Insurance Insights

What's Behind Blue Shield's 2% Pledge?

Blue Shield of California recently pledged to cap their annual profits at 2% of revenue and to refund any additional income to their customers and the community each year. Bruce Bodaken, Blue Shield’s CEO, announced that Blue Shield will return $167 million to customers through a 30% credit on their October insurance bills. This refund represents an annual premium reduction of 2.5%.

This is a major policy decision and a significant commitment to Blue Shield’s customers and health care providers. But the press has responded with distrust and criticism. Wendell Potter, former CIGNA executive turned health reform advocate and industry blogger, sees the pledge as an “orchestrated spin campaign” and believes that this year’s $167 million dollar refund is, “little more than a drop in the bucket of what [Blue Shield] really could afford to give back.”

Other reports have noted the pledge comes after the terrible publicity Blue Shield received for its planned individual health insurance rate increases. Blue Shield rolled back those increases under pressure from Insurance Commissioner Dave Jones. Now, Blue Shield, as well as other insurers, is opposing AB 52 which would give the California insurance commissioner the authority to actually reject premium increases deemed to be unreasonable. 

Clearly, the 2% pledge is motivated by Blue Shield’s determination to change its image in the eyes of customers and the media. Bodaken acknowledged that, “most people suspect that profiteering by health insurers is a major factor behind the high cost of health care.” He stated that, “this suspicion is more than just a PR problem. It hinders our ability to work with others toward solutions to the affordability problem.”

I believe the 2% pledge is a highly significant policy commitment. It will help alleviate the distrust in the community and build productive relationships with health care providers. It should give Blue Shield more credibility in its pricing negotiations with doctors and hospitals. Providers may now have some confidence that pricing concessions will directly benefit customers rather than increase Blue Shield’s profits. During an off the record conversation with one East Bay hospital administrator, I was told that the tenor of their negotiations has already changed.

Proving itself to be a credible partner will also help Blue Shield to continue to develop innovative collaborations with providers that have the potential to both reduce costs and improve care. An example of such a program is the Accountable Care Organization formed by Blue Shield in collaboration with Catholic Healthcare West and Hill Physicians, which serves more than 40,000 CalPERS members. It has saved more than $15 million in its first year.

With the 2% pledge, Blue Shield is looking both to address the affordability of insurance premiums and to establish a competitive advantage in the marketplace. An insurer with significantly lower costs and lower profit goals (the average for-profit health insurance company return is 4.6%) will be able to charge lower premiums than its competitors and attract new customers.

While the long term gains may be substantial, our clients are looking for immediate premium savings. What is the short term benefit? This policy begins to bring some transparency to insurance pricing. Blue Shield will calculate premiums based on its 2% target. Customers will know that they will receive another refund next year if Blue Shield’s claims costs are less than anticipated.

We see the pledge as a positive step forward in the greater restructuring of the health care and health insurance landscape brought about by the new health reform law. We will report on other insurers’ new products and initiatives in future posts.

Economic Stimulus or Cost Control? The Health Care Conflict

Four hundred business people with conflicting priorities came to the recent San Francisco Business Times program on the future of health care.

Many were interested in the enormous business opportunities that the UCSF and California Pacific hospital construction projects would bring to their companies. Others wanted to know what was being done to control health care costs and their companies’ health insurance premiums. 

That is the conflict. Health care facilities construction is one of the key economic drivers in San Francisco. We have seen many of our clients refocusing their business development efforts to the health care field. The companies who have won contracts are prospering. 

However, these expensive new hospitals, designed for seismic safety and greater efficiency, will be paid for by our taxes and insurance premiums. It was all too apparent that neither Mark Laret (CEO, UCSF Medical Center) nor Warren Browner (CEO, California Pacific Medical Center) were focused on cost control. Laret described new robots which will prepare and deliver medications to hospital patients, thus eliminating human error.

In contrast, Blue Shield’s COO Paul Markovich declared, “We are obsessed with costs.” Bill Kramer, Executive Director for National Health Policy, Pacific Business Group on Health and Steve McDermott, CEO, Hill Physicians, also spoke convincingly of the need for major overhaul in our health care system. 

What do they see as the future? Coordination of care seems to be the current buzzword. Markovich proudly described a collaboration with CalPERS, Mercy Hospital, and Hill Physicians designed to both reduce cost and improve quality of care. We are hopeful that the annual savings of $400 per person is just the beginning of the project’s impact.

During the question period, I asked how the Small Business Health Insurance Exchanges would deliver the much anticipated premium savings. The members of the panel shook their heads. Kramer said the exchanges have been “oversold.” The exchanges are likely to be the major source of insurance for lower income Californians, people with the most health problems and the least ability to pay. If the panel is correct, then the savings will come from tax credits for the smallest, lowest wage businesses and the subsidies to their employees—not from any reduction in insurance costs.

We are following the development of the California insurance exchanges, attending meetings and interviewing key people. Look for a summer blog post on the potential impact of the exchanges on your health insurance options and costs.

Can I Get A Better Price?

"Would I get a lower price from another broker? Or if I bought our company’s medical plan directly from Kaiser or Blue Shield? How much would I save if I bought our insurance online? How much more do I pay in premium for all the services your firm provides?"

Last December, the new CEO of a firm we have been doing business with for over ten years requested a meeting to address these questions. It was an excellent opportunity to describe how the small business insurance market (2-50 employees) works in California.

After that meeting, I realized that every business owner and CFO could use a refresher on plan pricing and broker compensation. Here are the answers to these common questions:

No, you would not get a lower price for the same medical product from another broker, by going directly to the insurer, or by purchasing insurance coverage online. Likewise, Shargel & Co. cannot get a lower price for you than another broker. 

Each insurance carrier files “standard” rates with the one of two California regulatory organizations, the Department of Managed Health Care or the Department of Insurance.

Small businesses are protected by California’s small business health reform, AB 1672. Your premiums may be no higher than 10% above standard rates, regardless of medical claims. Pricing can be no lower than 10% below standard.

Oftentimes, insurers will charge smaller groups the highest allowable rate and give discounts to larger companies. Our commission is built into these rates. Every customer pays them whether they use a broker, buy direct, etc. Some brokers charge extra fees for services performed. Shargel does not. 

Of course, while the pricing for the same product may be the same, Shargel makes sure that you are paying a competitive price for the plans you are purchasing. We prepare pricing summaries so that you can easily compare the cost of similar plans with competing insurers. We stay alert to opportunities that take place when an insurer discounts its pricing for new business for a limited time period. We advise you as we see changes in buying trends among companies so that you stay competitive with your offerings. 

How else does Shargel reduce your cost? We always provide you with cost savings ideas about how to structure your benefits plans. You can review some of our ideas here and here. We recommend that you give your employees a choice of benefits plans and cost sharing arrangements that are fair to both employers and employees.You can always count on Shargel for our thoughtful expert advice, our friendly and professional support, our communications materials and on-site meetings and our HR resources.

We provide outstanding value to you so that Shargel is always the best buy for your company. We thank you for your support!

Starting the Year Off Right

Greetings!

We have high hopes and expectations for 2011 but it is clear that businesses will continue to face very significant benefits challenges. Premium increases continue to outpace inflation. You can count on Shargel to provide recommendations that reduce costs and protect essential benefits for you and your people.

What’s new with Shargel in 2011? A completely updated www.shargel.com is now online. An HR portal will launch first quarter. It will simplify benefits administration and give your employees quick access to their health insurance information.

We’re always here to help you get the most value from your current benefits package. Here are 3 key recommendations to start 2011:

1. Provide Total Compensation Summaries to your staff.

Let your people know the full amount you spend on them:  salary, health benefits, retirement contribution including social security and 401K plans, professional training, etc. We’ve prepared a Total Compensation template that’s visually attractive, easy to use and simple to adapt to your company.  January is a great month to thank your people for their work in 2010, distribute this simple compensation summary, and plan for the year ahead. 

2. Promote Wellness through preventive health exams.

The new health reform law has made health prevention more accessible than ever before.  Most health plans (renewing after September 23^rd 2010) now cover recommended preventive exams and lab work at NO CHARGE to your employees. Set a company goal that every person completes their age recommended health exams in 2011. And then celebrate with a creative company event or prize—let us know what you’re doing and we’ll spread the word.

3. Read our insurance blogs and visit our website.

We’ll keep you up to date on how the upcoming insurance battles impact your business and your employees.

We very much appreciate your business, thank you for your support and look forward to working together in the year ahead. 

Wishing you good health and much success in 2011!

Employee Total Compensation Reports Made EASY!

Your employees are better paid than they realize! And you’re not getting the credit for your total spending on employee compensation.  

These are difficult times and many employers have had to reduce salaries, revise benefits plans and/or increase your employees’ share of insurance premiums.

But let’s focus your employees’ attention on how much you continue to spend on their salary and benefits package.

We have updated our Total Compensation Spreadsheet to make it easy for you to present salary and benefits spending for each of your employees.

Here is what a completed report may look like:

 

Click here to download the template. You can easily add, remove, or edit the compensation categories to reflect the benefits that your company offers. Lyndsey Reed in our office will happily answer any questions you may have. You can contact her at lreed@shargel.com.

Three Strategies for holding the Line on Benefits Costs

How can we reduce our costs? That’s the #1 question our small business clients are asking.   We are all stunned by the continuing double digit health insurance premium increases. 

But clients always have additional priorities.  They want to reduce costs but they also want employees to be able to keep the same doctors, or have a choice of plans or have an HMO option. The list is as varied as our clients.

It is our job to question and probe to identify all the priorities.  Then we craft solutions. Benefit plan design requires both market expertise and creative problem solving. 

This blog post describes three of the many different strategies we are using to reduce costs for our clients while keeping employee satisfaction high. 

#1 Small Employer Purchasing Pool—Cal Choice

One of our non-profit clients came to us with the urgent requirement to reduce benefits costs by 30%.  The obvious and certainly reasonable solution was to enroll the group in    Kaiser.  Everyone would continue to have comprehensive coverage with low out of pocket expenses.  But there was another compelling issue: two employees were in the midst of treatment for serious health problems.  It was essential that they continue with their current doctors.  

We proposed using Cal Choice, a small employer purchasing pool.  Cal Choice provides employees with a choice of health insurers and plan designs.  The organization selected a Kaiser plan as the base plan and determined an affordable cost sharing split with employees.  Each employee also had the option of purchasing any other plan in the pool.  The employees with health issues chose to pay the difference in premium between the base plan and their preferred plan.  Their treatment continued without interruption. 

#2 Association Plan—Cal CPA Society Group Insurance Trust

Our recommendation for a CPA firm was quite different. They received a whopping 70% increase for their Blue Shield HSA compatible, high deductible health plan.  There was no way they could afford that increase.  Our client ruled out moving to a higher deductible plan—that would place too great a burden on staff.

Our market review showed that other insurance carriers had comparable pricing.  We looked further afield.  We recommended an association plan open to members of the California Society of CPA’s.   Instead of the 70% increase, we delivered a 7% decrease with a manageable increase in the deductible.  The firm continues to cover the same percentage of the premium and deposits $125 monthly into each employee’s HSA plan.

#3 “Buy Up” Plan Structure

The third strategy we call the “buy up” approach.  A client who always provided the highest quality benefit plans for her staff could no longer absorb the yearly premium increases.  But she also did not want to give up offering these plans.  A number of her employees had significant health issues and valued the coverage.  She saw her benefits offering as her competitive advantage in the marketplace.   How could she control her costs while continuing to offer these plans?

We added additional choices to the benefits offering.  The employer fixed her contribution to a lower priced, but very acceptable plan.  Bottom line:  She kept her costs level with last year.  Employees all chose to buy up to the higher cost plan with pretax dollars.

What to Do Next:  Start Planning Early  

Our best advice for the fall:  Start planning early for your January renewals and benefits redesign.  Give yourself sufficient time to make good decisions, hold employee meetings and have new coverage approved before the holidays.

We’re here to help!

How Can Health Reform Move Forward?

How can health care reform move forward? As the debate continues, we need to examine the significance of the Massachusetts election and determine what reforms voters across the country now support.

What Happened?

The election of Republican Scott Brown to the Senate has caused an overnight shift in the dynamics of the health care reform debate and the prospects for the passage of comprehensive legislation. Brown ran on a promise to stop the Democratic reform bill. But he supports his own state of Massachusetts’ universal health care legislation which was implemented in 2006 and has resulted in 98% coverage. “Instead he argued that since Massachusetts’ citizens already have coverage, why should they help pay to expand coverage elsewhere.” (NYTimes)

With the loss of one seat, the Democrats have lost their filibuster-proof majority, imperiling the health reform effort and their entire progressive domestic agenda. There seems to be a Democratic consensus emerging that it is necessary to craft a new bill based on the provisions from the original that have bipartisan support. We should not take the events of the last few weeks as a mandate to give up on health care reform altogether. We must seek to understand public opinion on this issue and create legislation that can build broad support, whether it is through a large package or a series of incremental changes. And it is time to intensify communication with voters.

What do voters want?

Several polls conducted this month give us a valuable and informed view of public opinion. A poll conducted by the Washington Post, the Kaiser Family Foundation, and the Harvard School of Public Health shows that while only 43% of MA voters support the national health care reform package, 68% support Massachusetts' own universal health-care plan.  Both plans include an individual mandate to maintain health insurance, an insurance exchange to assist people purchase coverage, and subsidies to help lower income families pay for their insurance.

The national Health Tracking Poll conducted by the Kaiser Family Foundation in January found that 54% of respondents agree with the statement that "it is more important than ever to take on health care reform now". The poll measured the public's awareness of the specific provisions of the House and Senate proposals and how each provision affects support for the plan. The results can be used to find areas of broad support and identify policies that need to be better communicated.

What will increase support?

The provision that is most popular with people of all political persuasions is the creation of tax credits for small businesses (to help them purchase group insurance); 73% of those polled said this provision would make them more likely to support the bills. Interestingly, only 52% had been aware that the bills contained such a provision.

Health insurance exchanges and guarantees that the plan would not change most people’s existing insurance arrangements were also very popular, especially with independent voters; 74% said the inclusion of an exchange would increase their support for the plan and 69% said that the fact that people would get to keep their coverage would also increase their support.

What will increase opposition?

The aspects of the legislation most likely to increase opposition are the individual mandate to purchase insurance (62% less likely to support the bill) and the $871 billion cost of the plan over 10 years (51% less likely to support the bill). Although the majority of those polled disliked the individual mandate, 63% said that making insurance guaranteed issue would increase their support for the plan.

In fact, this is a major contradiction; guaranteed issue is not possible without an individual mandate. There would be no reason for people to maintain insurance if they could wait until they were sick to purchase it. The public needs to be better educated about the relationship between these two reform provisions.

What’s next?

It took 15 years after the defeat of the Clinton plan for another serious attempt at health care reform. The crisis of rising health care costs and the numbers of uninsured Americans will not allow us to wait another 15 to try again. Since 1999, health insurance premiums for families rose 131%, far more than the general 28% inflation rate.  In California, Anthem Blue Cross has just announced a rate increase of more than 30% on many individual plans. Our wallets cannot sustain this rate of increase indefinitely. We are heading into the eye of a health care storm which, if we do not change course, will ravage the finances of families and businesses and jeopardize the entire US economy. The time for action is now.

See the Kaiser Health Tracking Poll

 

Time to Take Another Look at Small Group Insurance

Current small business health insurance offerings hold some pleasant surprises for employers looking for affordable medical insurance coverage in 2010.

That’s because the California insurance industry is competing for customers in an economy that is expected to be flat to down in 2010.

Insurers are lowering premiums by introducing new high-deductible health plans (HDHPs) which can be paired with tax-advantaged Health Savings Accounts (HSAs).  Employers generally contribute a portion of the premium savings to the HSA, which can be further supplemented by the individual employee.

In the battle for market share, insurers – including Kaiser -- are all offering these plans at prices that are simply not sustainable. It might be a bit harsh to call it bait and switch, but it’s definitely a buyer-beware situation.

“Too-Good-To-Be-True” Benefits Pricing

As we’ve been advising you since 2006, the “too-good-to-be-true” prices had to go up.  And they have, by an average of 20% per year, and now in the case of one of our clients, a stunning 40% for 2010. 

That said, we think that the competition for business can work to your advantage. It is definitely not a one size fits all solution, but for employers with a substantial number of employees over age fifty it is definitely worth a second look.

Remember our client with the huge increase?  He was facing a 40% increase on his high deductible plan, as compared to a 7% increase on his PPO plan. Not surprisingly, he was ready to move everyone back to the standard PPO plan. On the surface it looked like an easy decision... Just to be certain, we ran the numbers.

The Employees Are The Real Winners

What we found is that when we combined the premium for the high-deductible plan with an employer contribution for the entire deductible into the HSA plan, the total employer outlay still turned out to be less than the premium for the standard PPO plan.

Once the deductible has been paid, this HDHP covers 100% of medical claims with no coinsurance.

Our Four Step Process

As we have said, this isn’t a one size fits all solution. The market is constantly changing, and new opportunities appear and disappear regularly.

At Shargel & Company, finding the right insurance solution for your company involves much more then identifying the low bidder. Group health insurance is a complex product, and precisely tailoring an employee benefits package to your needs is a complex process.

1) We work to understand your business preferences. We know that offering the best health insurance to your employees, is an important part of your strategy to attract and retain the talent that you need to be competitive.

2) We investigate the culture of the company. It is paramount that your employees value the benefits that you provide.

3) We look at what is available in the market place. As independent health insurance agents, we are carrier ‘agnostic’; our only concern is to find the best package for you.

4) Finally we look at cost, and make detailed cost comparisons between the programs we recommend.

In this difficult economic period, it will make sense for some of you to consider a HDHP/HSA plan. If you are interested, we are here to help.

For more information about high-deductible health plans/HSAs, please visit our website.

For a small group benefits consultation, please contact Susan directly.

If you are interested in the progress of health care reform legislation in Washington D.C., please visit Susan's Health Care Reform Blog.

Please join the discussion. How are you managing rising employee benefits costs?

San Francisco HMO Battle Heats Up: What Employers Need To Know

Employers are now caught in the cross fire as two major San Francisco medical groups compete for HMO patients. Employees are asking for guidance so here’s what you need to know.

What’s happening?

In our last blog we alerted you to the end-of-year contract termination between UCSF and Brown & Toland Medical Group. UCSF has formed a new affiliation with Hill Physicians Medical Group effective January 1^st, 2010.

Confusion reigns

We have received a few calls from our clients who have been told by their UCSF specialists that they will be unable to see them after December 31^st.  UCSF’s website tells patients “To maintain your same level of access to UCSF specialists and services, choose a primary care doctor who's a member of Hill Physicians, rather than Brown & Toland.”

Brown and Toland mailed a letter to all their patients headed “Make the Right Choice: Choose Brown & Toland Physicians.”  The letter asserts that patients are being given inaccurate information and that patients “may continue to have access to care at UCSF without changing from Brown & Toland to Hill Physicians.” 

Brown & Toland’s website says,

“Brown & Toland members who are in the middle of treatment for an acute or chronic condition (such as heart issues or cancer care) with a UCSF specialist, will continue to receive care from their UCSF specialist until the condition is resolved or through December 31, 2010, whichever comes first. Brown & Toland anticipates that as a result of a new agreement between Brown & Toland and UCSF, members who need specialty care at UCSF will be able to do so beyond 2010.”

We read this to mean that in the future referrals to UCSF doctors will go through an administrative review process. If Brown & Toland determines that you have a medical condition that can be treated by one of their specialists, you will likely be referred to that doctor. If they believe that your condition requires medical expertise not available within the Brown & Toland group, you may be referred to a UCSF specialist.

However, it is clear that UCSF chose a new partner. The number of UCSF specialists is not unlimited.  We expect that for future referrals, when there is not a medical emergency, members of Hill Physicians will receive more timely access to UCSF specialists. We also expect that Brown Toland doctors will refer first to specialists within their medical group. Referrals within the medical group normally do no require administrative approval.

What’s an employer to do? 

Inform your employees about Continuity of Care Protections.

• California law provides for Continuity of Care.  Patients have the right to continue treatment with their current doctors in the situations listed below for the specified period of time: (source UCSF website)
• A serious chronic condition - for up to 12 months
• Terminal illness - through completion of treatment
• Pregnancy - through birth
• Scheduled ambulatory surgery (within 180 days of 1/1/2010) - through surgery
• Very young children (up to 3 years old) – for up to 12 months

Direct your employees to the Medical Groups’ websites. 

These websites all contain relevant information with complete sections of frequently asked questions.  

UCSF

Brown & Toland

Hill Physicians

Yes, we realize some of the information is conflicting. 

Encourage your employees to request clarification for their particular situation.

Suggest they call and email their questions to the medical groups so that they get the best information available on their particular health issues.

Offer a choice of HMO and PPO plans

We also strongly recommend that employers offer a choice of HMO and PPO plans. PPO patients do not have to choose a medical group. They can see physicians throughout their insurance company’s PPO network. 

Share information with Shargel & Co.

Let us know what information you and your employees are receiving. We learn from each other!

 

San Francisco HMO Members: Act Now to Protect Your Choice of Physicians

Upcoming changes in San Francisco’s medical groups will affect access to your doctors.  Here’s what’s happening and what you need to do to make sure you are able to see the doctors who are most important to your health care.

What’s Happening?

The doctors of UCSF Medical Center and UCSF Children’s Hospital are becoming part of Hill Physicians Medical Group effective January 1st.  The UCSF doctors’ contract with Brown & Toland Medical Group will terminate at the end of 2009. Brown & Toland is largely composed of physicians associated with California Pacific Medical Center. 

This contract termination affects all HMO users of Brown & Toland doctors, regardless of which company is your insurer.  Blue Shield, Anthem Blue Cross, HealthNet, and Aetna HMO members are all affected.  If you remain a member of Brown & Toland after the transition, you will not be referred to UCSF doctors in 2010. This means your HMO insurance will not cover visits to UCSF doctors, regardless of whether you are an established patient or a new referral.

Hill Physicians is also expanding and contracting with new doctors affiliated with Saint Francis Memorial Hospital and St. Mary’s Medical Center. 

What You Need to Do:

First check to see whether your current primary care doctor is also associated with Hill Physicians through their website.  If your doctor is in both medical groups, it’s simple.  Just call your insurance company and change to Hill Physicians, effective January 1st. 

If your primary care doctor is not associated with Hill Physicians, you have a decision to make.  If your choose to maintain your relationship with your primary care doctor through Brown & Toland, then call his/her office as soon as possible.  Request a referral to new specialists within the Brown & Toland Medical group and make your first appointment.  Good doctors are in short supply.  Other patients will also be looking for new doctors so act now and get ahead of the line.

If you decide that you prefer to continue with UCSF specialists, you will need to select a new primary care doctor in the Hill Physicians Group.  Ask for referrals and review doctors’ backgrounds and qualifications on the Hill Physicians website.   Notify your insurance company that you want to change to Hill and sign up for your new primary care doctor.  Remember to act as soon as possible so that you can assure the best choice of physicians.  While Hill Physicians is expanding, it has a smaller number of SF based primary care doctors. 

What if your priority is to keep all your current doctors?  Most employers offer a choice of HMO and PPO coverage.  You can sign up for your company’s PPO plan during your next open enrollment period.   With PPO coverage, you have the choice of all the physicians in your insurance company’s network.  It is very likely that your doctors will be in the PPO network.  But, of course, check the website before making the change.

And what if you are already using the Hill Physicians Medical Group? Effective January 1st,   you will have access to a significantly expanded list of specialists.  Talk to your primary care doctor and discuss whether your health needs could be better served by consulting with one of the new physicians available to you. 

Contact Information

www.brownandtoland.com

e-mail  customerservice@btmg.com

or call 800.225.5637 between 8 a.m. and 5 p.m., Monday through Thursday, or on Friday between 9 a.m. and 5 p.m.
www.hillphysicians.com