June 29, 2009

Ready for a Trip to RHIO?

I recently received a form letter from Dr. Andrew Doniger, Director of the Monroe County Health Department.  The purpose of the letter was to introduce the Greater Rochester Regional Health Information Organization, also known as RHIO.

If you’re not familiar with health information exchanges, they are basically a clearinghouse for electronic medical records that allow health care providers, facilities and organizations to share relevant patient information. Things like x-rays, lab results and medication history are included in this exchange.  In the past, information like this may have been shared by fax, snail mail or phone calls between providers.  It’s easy to see how centralizing and making this information available across providers and institutions holds the potential for increased efficiency as well as improvements to patient outcomes and overall quality in our health delivery system.

Map of RHIO Regions in New York

Right now there are about 300 in development across the United States and 19 in New York State across six regions.   The Rochester RHIO was created in 2006 with a $4.4 million state grant and $1.9 million in funds from local businesses, hospitals and health insurers.  About 20 institutions are currently participating by providing data to the RHIO, including the major insurers, hospital systems and lab providers.  Ongoing operations of the RHIO are expected to be funded from lower health care expenses over time.   According to representatives at Rochester’s RHIO, there is not currently a mechanism to share information between organizations in different geographic areas, so if a participating member fell ill while traveling, it wouldn’t necessarily help outside their home area.  However, especially with the spotlight on healthcare IT as part of the health reform initiatives underway in Washington, this will clearly be an area targeted for future expansion.

Despite the benefits, participation is not mandatory. In fact, if you wish to participate as a patient, you’ll need to sign a release form at your provider’s office, authorizing them to share records using the exchange.  You can also sign up on their website, although it’s slightly more cumbersome since it requires that the form be notarized.  If you just go to the doctors office, you can sign in front of the provider without the additional notarization required.

According to the RHIO, here’s a quick run-down of the benefits:

  • Fewer repeated tests
  • Easier second opinons
  • Reduced risk of medical mistakes
  • Faster treatment in an emergency
  • Less chance of adverse drug reactions through electronic prescribing
  • Greater convenience for patients who won’t have to carry cards

It seems appropriate to end this post with a quick quote from Tommy Thompson, former Secretary of Health and Human Services.  He says, “The most remarkable feature of this 21st century medicine is that we hold it together with 19th century paperwork.”

I couldn’t agree more.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

May 20, 2009

Premium Tax Increase Triggers Mid-Year Heartburn for Area Employers

On the heels of last year’s double digit increases, many New York health plans are sending out mid-year rate increases to their clients reflecting the premium tax increases that were pushed through the State Legislature as part of February’s Deficit Reduction Package (DRP) and the recently passed state budget.  For those carriers not doing mid-year adjustments, it appears these taxes will be rolled into next year’s renewal increases, so a temporary reprieve for some employers will only lead to added pain in 2010.

When these tax increases were originally proposed, Governor Patterson asserted that they would be simply be absorbed by the health carriers and not passed on to employer groups.  While that may have been a convenient way to avoid difficult questions at the time, it apparently was not an informed or realistic assessment of how things would play out.

For the wonkish among us, premium taxes on health insurance in New York fall into four distinct categories:

  1. Surcharge on Hospital and Other Health Services – This functions basically like a sales tax on certain health services.  This tax rate increased to 9.73% under the FY 2009/10 state budget.  For comparison sake, it was 8.18 % in 2003.
  2. Covered Lives Assessment (CLA) - This is collected from insurance companies based on the number of single and family policies they issue.  For NY insurers, this amounts to $1.16 billion in assessments.  Again, for comparison sake, just three years ago the CLA was $775 million.
  3. Premium Taxes on Health Insurers – Collected from a 1.75% tax on total premiums paid.  This money is directed to the NYS General Fund and is not necessarily earmarked for health related programs.
  4. NYS Department of Insurance Assessments – Paid by insurers in New York, including HMOs, Non-Profit Insurers and For Profit Commercial Insurers.  According to the NYS Business Council, this amount has increased by at least $300 million because a number of budget items previously funded by the General Fund have been moved into the Insurance Department budget and are now funded through these so called “Section 332″ Assessments.

These taxes add up – according to the NYS Conference of Blue Cross and Blue Shield Plans:

New Yorkers who voluntarily purchase private health insurance coverage pay approximately $3.752 billion in state health taxes. Because employers pay for most New Yorkers’ health benefits, the various private insurance surcharges are viewed as a business tax. Compared to other state business levies, private health coverage taxes would rank as the largest business tax.

Combining the effects of these taxes and the 50 or so mandated services that are required to be included in each health policy, you really start to see the impact of government regulation on the cost of health insurance in New York.

When you start to look at the numbers for actual employers, it quickly becomes clear why many people claim that excessive taxes have lead to a stagnant business environment in upstate New York.  Lee Drake, the owner of OS-Cubed, Inc., a local software development firm, says that the increase will cost him about $2,800 more this year for his five covered employees.

According to Drake, “It encourages business owners to drop insurance benefits and/or pass additional costs to employees.”  He continues, “In effect, it’s a negative raise and penalizes companies who pay a higher percentage of their employees’ health benefits.”

A company that pays no health insurance benefit, or has capped this benefit ends up with no direct cost. Those that pay a full benefit or a portion of an employee’s benefit based on a percentage of the total cost is penalized by having to pay all or some of the tax [increase]. According to Drake, there is a negative incentive for the business to do right by their employees.

Is your company impacted by a mid-year rate increase?  If so, are you passing it on to employees or absorbing it as a cost of doing business?

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

May 19, 2009

Allstate Declines TARP Money

We recently wrote about the Treasury Department giving preliminary approval for six insurance carriers to receive TARP funding as part of the ongoing economic recovery package.

It appears that the ‘Good Hands People’ at Allstate have decided to go it alone, without government help. To be sure, Allstate is not a major player in the group benefits market but they do have a series of voluntary products that compete with AFLAC and Colonial (part of the Unum family).

Thomas Wilson, Allstate’s CEO had the following to say:

We applaud the Administration’s decision to include insurers in the U.S. Treasury’s programs. Given Allstate’s strong capital and liquidity positions, however, we will not participate in this program.

Two factors affecting their decision to decline the funds were a successful debt offering in the private market and the increase in the value of their portfolio by $1.5 billion since first applying for the program.  The rebound in the market and money raised from the offering has apparently allowed them enough additional breathing room to make the TARP funds less necessary.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

May 18, 2009

Hartford Staying in the Group Insurance Business

Over the past several months there has been speculation that The Hartford would break itself up as a way to insulate its generally well performing property and casualty business from the losses incurred in it’s life insurance unit.

As we discussed in a recent post, it wasn’t the group insurance business that was causing problems, but it was said to be on the block as one way to raise capital and weather the storm.

In a news release on Hartford’s website today, they have announced that as a result of the approval of TARP funds for life insurers, they will basically be keeping the company intact, although they will pull back from previous expansions in Japan and Europe.

Here’s part of that release, from Ramani Ayer, CEO of Hartford:

In recent months, we have experienced a great deal of public speculation about our company and our future direction. The Hartford’s recent overall financial performance has been disappointing and the difficult economic environment has placed significant pressures on some of our businesses. While many of our underlying operations are performing well, The Hartford was more affected by the market volatility than some of our peers, given the issues in our investment portfolio and the size of our variable annuities businesses.

He goes on to affirm that they will be staying in the group business and that their annuity products, that got them into their current predicament, will be restructured

We have concluded that the best way to deliver long-term value to our shareholders is to return to our historical strengths as a U.S.-centric insurance company, with a focus on our strong portfolio of protection businesses, primarily property and casualty, group benefits and life insurance. We will also continue to operate strong wealth management and retirement businesses, including mutual funds, retirement plans and a restructured annuities business. As a result, we will move forward with both property and casualty and life businesses.

While I assume that they’re not out of the woods, this does provide some sense of stability for their workforce and current clients.  I can’t help but think that this will have a beneficial effect on the amount of new and retained business on their books.  I also think that until the recent uncertainty, Hartford’s group business was generally well regarded, so keeping a quality carrier in the mix will be a good thing for benefits buyers going forward.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

May 15, 2009

Do TARP Funded Group Carriers Represent a Higher Risk?

Today’s news brought word that Treasury Department has given preliminary approval of the applications of several non-medical carriers for funding under the Troubled Asset Relief Program (TARP).

Hartford Life, Principal, Lincoln Financial, Allstate and Prudential were among the carriers that had applied for participation in the program back in November, and have been approved for funding of up to $22 billion in TARP funds.

Interestingly, the business units responsible for group coverage at each of these carriers, weren’t the ones causing problems  necessitating TARP funding.  At several of the carriers, losses that depleted their capital were related to annuities sold in their individual products divisions.  Many of these annuities contained guarantees for the annuity owners that protected them against downturns in the stock market.  Good for the individuals who bought them — not so good for the carriers.  Because of these generous guarantees, carriers had to reserve a lot more money than they expected to cover the possibility of individual annuity holders cashing in their annuities.  More reserves mean lower capital ratios and the need to raise money – that’s where TARP comes in.

What does this mean for group customers?  Because of capital concerns, these carriers are likely to have less financial flexibility when it comes to pricing new business and in calculating renewal rates.  When times are flush, there are more resources available to ‘invest’ in retaining and winning new business.  When times are tough and carriers are looking to hold on to each dollar they have, they tend to price more conservatively, which means smaller discounts on new business and higher renewal rates on existing business.

We’re also likely to see some reordering of the group landscape – with rumors of Hartford and Lincoln looking to shed their group business.  Other carriers with better financial positions will be kicking the tires on these divisions to see if they can ‘help’ the weaker carriers buy buying their group operations.

While we’re not a ratings agency, there doesn’t seem to be any evidence of the pending failure of any of these carriers.  As such, I wouldn’t necessarily use TARP funding as the sole reason for ending an existing carrier relationship.   That said, if you were concerned about the financial viability of any of your carriers, you should be more concerned about financial difficulties at carriers with long term obligations to your employees – things like cash value life insurance, long term care and long term disability coverage.  Carriers with short term obligations like a dental plan or STD coverage would be less of a concern.  Partnering with a good broker or benefits consultant will help you to navigate these issues with ease.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

April 17, 2009

Preferred Care Plans to Phase Out Free COBRA Billing Service

This may not be a big deal to readers in other parts of the country or even elsewhere in New York State, but for years Preferred Care and Excellus have both offered free COBRA billing services as part of their value proposition for  health insurance products sold in the Rochester market.

COBRA (and state continuation) compliance is an employer responsibility and in most parts of the country this is either handled internally or outsourced to a third party administrator or brokerage firm to complete.

preferred-care-logoWhile Preferred Care has traditionally offered free COBRA billing, it’s parent, Schenectady based MVP Health Care has not.  In a letter to their employer clients this week, they have announced that they will be discontinuing free COBRA billing effective 1/1/2010.  They will make COBRA services available through their Upstate Administrative Services subsidiary on a fee basis.

Clearly there is an expense associated with giving away the service for free and the recent COBRA changes under ARRA have given them an opportunity to reevaluate this option.

So far, Excellus has been mum on their plans for the Rochester market.  As it stands now, they provide free COBRA billing but I wonder if they might see this as a good opportunity to take a second look at splitting it out as a fee based service (driving more business to their EBS/RMSCO subsidiary) or some other tiered mechanism for offering it.

Stay tuned, as I’m sure there will be plenty of discussion around this as employers begin to understand the implications of this change.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

March 31, 2009

NYS Budget Puts Pressure on Health Rates, May Increase Uninsureds

So it looks like we’ve got the best of both worlds in this state budget:  we still won’t be able to buy wine in grocery stores in New York and health insurance rates will likely be increasing by double digits **again** in part because of the disfunctional “three men in a room” budget process in New York State.

The budget proposes $855.3 million (FY2009-10) and $827.0 million (FY2010-11) in new or increased insurance and/or health-related assessments and surcharges for health carriers over and above last year’s levels.

The specific areas of increase are in behind the scenes charges paid by health plans, but here is a quick run down of the impacted areas, courtesy of the NYS Business Council.

On top of the $348 million in new health insurance taxes that were passed as part of the Deficit Reduction Plan (DRP) in February, the proposed budget calls for an additional $481 million in new taxes on this industry, including:

  • $63 million from establishing a third party administrator claims processing fee, which is a $1 assessment on health, pharmaceutical, dental and vision claims valued at more than $20 processed by entities that administer self-funded health insurance plans. We expect that self-insured employers would ultimately be responsible for paying this claims fee.
  • $180 million by increasing the state Insurance Department Section 332 assessments on all New York insurers; $108 million is estimated to be paid by health insurers.
  • $62 million by increasing the Article 32 premium tax on commercial insurers from 1.75 percent to 2 percent.
  • $126 million by increasing the HCRA hospital services surcharge – essentially a sales tax on health care services performed in hospitals – from 8.95 percent to 9.63 percent.
  • $50 million from expanding the (proposed increased) 9.63 percent hospital services surcharge to other services provided in other health-care settings by establishing a physician procedure surcharge.

At the time the Legislature passed the mid-year Deficit Reduction Package in February, I was puzzled by the counter productive nature of these types of taxes.  That is, until I looked at the Governor’s position on this tax increase:

The health insurance business is a competitive industry that has significant cash reserves. We do not believe that the cost of this increase will be passed on to consumers.

With all due respect to the Governor, he is dreaming if he believes that tax increases on health plans won’t be passed through to employer groups and ultimately to rank and file employees at New York companies.

These increases are especially onerous when you consider that for each 1% rise in premium, an estimated 30,000 New Yorkers are pushed into the growing uninsured population.  At a time when more people rather than less should have coverage,  our state leadership seems especially out of touch when it passes a budget with 9% growth in spending, not one dollar less in pork barrel “member items” and all these extra health care taxes.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

March 27, 2009

Employee Free Choice Act (EFCA) Loses Key Supporter

Many of us have been closely following the progress of the Employee Free Choice Act as it works it’s way through Congress.

I was at a GVC SHRM meeting yesterday and the topic came up because there was a recent development in the US Senate that may have some impact on the ultimate passage of this legislation.

The conventional thinking has been that this is a “done deal” with the Democrats in control of the House and in a near filibuster proof position in the Senate.  While they are close, the Democrats need at least 60 votes to pass a bill in the Senate.  Previously they had 59 votes, plus one additional vote assuming Al Franken ultimately prevails in the Minnesota election to bring them to 60.  Arlen Specter, a moderate Republican Senator from Pennsylvania, had previously indicated his support for this legislation but on Tuesday spoke on the floor to basically withdraw his support for EFCA in favor of less sweeping amendments to the National Labor Relations Act.

If the rest of the Republican caucus holds their opposition to this, it may force the Democrats to abandon or negotiate away some of the more onerous terms (like the end of secret ballots in union elections).

For those who are interested, here’s a link to the House (H.R.1409) and Senate (S.560)  versions of the bills.

Here’s a quick rundown of a portion of our New York Delegation and their positions on the issue:

US Senate:

Chuck Schumer (D) – In Favor, Co-Sponsor

Kirsten Gillibrand (D) – In Favor, Co-Sponsor

House of Representatives:

Louise Slaughter (D), Fairport – In Favor, Co-Sponsor

Eric Massa (D), Corning – In Favor, Co-Sponsor

Dan Maffei (D), Dewitt – In Favor, Co-Sponsor

Chris Lee (R), Clarence – Opposed

Brian Higgins (D), Buffalo, In Favor, Co-Sponsor

Michael Arcuri (D), Utica – In Favor, Co-Sponsor

We’ll stay tuned over the next few weeks to see how this plays itself out.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

March 25, 2009

MVP Enrollment Up Nearly 7% – What Does This Mean for Excellus?

The CNY Business Journal is reporting that MVP Health Care, the parent of Preferred Care in Rochester, is showing enrollment growth across their footprint in upstate New York, Vermont and New Hampshire.

At the end of February, they were reporting approximately 748,000 subscribers, up from about 700,000 the year before.  MVP doesn’t publicly break this growth up by region, so it’s difficult to speculate where this subscriber growth was occurring.

What we can say is that the areas that they serve are not growing in population, so it’s probably a fair bet that this growth is coming at the expense of other carriers, including Excellus Blue Cross – Blue Shield.

As of their last annual report at the end of 2007, Excellus was reporting just under 2 million covered members (plus another 200,000 in their Buffalo area Univera subsidiary) – it will be interesting to see what this year’s report brings.  Even if all MVP’s new subscribers came from Excellus, it would represent a relatively small percentage decline for the carrier.  That said, a little here, a little there and before long you have a pretty substantial haircut for the heavyweight health carrier.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.

March 23, 2009

Wellness Initiatives Still Going Strong Despite Economy

A new survey released by Buck Consultants shows that even with tough budgetary restraints, employers are sticking with wellness initiatives as a way to help employees deal with issues brought about by the economic downturn.

According to the study:

Many employers are increasing their employee wellness communications and most expect wellness budget cuts will be no greater than other cutbacks, because these programs help employees cope with issues brought about by the economic downturn.

Getting down to specific numbers,

In terms of wellness budgets, 19 percent are likely to increase spending on wellness. Another 59 percent have experienced no budget changes, but many are nervous about the possible need to make cuts in the future. However, among those expecting cuts, 78 percent expect them to be no larger than other corporate cutbacks.

Clearly, this study isn’t perfect – the public version doesn’t provide any breakdown by industry, geography or employer size.

What does seem apparent is that in general, employers aren’t looking to wellness as an early cost saving item during cutbacks.  I see this as a positive note amid lots of otherwise negative news for upstate New York employers.

Correctly designed and managed wellness initiatives can show significant payback in larger self-insured health plans.  While you may not be managing benefits for Eastman Kodak, the payback for smaller employers is generally found in things like reductions in workers’ compensation costs, lower absenteeism and productivity increases.

Savings in those areas mean a more efficient workforce and lower expenses to your business – both nice things to have in a time of economic uncertainty.

About the Author:

Matthew McDermott, SPHR is an experienced Employee Benefits Consultant with The Landmark Group in Rochester, NY.  If you wish to reach him regarding this or any other benefits related issue, please contact him at (585) 272-1956 x206 or by email at mmcdermott <at> landmarkinsurance.net.