September 30, 2010
Principal Financial Group is exiting the health insurance business. Why? The business is changing, requires investment, and is a shrinking component of the company’s overall portfolio. While only partly about reform, the decision highlights the strategic dilemma facing marginal players. Expect more of this kind of thing in the months ahead.
Principal agreed to allow UnitedHealth to act as the incumbent when accounts come up for renewal over the next 36 months. United will pay Principal an undisclosed amount based on the number of lives renewed. The exit doesn’t impact Principal’s wellness, vision or dental lines.
Principal had about 381,000 fully funded group health members as of year-end 2009 and 615,000 ASO lives (health, dental, vision and disability). But health insurance membership was declining in 2010 along with revenues and operating earnings. Premiums and fees fell 15% to $705 million through six months of 2010, while health insurance accounted for just 15% of total company revenues. Principal’s health plan membership spanned 31 states, but was concentrated in the central U.S.
September 29, 2010
This week’s issue of Health Plan Market Trends Letter is a data dump of enrollment figures for major health plans – all of which reinforces familiar trends. Fully funded enrollment continues to fall. Self-insured enrollment continues to rise. Medicaid and HSA-compatible high-deductible health plans are enjoying gains.
September 28, 2010
Here’s an interesting analysis from The Motley Fool on margin trends at pharmacy benefit manager Medco Health Solutions (Note: TTM = trailing 12 months):
- Over the past five years, gross margin peaked at 7.3% and averaged 6.3%. Operating margin peaked at 3.9% and averaged 3.4%. Net margin peaked at 2.2% and averaged 1.9%.
- TTM gross margin is 6.6%, 30 basis points better than the five-year average. TTM operating margin is 3.8%, 40 basis points better than the five-year average. TTM net margin is 2.2%, 30 basis points better than the five-year average.
The Fool’s conclusion: Medco “looks like it is doing fine.” Still shares in the company are down about 20% this year, in part because profits per prescription — a key metric — have disappointed investors. Shares in leading competitors have done better, with CVS Caremark down about 1% for the year and Express-Scripts up about 14%.
September 28, 2010
From the Associated Press:
Some executions in the U.S. have been put on hold because of a shortage of one of the drugs used in lethal injections from coast to coast.
September 27, 2010
The Kaiser Family Foundation has released its September health tracking poll, which finds that 49% of Americans have a favorable view of healthcare reform, up 400 basis points from August. About 45% have an unfavorable view. The poll also finds that 53% of Americans are confused about the law, up 800 basis points. Still, it’s unclear what impact healthcare reform will have on the November midterm elections. Notes Kaiser:
When it comes to voter turnout and vote choice, the September tracking survey suggests that, at least at this point, health reform is not playing a major role or providing a decisive advantage to one party’s position over the other.
September 24, 2010
A Health Dialog study of 174,120 patients found that care management instructions delivered by health coaches over the phone help reduce medical costs and hospital admissions. The idea was that a targeted program that identified more members for support than typical programs would reduce medical costs. Subjects were randomly split into two groups — one of which received the enhanced support.
At baseline, medical costs and resource utilization were similar in the two groups. After 12 months, 10.4% of the enhanced-support group and 3.7% of the usual-support group received the telephone intervention. The average monthly medical and pharmacy costs per person in the enhanced-support group were 3.6% ($7.96) lower than those in the usual-support group ($213.82 vs. $331.78; P=0.05); a 10.1% reduction in annual hospital admissions (P<0.001) accounted for the majority of savings. The cost of this intervention program was less than $2.00 per person per month.
I’m a big believer in care management programs. But I’m skeptical any time a care management vendor like Health Dialog releases return-on-investment figures touting the value of its products and services — even when the study is published in the prestigious New England Journal of Medicine. I always feel like, “What am I missing?” That’s especially true given that studies from third parties suggest little meaningful ROI for care management programs.
Lead author David Wennberg, M.D. — who is Health Dialog’s chief science and products officer and the son of Dartmouth’s Jack Wennberg , M.D — lists some key differences between this study and ones that failed: 1. For this study, Health Dialog used an opt-out model. “By avoiding a long recruitment process, we could simultaneously engage subjects and intervene while achieving a very low refusal rate;” 2. Health Dialog also used real-time administrative feeds (e.g., discharge notifications, “which are issued at a time when patients are particularly receptive to coaching”), which Wennberg says allowed the type of dynamic targeting of members not available in many prior studies; 3. Wennberg also says a flexible, total population approach allowed Health Dialog to reduce investment in support not likely to yield results (e.g., support for patients too sick or too well for telephone coaching to be meaningful).
This is a study that will be talked about for some time. The results are impressive. Let’s hope they hold up under scrutiny.
September 23, 2010
Blue Cross Blue Shield of North Carolina agreed this week to refund $155.8 million to 325,000 individual plan members, reflecting reserves for policies that will no longer exist after the introduction of insurance exchanges in 2014. WellPoint agreed last week to pay $20 million in rebates to 90,000 individuals in Colorado following a state review of premium rate hikes. Notes Charles Boorady of Credit-Suisse:
While for unrelated reasons, rebates reflect increased diligence by states on rates. However, at the same time, states are pushing the White House to delay minimum MLR implementation, and we believe such delay would more than offset the impact of pricing push-back and rebates.
September 23, 2010
Several key provision of healthcare reform kick in today (see prior post). President Obama is already touting the law and daring Republicans to try to repeal it.
I want to see them come and talk to Gail or talk to Dawn or talk to any of you who now have more security as a consequence of this act, and I want them to look you in the eye and say, sorry, Gail, you can’t buy health insurance; or, sorry, little Wes, he’s going to be excluded when it comes to an eye operation that he might have to get in the future.
September 22, 2010
I’ll say it again. The reason we have healthcare reform is that the managed care industry failed to address the problem of the uninsured and failed to consistently provide plan members with the insurance protection they need when they are sick. The way the industry will survive is to solve the puzzle of how to reduce healthcare costs while simultaneously improving quality. It’s called adding value. Judging by the decision of several health plans to stop offering child-only policies in certain markets, I’d say the industry still doesn’t get it. Extended coverage appears in the Sept. 20 issue of Carl Mercurio’s Health Plan Market Trends Letter.
September 21, 2010
CMS administrator Don Berwick, M.D., in announcing that Medicare Advantage premiums paid by seniors will fall 1% in 2011 with little or no reduction in benefits, while membership is expected to rise 5%:
Despite the claims of some, Medicare Advantage remains strong and a robust option for millions of seniors who choose to enroll or stay in a participating plan today and in the future.
September 21, 2010
Here are the facts in two parts:
1. Blue Cross Blue Shield of North Carolina agreed to refund $155.8 million to approximately 325,000 individual health plan members (215,000 policies) at the request of state regulators. The refunds will come from the plan’s active life reserves, essentially a portion of premiums put aside in the early stages of a policy to help hold down rates in the future. Since the life of individual policies will be shortened by the introduction of new plans through insurance exchanges in 2014, there’s a pile of money left over. The DOI lacks the authority to force BCBS-NC to refund the money; however, the plan still agreed.
2. The DOI granted BCBS-NC a 5.37% rate increase for its Blue Advantage individual plan, 160 basis points lower than the 6.97% hike that BCBS-NC wanted. The state did approve BCBS-NC’s request for a 2.06% increase for the company’s Blue Options individual product.
Now the spin.
It’s not exactly clear what BCBS-NC gains by agreeing to the refunds – except perhaps a wee bit of goodwill at a time when health plans are being cast as villains. I emphasize “wee bit.” A member who pays $380 monthly for individual coverage would receive a $690 refund — about 1.5 months of premiums. “I don’t know exactly what they stand to gain,” says a state DOI spokeswoman. “That’s a good question,” says a BCBS-NC spokesman adding, “We’re rolling with the change.”
While the DOI can’t order refunds, it can initiate a rate hearing or take you to court. That could have been ugly for BCBS-NC, an organization badly in need of some positive PR following the North Carolina State Health Plan fiasco and the embarrassing leak of planned anti-reform ads. The timing is also right. It’s a one-time refund tied to reform, and the company has a new chief executive who’s calling for change.
A bigger question is whether regulators in other states will now be tipped to the issue. “WellPoint is among the most exposed,” says Charles Boorady of Credit-Suisse, adding that UnitedHealth and Cigna are among the least.
September 21, 2010
This cartoon in today’s Wall Street Journal made me laugh.
September 20, 2010
A Commonwealth Fund study highlights the millions of Americans who will benefit from provisions of healthcare reform that kick-in Sept. 23:
- 120 million who will no longer face lifetime or annual benefit limits
- 1 million who can obtain coverage through their parents’ policies up to age 26
- 10,700 annually who will no longer get hit with a rescission (retroactive cancellation of coverage)
- 200,000 to 400,000 who can enroll in special plans for people with preexisting medical conditions
- Thousands of children with preexisting conditions who can no longer be denied coverage
Furthermore, Commonwealth notes, “The major provisions of the law that take effect in 2014 will bring sweeping change to insurance coverage for many Americans” and ensure health security and access to care for working families. I say once people get stuff, they don’t want to give it up — which is why I predict little change to the law even if Republicans take back Congress this year and the White House in 2012.
September 20, 2010
The number of people in America without health insurance rose 1.3% to 50.7 million in 2009, according to the U.S. Census Bureau. Blame the recession and rising unemployment in part for the increase; about 6.6 million people lost employer-sponsored coverage in 2009.
As I’ve said before, the inability of the health insurance industry to address the problem of the uninsured is a major reason why we have healthcare reform. Another is the industry’s failure to consistently provide plan members with the insurance protection they need—and the healthcare coverage they have paid for—when they are sick.
I predict the next round of reform will come if (skeptics say “when”) the industry fails to demonstrate exactly what purchasers of insurance get for the 13% of healthcare premiums that go toward administrative costs, executive compensation and industry profits. Helping to reduce costs while improving healthcare quality would be a good start.
September 17, 2010
I haven’t yet gotten a copy of the new whistleblowing memoir Deadly Spin by former Cigna executive Wendell Potter, but David Whelan over at Forbes has, and he’s written up some highlights. Writes Potter:
The further up the corporate ladder I climbed, the more I saw, and the more disillusioned I became with my job, my profession and my industry….With each promotion I got a better understanding of how insurers get rid of enrollees they don’t want.
September 16, 2010
Arnold Relman, former editor of The New England Journal of Medicine, in his recent review of John Wennberg’s new book Tracking Medicine:
Because of its overhead, as well as the expense of billing and collecting it imposes on doctors and hospitals, the investor-owned for-profit insurance industry probably adds at least $150–$200 billion to the annual cost of providing health coverage to the American population, as compared with government-run programs such as Medicare. These added costs will become even greater under the new law because the industry will grow….I find it difficult to believe that this industry contributes anything that is close in value to what it costs the US health system.
And therein lies the rub for managed care. Unless the industry can prove value, there’s a good chance it will be regulated out of business during some future round of “healthcare reform.”
September 15, 2010
Here are the headlines from Carl Mercurio’s Health Plan Market Trends Letter for September 13, 2010.
- No Surprise: Healthcare Reform Does Little to Reduce Cost
- Chart: Health Spending Growth Projections
- Health Plan Cost Trends: The Big Picture
- More Premium Rate Sagas for Health Plans
- Emdeon Expands Medicaid Presence with Pricey Acquisition
September 15, 2010
From the online version of Isreal’s Haaretz Newspaper:
A Clalit Health Services representative allegedly offered a Rahat resident money if he were to transfer his family – including two wives and 15 children – to the health maintenance organization, the competing Leumit HMO has alleged in a complaint to the police and the Health Ministry.
And you thought Dave Colby was bad.
September 13, 2010
I and others said it before: Healthcare reform is (at least initially) about increasing access, not reducing cost. CMS agrees, as shown in its latest healthcare spending projections. The projections — published in the latest Health Affairs — suggest that through 2019 the average annual rate of increase in healthcare costs will be about 6.3% under reform legislation, compared to 6.1% had there been no reform.
The White House tried to spin the numbers, noting that spending per insured person will be 9% lower by 2019 because of reform. Duh! If you increase the number of insured by 33 million, of course spending per insured person will be down. Far more relevant is the fact that for a relatively insignificant increase in costs, millions more Americans will have much better coverage because of reform — with far fewer people left out in the cold. Furthermore, out-of-pocket payments by consumers will be down, while payouts by insurance companies will be up.
And now that we’ve addressed the access piece, perhaps we can get at the cost piece. Clearly, the legislation points us in the right direction; albeit a lot of work needs to be done.
September 9, 2010
A patient-centered medical home without PMPM payments to primary care physicians? It would seem to defeat the whole purpose of the PCMH concept – which is to wean doctors off fee-for-service (i.e., pay for volume) and move toward capitation and other incentive-based payments (i.e., pay for results) in hopes of improving care and reducing cost.
Blue Cross Blue Shield of North Carolina has a different view. About 78 PCPs in 15 practices (serving some 40,000 BCBS-NC members) qualify for the plan’s PCMH Blue Quality Physician Program, which pays higher fee-for-service reimbursements for office visits than the company’s usual rate. How much higher? “Double-digit higher,” says Genie Komives, M.D., senior medical director for BCBS-NC, who declined to release specifics.
One reason why BCBS-NC doesn’t make PMPM payments, Komives says, is that patients who generate the most physician orders for medical services also generate the most office visits, so doctors are getting paid extra to see the patients most in need – rather than getting a capitated rate for both the healthy and sick, Komives says. “When you’re actually spending time with the patient in the office, that’s the value,” she adds.
Extended coverage appears in the Sept. 7 issue of Carl Mercurio’s Health Plan Market Trends Letter.
September 8, 2010
The Wall Street Journal reports that health plans are raising individual and small group premiums 1% to 9% to cover the near-term cost of new benefits mandated by healthcare reform, such as the elimination of lifetime coverage caps. Analyst Justin Lake of UBS says the increases are in line with his projections of a 200 to 400 basis-point increase in premiums related to near-term coverage mandates. Lake expects individual premiums to get hit the hardest (+500 to 800 bps), followed by small group (+300 to 500 bps) and large group (+100 to 200 bps).
September 8, 2010
David Bertke, vice president of managed care at hospital system TriHealth Inc. (Cincinnati), in response to my LinkedIn question: Are medical homes/ACOs the future or just another fad?:
We have over 100 employed PCP’s and they are concerned about the future because of their relatively low pay. That could be attributed to the under value attributed to CMS weights. In a meeting recently, a medical director with Humana called medical home the last hope for PCP’s. So at least in the opinion of one person, the answer is that it better not be a fad.
September 7, 2010
Annual healthcare premiums rose 5% to an average of $5049 for single coverage in 2010, while family coverage rose 3% to $13,770, according to a Kaiser Family Foundation survey. While the increases were modest, the share of premiums borne by employees soared. Employees paid 19% of the premium for single coverage, up 200 basis from 2009; for family coverage, employees paid 30% of the premium, up 300 basis points. Kaiser notes that this is the first statistically significant increase in employee contribution since the survey began in 1999. ”Workers paid more as employers responded to the economic downturn by increasing employee contributions and reducing the scope of coverage,” the report’s authors say. The trend toward self-insurance among employers continued, rising 200 basis points to 59% in 2010.
September 7, 2010
We don’t always get a chance to write about some of the smaller Blues plans. Blue Cross Blue Shield of Montana (Helena) announced that Sherry Cladouhos would retire as chief executive by the end of 2010, after five years in the position and 36 years with the company. She will be replaced by BCBS-MT president Mike Frank, who has been with the company for 11 years. In 2009, BCBS-MT reported a net loss of $9.8 million on revenues of $503.3 million. In 2008, the company posted net income of $17.7 million on revenues of $516.2 million. The company served more than 200,000 members in 2009.
September 2, 2010
There are always questions when a company’s chief financial officer suddenly quits or gets fired — especially when the company is in the middle of implementing a major strategy shift. Cigna Corp. announced the departure of CFO Annmarie Hagan, naming company treasurer Thomas McCarthy as acting CFO. Cigna took the unusual step of making public its entire separation and non-disclosure agreement with Hagan. Two things stood out for me: 1. Hagan gets a lot of money — $1.4 million, plus bonus and long-term compensation payouts; 2. Neither Cigna or Hagan is admitting it violated “any law, rule, order, policy, procedure, or contract.” Separately, Cigna reaffirmed its 2010 profit forecast. The implication is clear: the company is going out of its way to show that all is well. A company spokesman told me the departure was a “mutual decision” and wasn’t related to any malfeasance or disagreement with company strategy or policy. For the most part, Wall Street seems to be buying the explanation. Shares in Cigna are down just 0.3% in morning trading in a mixed market opening.