:Brokers Face Tough Ride on New Charges to Insurers | www.businessinsurance.com

It is very unlikely that 2% service fees for membership cards, and claims administration will match lost prohibited production and profit sharing revenue volume. September 2007 Ohio sues Zurich, Travelers, Chubb, Marsh Hartford and Ace on Anti Trust.  Carriers are insulated, but brokerage houses are not.

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