With Medical Plan Cost Inflation at 11%, Most Employers Still Won't Do Anything About It

The recent findings of two major surveys of employer health plan sponsors paints a pretty bleak picture of things to come in 2010. And employers will play the part of the proverbial lemmings.

The first survey, "2010 Segal Health Plan Cost Trend Survey," predicts increases in the per-capita medical claims costs will range from 10.2% to 13.3%, depending on the type of plan. That's four times greater than the forecasted annual increase in average hourly earnings and sharply higher than the Consumer Price Index which has remained relatively flat over the past 12 months. Cost inflation for PPO plans, which represent 80% of all employer health plans, will rise by 10.8%, according to the survey.

The results of the second survey, "2010 Employer Buying Intentions Report," published by JHA and Employee Benefits News, stand in ironic contrast to those of the Segal survey. Of the 4,500 benefits and HR managers surveyed, only 14% said they planned to changed their medical plan providers. Clearly, most have given up any hope of mitigating double-digit cost increases by switching carriers. The predominant thinking must be that everyone's costs are going to increase, so changing will do no good.

It's hard to believe that so many employers would give up on being able to reduce costs by changing medical plans and simply give into the profit-bloated insurance industry's excuses for the increases. Perhaps the entire health care reform debate has worn everyone out and created fear of any change to employer medical plans.

More likely, however, it's who they're getting their information and advice from that's causing fear of doing anything. Results from the same JHA/EBN survey indicate 8 out of 10 respondents consult with their brokers or TPAs (or ASO carriers) prior to making changes to their medical plans. That's like asking the fox who should be guarding the hen house. The deeply vested financial interests that carriers, brokers, and TPAs have in the status quo medical plans (irrespective of adverse cost implications) heavily influence what they're advising clients to do. They've nothing to gain and everything to lose by suggesting change to clients, especially if it means that the client walks.

Collectively, the insurance industry, PPOs, brokers, and many consultants, have done a huge and extremely costly disservice to American employers by keeping them convinced that there's no hope for rising costs and no alternative to the way things are done now. Unfortunately, too, a lot of the blame also rests with the same HR/benefit managers who responded in unison to a situation they clearly perceive as hopeless. Like lemmings being lead to the economic cliff by the insurance industry and its proponents, they've unquestioningly accepted the notion that there's nothing they or anyone can do about it. Oh, well, at least they'll have good company as they go over the side.

I've noticed the same trend for the past 15 years among HR/benefit managers every time I've suggested direct provider contracting as a viable alternative to PPO medical plans. The cost savings and inflation abatement my clients have realized present the strongest case possible for this approach. Unfortunately, whatever initial interest HR/benefit managers have is quickly quashed after they consult with their carrier, PPO, broker, or consultant. The timidity of HR/benefit managers in the face of that situation still astounds me, yet it's understandable when one considers the enormous influence and control most major carriers have over their corporate clients.

Perhaps that's why direct provider contracting, and other innovative cost-containment approaches that don't abdicate to the insurance industry, seem to work best whenever a CEO or CFO stands behind the idea. Their direct involvement and support of unconventional approaches have always been key to the success of the direct networks we've established over the past 15 years and the amazing results they've achieved. In my opinion, it takes top-level, visionary perspective to see beyond the carrier-induced sense of hopelessness over rising medical plan costs. It takes uncommon leadership to see the broken, corrupt system for what it is and the courage to say: "Enough is enough."

Just Published, A White Paper for Docs: Cutting Out Adversarial PPO Agreements

I just published a new White Paper: Physicians Cutting Out the Middleman:

How to Contract Directly with Employers & Eliminate Adversarial Managed Care Agreements

This informative guide for physicians provides step-by-step instructions on when, where, and how to negotiate direct agreements with employers as an alternative to adversarial PPO and HMO agreements. Most physicians and practice management firms have never taken a close look at direct contracting because of the widespread assumption that managed care companies control the means by which employers can do business with medical providers. That assumption is simply not true.

My White Paper highlights the advantages of direct contracting for physicians while it debunks the myths that managed care companies have spread for years about how physicians can do business with employers.

This is a "must-read" for medical providers, but also for employers. Knowing the advantages that physicians can gain from direct contracts should encourage employers to seek out those providers for direct contracts. Read my previous post on Employers Held Hostage by Managed Care Companies and you'll understand the importance of direct agreements for employers and physicians alike.

The Public Option Sideshow & Congressional Mind Control

Zack Cooper's Huffington Post article The Public Option Sideshow brilliantly elucidates the distractive problem of elevating the public option to mythic proportions within the healthcare reform debate.

Nobody in Congress wants to acknowledge the unbridled influence the insurance industry has over the legislative process, nor the complete mind-control that Big Insurance exercises over our elected representatives. The "watered-down" public option has become a brilliant smoke-screen behind which the insurance industry can hide from real reform.

As long as debate and public awareness focus on the public option, and other "toothless" components of the bill, the spotlight will be shifted away from real reform. Any bill that emerges will be a victory for the insurance industry, as long as nothing is done to repeal antitrust exemptions, ban pre-existing condition denials, and regulate insurance markets.

Even if a public option should create market competition, private insurance companies will surely find a way to squash it. Look at all the experience Blue Cross, Cigna, Aetna, and United Healthcare have had squashing competition and building near-monopolies. Without concurrent regulation, there's no way in the world any public option, no matter how strong, can prevail over the profit-bloated insurance industry. Granted, more people may gain coverage after a bill is passed, but it's going to be the private insurance behemoths that win, not the American people.

The public option is a great sideshow. And, sadly, it has distracted Americans from the real issues. In the end, passage of any reform bill will be a hollow victory. Until Congress acknowledges what's wrong with the current system and the need for insurance reform, how can things possibly improve?

Health Care Bill: Template for Future Defeats?

The Senate's 60-39 vote to begin debate on health care reform is a step in the right direction. Unfortunately, that direction is one that's bound to yield a weak, toothless bill (if one even emerges). For opponents of the bill, this is more about defeating Obama anyway than it is about defeating an ineffectual piece of legislation. The President's opportunity to exercise Johnson-esque tactics with Congressmen has come and gone. Now, all he can hope for is victory, any victory, even if it's an eviscerated bill that, among other shortcomings, allows states to opt-out of the public option.

I do hope a bill, any bill, reaches Obama's desk for signature. If it doesn't, I'm afraid the balance of his presidency will become as ineffectual as the bill that never made to his desk. The administration's handling of the healthcare debate will become the template for failure (or the game-plan for defeating Obama) on every subsequent reform he puts out there.

Point is, when it comes to health care reform, no matter how the debate turns out (bill or no bill), the only real winners are going to be the big insurance companies. Their monopolies will continue to grow. Their profits and executive compensations will continue to soar. In the end, Big Insurance's influence over the U.S. Congress will have come full-circle for those Senators and Representatives whose political lives seem to live and die by the contributions and lobbying efforts of the insurance industry.

Eliminate Anti-Trust Exemption for Health Insurers? Good Luck, Congressman!

In his recent article on The Hill's Congress Blog, Rep. Raúl Grijalva (D-Ariz.) suggested something I've advocated for years: Eliminate the anti-trust exemption that health insurance companies have used for years to build their near monopolies across the U.S. Their cartel-like control over the access to and financing of health care in this country would never have occurred if these profit-bloated managed care companies had been subject to the same anti-trust rules that apply to other industries.

So now, while the healthcare reform debate continues to be orchestrated according to the whims of the mighty insurance lobby in Washington, it's almost inconceivable to think that Big Insurance will sit still amidst any rumblings of anti-trust proponents. The insurance lobby has already demonstrated it can get exactly what it wants (or prevent what it doesn't want) from Congress, without having to pull out any of the stops. They've done it almost casually. Imagine the fight they could mount (over anti-trust) if they really put their minds and resources to it.

While I support Rep. Grijalva's sentiment with regard to removing the anti-trust exemption, and I wish him luck with his efforts, the odds of it succeeding fall somewhere between slim and none.

Right Steps? Wrong Directions? Congress Needs to Look at Itself First

A recent article in the Huffington Post by U.S. Representative Joe Sestak of Pennsylvania labeled the Baucus bill that emerged from Senate committee as the "right step in the wrong direction." Like other representatives, Sestak, a Democrat who is also running for Senate, decried the elimination of the public option in the Senate bill. In Sestak's own words: The "public option is crucial if we want to introduce competition and bring down costs. The current health insurance industry is highly monopolized, with a small group of insurers exercising an almost "cartel" like power to dictate prices and continually raise premiums and fees on American families.... A public option will guarantee competition and, as it will not be subsidized by the government and will operate on a fair playing field, it will use market forces to bring down prices and raise the quality of care."

It's great that Sestak and other members of Congress (albeit, only Democrats) understand that a public option is crucial and will guarantee competition. Unfortunately, what Sestak and everyone else forgets, or conveniently overlooks, is the nature of that competition. Big insurance companies comprising the "cartel" have effectively quashed competition in their own industry to create near-monopolies in most healthcare markets. They’ve expertly beaten competitors who've been much fiercer than any pubic option could ever be. They've defeated competitors with impunity and ruthless efficiency.

To date, Big Insurance has flexed a relatively small degree of its massive lobbying muscle. Yet look at how Congress has all but rolled over. Committees have dismantled or eliminated critical components of healthcare reform. The insurance cartel's complete dominance over the legislative process is further proof of their unmitigated power. Compared to that power, the public option as competition will be brushed aside by the insurance companies like a gnat off an elephant's butt.

How can things change when Congress is so overwhelmingly influenced by the insurance lobby? The money, staff, and resources that Congress people so gladly accept from the industry is the real problem. Until Representatives and Senators escape the cartel's clutches, nothing like real progress toward healthcare reform can be made.

When the Healthcare Debate Dust Settles, the Insurance Monopoly Will Be the Biggest Problem of All

No matter how the health care reform debate turns out, the increasingly monopolistic health insurance industry, is going to emerge as the biggest problem of all. With fewer choices of carriers, employers are going to be forced to pay higher premiums for plans that'll become more restrictive than ever. Doctors and hospitals will be forced by their managed care agreements to provide more services (subject to more administrative hassles) for lower reimbursements than ever. The lack of competition will hurt patients and consumers in the end as higher deductibles and copayments will be jacked up by the insurance carriers to create further profits.

Where's the Justice Department? Whatever happened to anti-trust laws? How has the insurance industry been able to vault itself to a position that appears above those laws? Anyone know?

Employers Held Hostage by Managed Care Companies: An Escape Plan

Despite healthcare reform debate, rising medical plan costs continue to pummel U.S. employers. Corporate health plan costs are projected to increase again this year by more than 6%*. Since 1999, costs have increased by 134%**, nearly five times the rate of inflation.

"Ironically, during the same 10-year period, private insurers posted record profits, while holding their employer-clients as hostages, feeding them only soaring costs, poor service, and lots of excuses."

But one major east coast company just celebrated its 8^th straight year without a medical cost increase. In fact, while other companies reduced benefits to lessen crippling rate increases, this employer, whose medical plan covers 45,000 lives, actually enriched its benefits program. Today, its annual health plan costs per employee are 60% below the national average. These astonishing results were achieved without a major insurance company’s help. They simply eliminated the managed care middleman entirely and contracted directly with doctors and hospitals.

Cutting out the middleman is an age old idea, but when it comes to employer health plans, insurance carriers still hold employers hostage. Large managed care networks, controlled by profit-bloated and increasingly monopolistic private insurers, have emerged as the only means of coverage for employers. They’re also the dominant source of patient revenue for doctors and hospitals, so medical providers are held hostage, too. Consequently, the middleman controls both sides of the healthcare equation and effectively prevents buyer and seller from doing business directly with each other.

Though highly effective, direct contracting is still largely unknown to CEOs whose companies are held hostage. Whipsawed by relentless cost increases, their benefit departments still rely on profit-centric insurance companies for cost-containment strategies, most of which are based on conventional managed care networks and cost-shifting onto employees. As true hostages of the big carriers, employers have been brainwashed into believing there’s no viable alternative to the carrier’s approach. They’re convinced that if the big insurers like Blue Cross, United Healthcare, Cigna, and Aetna don’t have the answer, no one does. But direct contracting proves otherwise.

Direct contracting creates a “win-win” business relationship between employer and medical provider, the true “buyer” and “seller” in the managed care equation. By cutting out the managed care middleman, the employer and provider eliminate the inherent disadvantages and financial shortcomings found in commercial managed care contracts. The direct agreement saves the employer money without shortchanging the medical provider. It creates a strong, stable, long-term, and mutually beneficial business relationship.

Employer-owned networks are comprised of doctors and hospitals that provide medical care according to the employer’s health plan. For instance, the east-coast employer mentioned earlier has direct contracts in place with more than 10,000 physicians and 80 hospitals across 15 states. Direct agreements give employees and dependents easy access to medical care, while paying those providers quickly, fairly, and without administrative hassle.

Direct contracting bears no resemblance to the complex, adversarial, and financially disadvantageous network agreements forced upon medical providers by insurance companies. Direct networks truly unite physicians and employers in the goal of providing accessible and affordable medical care to employees, without the obstacles and costs found in commercial PPO networks.

As an alternative to HMOs, PPOs, and other commercial managed care approaches, directly contracting is a proven solution for employers who are desperate for relief from soaring costs. For employers held hostage by insurance carriers, direct contracting is a bold plan of escape. However, for such a plan to work, it takes strong leadership and a willingness to endure risks along the way. But for those companies that do, the rewards of freedom from the carriers can mean huge savings, happier employees, and better control over future health plan costs.

* According to Towers Perrin's 2009 Health Care Cost Survey, the average corporate health benefit expenditure in 2009 will be $9,660 per employee--an increase of 6% over 2008 figures.

** Kaiser Family Foundation Employer Health Benefits 2009 Annual Survey.

Where are Harry Reasoner and Howard K. Smith When You Need Them? Oh, That's Right, They're Dead (Sigh)

In the midst of all the news about healthcare reform, another story has emerged that I'm afraid has eclipsed the entire debate (at least for a few hours): Diane Sawyer may replace Charlie Gibson as anchor of ABC's World News Tonight!

Who's watching World News Tonight anyway? Ask their sponsors (99% of whom are pharmaceutical companies) and you'll find nary a soul under the age of about 60. The makers of Viagra, Nexium, Plavix, Lipitor, and other Rx's for "Over-the-Hillers" (like me) spend millions mononpolizing virtually every minute of commercials on WNT for the simple reason that they'll never reach such viewers through the internet.

But, just in case an occasional viewer under middle-age tunes in, WNT makes sure to say "visit ABCnews.com" as the tag line to every sentence they utter. Not to mention, the ABCnews.com graphic that's obnoxiously burned itself into my plasma TV's display.

I've watched ABC News on and off for the past 40 years and, frankly, it's never ever been as good as when Harry Reasoner and Howard K. Smith were at the helm. Now there were a couple of anchors! Oh well, I'll probably watch Diane, just like I watched Charlie, but never in the same way I watched Harry and Howard.

Whether it's Diane, Charlie, Katie, Brian, it really makes no difference anymore. Somewhere along the way, as prime-time news evolved into entertainment, these news anchors became entertainers. Nice to listen to and watch. Hard to really believe.

I suppose when I want the real story, the hard-facts, the truth, I'll just have to go to The Onion or The Huffington Post. Just kidding....

Obama's Handling of Healthcare Reform Issue: Same as Bank Bailout?

Arianna Huffington's article "Has Obama's Handling of the Bank Bailout Undermined Health Care Reform?" illuminates the impact that one major political issue can have on another. Unfortunately, it's true and sad that Obama's handling of the financial crisis has diluted the realistic need for reform down into a vague idealistic want.

However, unlike the financial crisis, most Americans have no realistic frame of reference for the healthcare crisis. No personal experience with the healthcare system itself. The financial meltdown touched virtually everyone, sick and healthy. From those with a few bucks to those who lost millions. But the shortcomings and injustices of healthcare seem to touch only those who use it. Considering the huge number of people who never see a doctor, the remainder's a pretty small basis for real support.

No wonder support for Obama has been so elusive. The strongest base he mobilized during the presidential campaign is comprised of mostly young, healthy people. There's no group whose lives are touched less by healthcare issues. For them, healthcare reform is, at best, ideological, unless they get sick and, even then, only gravely so.

Support from the young and healthy for reform of a system that seems to affect only the older and sickly, will require the same effort the Civil Rights movement needed in the 60's. Support from those who were not personally touched by racism grew only after the true injustices and inequality of the system were exposed. People today will respond to and mobilize around healthcare reform, but the administration and its supporters must expose the suffering that’s going on and stop waffling behind rhetoric.

Isn’t that how Ted Kennedy used to do it?

If Only Their Voices Could Be Heard....

Imagine how different the whole healthcare reform debate would be if all the voices of those who’ve been directly affected by the current system could be heard. Unfortunately, those same voices of people who’ve suffered with the shortcomings and inherent injustice of the system are, by virtue of their weakened physical or financial conditions, the people least likely to be heard. And, ironically, those who champion the cause on behalf of those unfortunates, have become easy objects of attack by healthcare reform opponents.

Opponents have become so clever and devious that it’s almost impossible to prove they’re kicking the sick, weakened, and disenfranchised while they’re down. But, they’re sure kicking-the-hell out of the people who are trying to help those others get up.

Apples-to-Oranges Comparison of Profits Among Healthcare Companies Lets Big Insurance Off the Hook

Rick Newman's recent U.S. News & World Report article, "Why Insurance Companies Make Lousy Villians", suggests that the profit levels of the major insurance companies are not that high compared to pharmaceutical, biotech, and medical equipment companies. Saying, “blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn't all that profitable to start with," Mr. Newman's argument plays right into the hands of the insurance industry.

Using Morningstar's ranking of corporate profits among major healthcare-related companies, Mr. Newman has found yet one more way to let the insurance industry off the hot-seat. After all, who could begrudge those hard-working folks at WellPoint a measly 4% profit when Amgen's making 30% and Pfizer's pulling in over 16%?

This kind of analysis is exactly what the insurance industry counts on to (yet again) shift the spotlight away from what they're doing and onto someone else.

But when you consider the role that Aetna, Unitedhealth, and WellPoint play in the actual day-to-day financing and delivery of healthcare, Mr. Newman's comparison is truly "apples-to-oranges" and here's why:

By virtue of their agreements with doctors and hospitals across the country, as well as thousands of employers representing millions of subscribers, managed care companies can literally control how medical care is provided. They pay or don't pay for services; authorize or don't authorize treatments; and can quickly interfere with the delivery of medical services by doctors, hospitals, and other medical providers at any time to fulfill the insurance companies' profit motives.

I don't know of one pharmaceutical company, biotech firm, or medical equipment manufacturer that can dictate how physicians practice medicine or control what services are covered or paid for. The freebies, trips, and other incentives that these companies offer medical providers may create a certain amount of influence over what medications doctors prescribe or equipment/techniques they use. But in the end, doctors are still free to practice medicine as they see fit, regardless of marketing efforts put upon them by such profit-rich companies on Morningstar's list.

Shifting blame away from the insurance companies will not serve the advancement of meaningful healthcare reform. The integral part that managed care companies play is simply too big to suggest that any other factor should be considered first or foremost. My suggestion: Keep the heat turned up the managed care companies and the insurance industry, and keep the fork ready.

Want to Link Patient Advocacy to Death Panels? Look No Further Than Your Nearest PPO

Opponents of the healthcare reform have zeroed-in on the part of the bill that calls for reimbursing practitioners for “advance care consultation” inclusive of "end-of-life" considerations related to changes in the health condition of the individual, including diagnosis of a chronic, life-limiting condition, terminal illness or injury, etc. They're deeming this critical function of patient advocacy, and the patient advocates who fulfill it, as "death panels" in the opposition's reprehensible attempt to scare the public away from healthcare reform.

Isn't it ironic that Big Insurance has for years employed a huge number of so-called "patient advocates" who sureptitiously direct patient care in alignment with the profit motives of the managed care companies, rather than in alignment with the true medical interests of the patients?

Of course, no one is talking about Blue Cross, United Healthcare, Aetna, or Cigna "death panels" because who'd ever admit they exist? Yet every day, at every managed care company, medical decisions are being made or, at very least, are being influenced by people who are not the patient's doctor. Patient advocates who work for the managed care companies, in the process of fulfilling their noble profession, are nonetheless feeding information back-and-forth to their employers. Information that influences length of hospital stay, treatment options, and other medical considerations that, over time and in many cases, can influence whether a person lives or dies. Yet no one talks about this, nor ever mentions the deep-seated motives that underlie "patient advocacy" as sponsored by commercial managed care entities.

Death panels are a great way to scare people. Maybe if supporters of healthcare reform were willing to stoop as low its opponents, someone could build quite a case that such systems have been firmly in place all along in the profit-driven managed care business model of healthcare in the U.S.

I personally honor and respect the work of truly independent patient advocates. Such people saved my mother's life when she was prematurely released from hospital several years back with a latent staph infection. Had they not asked the hard questions of the managed care providers who were treating my mother, and then arranged for her re-admittance to the hospital, she'd probably not be alive today. I won't "blame" commercial managed care for releasing her too early, but I've thought of how differently that situation would have been had the managed care discharge planners recommended releasing her when she was "healthy", instead of releasing her when their managed care protocols said she was "ready."

Co-Ops vs. Big Insurance: David vs. Goliath?

After I recently commented on HealthBeat Blog about co-ops, one of their readers posted the following:

A.J.

With your 30 years of experience, do you have any suggestions of ways to compete with the big boys, that is not government funded? Co-ops are intended to be member owned and member run (the government is not supposed to be a member). They also are intended to be the David that changed Goliath's way of doing business.

Here's my response:

The best way to compete is one that's worked for major clients of mine for the past 15 years: Eliminate the managed care middleman and contract directly with medical providers.

This approach, not co-ops, is the real David vs. Goliath. It calls for exceptionally bold and confident CEOs (who've historically stayed uninvolved in matters related to health benefits within their own companies) to leave their big carrier and contract directly with doctors and hospitals.

If you go to my corporate website ajlester. com, you'll find case studies of companies that have successfully developed their own direct networks. In doing so, they've regained the control over their health care plan operations and finances that most employers have relinquished to managed care companies.

For self-insured employers (the majority of larger companies are self-insured), medical claims are paid by the insurance company using the employer's funds according to the contracted terms and and reimbursements of the managed care network's provider agreements. The employer has zero input or control over these agreements, and little, if any influence over how the claims are paid. Blue Cross, United, Aetna, Cigna, and others never release details of their agreements with providers, so it's impossible for employers to know whether they're fair or the actual amount of the middleman "skim." All the employer knows is that plan costs keep rising every year.

In the direct contracting model, claims are paid from the employer's funds, but they're processed by independent Third Party Administrators (TPAs) according to the contractual terms and reimbursements negotiated directly between the employer and the medical providers. This pure "buyer-seller" relationship is unencumbered by the managed care middleman's profit motives and need for total control.

The idea behind co-ops is a good one, but unless the largest employers, who are now clients of and held hostage by the Big Insurance carriers, are willing to leave those carriers and get behind the co-ops, the whole idea will fail.

The giant managed care companies have been so effective as middlemen that most employers and providers believe there's no really credible alternative. The middlemen have created a fallacy that passes as a virtually unassailable form of conventional wisdom among employers. It goes something like this: "If Blue Cross (or United, Aetna, etc.) with their size and millions of members can't handle this, no one can." Consequently, otherwise business-savvy employers and medical providers summarily dismiss the idea of directly contracting with each other. They remain hostages of Big Insurance.

My concern is that this prevailing belief will carry over into any consideration of co-ops as a viable alternative. In any given market, co-ops will have to go in and compete with a middleman-created business model that's brainwashed employers and providers into thinking there's no other way to do business.

Over the years, I've found some success at overcoming that brainwashing whenever we've approached providers with the idea of contracting directly with employers in their own community. If the employer is committed to the approach, most providers jump at the opportunity for a direct agreement. Although it's almost always perceived as a good business decision for providers to make, sometimes its biggest attraction is that it is NOT a conventional commercial PPO network agreement. At those times, in that situation, the direct employer/provider agreement is the only respite from the managed care "hostage" situation that most employers or providers will ever experience.

Health Care Co-Ops: A Doomed Idea That Big Insurance Will Love

As opposition to the Public Option of the Healthcare Reform Bill grows, "waffling" Congressmen are floating the idea of establishing a few nonprofit co-operatives to compete with the insurance companies. Such an idea seems doomed to failure and, for that reason, the Big Insurance companies are certain to love it.

The idea that any newly-created, public-backed co-ops can compete with Big Insurance anywhere at any time is frankly ridiculous. It's like suggesting that a small co-op fruitstand will make the market more competitive by opening across the street from a Sam's Club/Wal-Mart mega-complex. It simply won't succeed.

Initially, it's reasonable to assume that Big Insurance would oppose co-ops for the same reasons they oppose the public option. But if co-ops really cannot succeed, and if it shifts the focus away from what they're doing, the Big Insurance carriers will support it hammer and tong. Especially if it become labeled as a negative approach, the carriers are still going to love it.

In the past 20 years, Big Insurance has found a way to turn every seemingly negative approach (e.g. CDH, high-deductible plans, etc.) into profits by diverting employers' attention away from the real causes of skyrocketing health plan costs. The same will hold true of co-ops. And Cigna, Blue Cross, Aetna, United, and others will find a way to support the idea of co-ops as it becomes increasingly evident that they won't work. What's more, they'll pay lots of lip-service because co-ops will divert attention away from their "business-as-usual" efforts to dominate the markets those co-ops are meant to serve.

If such co-ops are formed and try to compete with the Big Boys, it'll play right into the hands of the carriers. When the doomed co-op fails to work in a big market currently dominated by a couple of carriers (like Blue Cross and Aetna in Philadelphia), maybe Cigna will find a way to ride in on a white horse with some cockamamie plan to save the day, or, at very least, split spoils with BC and Aetna. In the end, no matter what the outcome, Big Insurance will still win.

I remember the days in the 1980's when independent staff-model and group HMOs were failing. Carriers waltzed in with PPOs and built their (now indomitable) position by acquiring those HMOs and selling providers on participating in their so-call "less restrictive" networks. The Big Carriers found a way to turn the fear and angst most employers and providers felt toward managed care at that time into a system of healthcare delivery and finance from which few have every been able to escape.

What do they call that psychological condition when hostages fall in love with their abductors? In my 30 years in this business, I've seen medical providers and employers taken hostage by Big Insurance. As suffering, long-term hostages, they're truly scared to death to leave their abductors because the managed care companies have so completely brain-washed them that they cannot live without the Big Insurance business model.

So co-ops will only solidify Big Insurance's strangle-hold of American healthcare. If it's tried, it's bound to fail. And, sadly, all those hostages who glimpsed the co-op approach and held a brief glimmer of hope for freedom from captivity, will have to sink back into hopelessness. Never fear, though, their insurance carriers will reassure them: "Don't worry, things will get better."

One Little Word - "Public" - Causing Real Trouble for Obama

The reason the Obama administration is having so much trouble defining and defending their position is because of one innocent, little word: "public."

If only they'd used the term "Anti-Insurance Industry" option or "Alternative to 8-figure CEO Salary" option, things might be going better. No matter how Obama or the administration spins it, the word "public" has inherently negative connotations. Probably hearkens back to visions of "public" relief or "public" assistance. Hell, these days, people could be thinking of "public" transportation or "public" bathrooms and getting a bad feeling.

The point is, this one word, "public," provides the perfect segue for the insurance lobby, anti-reformers, and squawk-radio to label the whole plan as "government -ontrolled", "socialist" , or, for some Right-wingers, "fascist".

No matter how negatively Americans perceive "Big Insurance", the notion of a "public" option seems much worse. Even if a public option is the only way mitigate the insurance industry's virtually dictatorial control of American health care, the negative "spin" that naysayers can attach to the word "public" is simply too strong.

Unfortunately, Obama's chief message for positive change is lost whenever he says the best alternative to Big Insurance is the "public" option. No wonder he's having a hard time. Americans understand the words "greedy", "self-serving", and "corrupt". Why, oh why can't someone among Obama's sharp staff find a way to define "public" option for what it really is: A viable alternative to everything that's wrong with commercial managed care.

Dr. Ornish is Right: Reimbursements a Major Determinant in the Way Medicine is Practiced

Dr. Dean Ornish, new Medical Editor at the Huffington Post, in an article entitled Resuscitating Health Care Reform, suggested that physician reimbursement is a major deterrant in the way medicine is practiced. He's right, but I'd go a step further and say, reimbursement is THE major determinant. Unfortunately, the overwhelming trend in managed care has been to pay primary care physicians (PCPs) very poorly for their services.

Managed care companies, through their self-serving provider agreements, shortchange PCPs on office visit fees and other primary services. That removes all incentive for these "front-line" doctors to spend time with patients, let alone offer them additional treatment or medical education. Whatever additional services a PCP might otherwise provide a patient by virtue of the doc's additional training, or sub-specialty, are derailed by inadequate reimbursements. So the PCP refers the patient away to a more costly specialist for treatment he might have handled himself.

In my experience negotiating direct agreements between employers and medical providers, cutting out the managed care middleman, we've found that "win-win" agreements based on fair reimbursements to PCPs are the best way to gain their support for employer-driven preventive care initiatives. Higher reimbursement of primary services also removes the disincentive to spend more time with patients and provide additional treatment. In the process of paying PCPs more, employer health plan costs have actually gone down, not up.

To create a healthcare system that removes disincentives for providing prevention and education, managed care companies will need to pay primary care doctors more, not less, for their services. Any public option will also need to do the same thing.

Ironically, most services provided by PCPs are relatively low-dollar evaluation and management (E&M) procedures, such as office visits, so the difference between a fair and unfair reimbursement is often just a few dollars. But that adds to a big loss of income, especially for PCPs who have lots of HMO and PPO patients. Until managed care companies stop gypping PCPs through unfair agreements and inadequate reimbursements, how can things possibly change?

Open Letter to Wendell Potter RE: Cutting Out the Middleman

An open letter to Wendell Potter, a Senior Fellow at the Center for Media and Democracy, and ex-PR VP at Cigna, who's now speaking out against the insurance industry's efforts to kill healthcare reform. This letter appeared as a post on Wendell Potter's blog.

Mr. Potter, I applaud your efforts on behalf of the CMD and would like your thoughts on one solution that's been entirely overlooked amidst the healthcare reform debate: Employers eliminating the managed care middleman and contracting directly with doctors and hospitals.

For the past 15 years, I've been working with major self-insured employers, negotiating direct agreements between those employers and medical providers as an alternative to conventional PPO networks. Coincidentally, one of my largest clients, a company with over 40,000 covered lives, was with Cigna when they opted to develop their own direct networks instead of using Cigna's PPO networks.

With direct networks now across 14 states, my client's medical trend has been essentially flat for the past 9 years, while companies their size suffered increases of 10% or more each and every year. This client's employer-owned networks, built upon fair "win-win" agreements, are stable and well-liked by providers. Compare that to the openly contentious and adversarial relationships you and I know exist in virtually every commercial PPO network.

The huge savings this particular employer has achieved by having its own direct networks for the past 9 years has allowed it to maintain a relatively rich medical benefits plan, with low deductibles and without shifting costs onto employees.

Incidentally, this employer uses a third party administrator (TPA) to process its claims according to the reimbursement and contractual terms of the direct agreements, as well as the UR, pre-cert, and case-management components. In this case, the TPA works for the client, and has no middleman loss-ratio to protect, so the admin costs are a fraction of what they run with Cigna.

I invite you to peruse the articles about the success of this approach that appeared in the WSJ, Business Insurance, Employee Benefits Review, and the Kiplinger Letter. Many of these are available at my website, AJLester.com.com, in the Resource Center-Newsroom.

For years, managed care companies have disdained my efforts to help employers bypass PPO networks by contracting directly with providers. Even Cigna tried to dissuade my client from developing their own networks, a story I'll share with you off-line, if you're interested.

Unfortunately, the insurance companies have done such a bullet-proof job as middlemen, that most doctors and employers believe there is no other way for them to do business with each other than through a managed care company. Ironically, the very first people that my prospective clients consult with about the idea of direct contracting is....you guessed it, their insurance company. Coming from Cigna, I'm sure you know how quickly employers can be talked out of that idea.

So, notwithstanding your background as a managed care guy, what are your thoughts about employers cutting out the middleman and contracting directly with doctors and hospitals? Shouldn't it be promoted as an alternative to commercial PPO networks? It's still a "private-payer" approach, which should appease opponents of the "public option". But the private part of it really is private. That is, between the employer as buyer and the medical provider as seller, without need of a middleman.

Lastly, is anyone else you know talking about this approach? If not, why not? If it's because no one thinks it'll work, where is that message coming from? There are companies out there, albeit not a huge number, who can tell a compelling story about the success of this approach. Is it possible to get people to listen?

Many thanks in advance for whatever insights you can lend.

Mobilizing Supporters of Obama's Healthcare Reform Requires New Strategy

To have any hope of getting his healthcare reform package through Congress, President Obama will need the same level of grass-roots support he had during the presidential campaign. Without a new strategy for creating it, however,that's going to prove difficult.

The huge mobilized base of support Obama enjoyed during the presidential campaign was comprised of mostly young and healthy people. When it comes to healthcare, there's no group whose lives are touched less on a day-to-day basis than the healthy, robust masses in their 20's and 30's. For them personally, healthcare reform is, at best, an ideological issue. Unlike the economy or even the wars in Iraq and Afganistan, there's no perceivable impact from the issue, unless they get sick and, even then, only gravely so.

To gain the support of the young and healthy for reform of a system that seems to immediately affect only the old(er) and sickly, is going to require the same kind of effort that the Civil Rights movement of the 60's required. That movement garnered support from millions who were not personally touched by racism through actively exposing the injustices and inequality of the status quo. Young people today will respond and, hopefully, mobilize on the healthcare issue, but they'll have to witness the injustices and inequality that infect healthcare in the U.S. Specifically, they'll have to be shown how their parents, relatives, friends, and other members of society are suffering daily under the current system.

President Obama Needs to Take Case for Healthcare Reform Directly to Employers

There's been lots of talk that President Obama should have the courage to pull his healthcare bill away from the lobby-taintedCongress and pitch his case for reform directly to the American public. I disagree. If he takes it to the people, amidst the barrage of negative advertising funded by the insurance industry and big PHarma, perhaps they'll contact their elected representatives. But, by then,the lobbying juggernaught of the anti-reformers will have negated whatever positive effect that outraged public sentiment might otherwise have had on members of Congress.

No, the President should take his case to American employers. They’re the ones who’ve been paying the escalating tab of medical costs through their double-digit annual premium increases over the past ten years. If corporate CEOs and CFOs don’t already know it, Mr. Obama could remind them of how private insurance companies, as managed care middlemen, have built huge profits at the expense of American employers, while offering nothing in the way of true cooperation to lower costs or provide better service. The President could also remind them that every contract renewal signed by employers (whether they have any choice or not) is sending the clear message to the insurance companies: “Keep up the bad work.”

Employers that have been beaten-up by health insurance companies (are there any who haven’t?) are really the most powerful entity in the entire healthcare reform debate. They hold the true purse-strings. Imagine the impact of hundreds or thousands of major employers canceling their agreements with insurance companies and contracting with medical providers, either directly or through a public option. There are a handful of major employers out there right now who’ve eliminated the insurance company managed care middlemen to deal directly with doctors and hospitals. The results, in terms of lower costs, fewer administrative hassles, and higher satisfaction among patients and providers have been astounding. Unfortunately, however, those results have been largely overlooked. Seems most employers were too busy buying into new illusory savings alternatives offered by their insurance companies. Such as consumer-driven health plans and other ruses that simply shifted escalating costs onto the backs of employees, and did little to mitigate the long-term trend of rising premiums.

Demand by employers for an alternative to private insurance companies is key to the debate and something the President should focus on first. True, the lobbyists will have their way with Congress and the insurance industry will its way with the American public. But if major U.S. employers really are mad as hell and aren’t gonna take it anymore, they’ll choose not to buy what the insurance industry is selling and demand other options.

A Critical Omission in Bill Moyers' Interview w/Former Cigna VP

Bill Moyers' interview with former Cigna VP, Wendell Potter, was timely, though I wish it hadn't taken 15 years for Potter to see the light. Or was it that he felt the heat? Nevertheless, in an industry of tight lips and stealth PR tactics, it's good to have at least one insider willing to jump ship and spill the beans.

There was a critical omission, however, one key factor on which Mr. Potter needs to shed light. If the American public is going to know the whole story of the insurance industry's strangle-hold of American health care, lobbying efforts notwithstanding, this factor has to be exposed and addressed.

It concerns the insurance industry’s control of nation’s private medical delivery system via their managed care agreements with doctors and hospitals. These lengthy, complicated, and often adversarial contracts signed by medical providers to become part of a PPO or HMO network are heavily slanted toward the financial interests of the insurance companies. The denials of coverage and over-turned medical decisions that outrage patients, consumer-advocates, and members of Congress are actually stipulated by contractual clauses in the provider agreements. Or, they’re permitted by contractual reference to vague utilization review protocols and case management programs that the insurance companies also control.

Mr. Potter talked about insurance company bureaucrats standing between the doctor and patient. But, he needs to also acknowledge that Cigna’s agreements with its network providers completely allow it. Managed care companies leverage huge membership numbers to get exactly what they want in their contracts from providers. Whether it’s lower reimbursements or more control, insurance companies hold hospitals and physician groups hostage by the threat of losing patient revenue if they don’t agree to contractual terms. Even in the face of insufficient reimbursement levels or other unreasonable contractual stipulations, providers invariably sign these agreements because they have no other choice.

If Mr. Potter wants to expose some real dirt, let him find and release a copy of an actual provider agreement Cigna has with a network doctor or hospital. I doubt he’ll be able to do it. Such agreements are “proprietary,” you know. But, if he can, everyone will see just how lopsided those agreements really are in favor of the insurance companies. And, how they’ve completely codified a medical delivery system in which insurance company bureaucrats really can legally call all the shots.

Insurance Industry Fear Tactics...Nothing New

Insurance companies may be using fear to sway public opinion against healthcare reform, but everyone seems to forget: As managed care middlemen, they’ve used fear over the past 25 years to take as hostages two key components of the healthcare equation: Medical providers and employers.

Here’s how they did it: As managed care companies began to dominate the delivery of medical care through their HMO and PPO networks, physicians and hospitals who contracted with those companies reduced or eliminated all other means of doing business with employers. While HMO/PPO membership swelled, medical providers’ access to patients became increasingly limited to patients who were members of those HMOs and PPOs. So doctors and hospitals who wanted the business (patients) were forced to contract with the managed care companies. Once under contract, these providers were “held hostage’ by overwhelming fear that quitting the network meant losing the patient revenue.

As hostages, medical providers have been mercilessly hammered by declining reimbursements and administrative hassles. Yet few doctors or hospitals have ever been able to quit their managed care contracts and recoup the same patient revenue on their own. What’s more, while they rake in ungodly profits, managed care companies have somehow convinced medical providers that dwindling reimbursements are due to push-back from employer health plans. Ironically, those plans are also largely controlled by the managed care companies.

Through their agreements with employers, managed care companies control the “buyer” side of the health care equation. Beginning with the HMO Act of 1973, the managed care industry has grown to dominate employer health plans. From design to funding to administration to actual provider access, managed care’s “package” of services under the guise of saving employers money, has evolved into another hostage situation. In it, insurance companies control access to medical care through their HMO /PPO agreements with providers. To gain access to those providers and the “supposed” discounts they offer via the networks, employers must do business through the middleman.

With the growing monopolization of the health insurance industry among a handful of managed care behemouths, like Blue Cross, United Healthcare, Cigna, and Aetna, employer choice of health plans and, therefore, medical networks is severely limited. What’s worse, most employers blindly believe the only way to access affordable medical care is through a health plan completely controlled by a managed care company. The notion that employers could, if they want, contract directly with doctors and hospitals for the same services (a free-market approach) has been brainwashed away by insurance company representatives. Consequently, conventional wisdom among human resource executives is that, “if Blue Cross (Cigna, United, etc.) can’t give us what we need, nobody can.”

Unfortunately, the health insurance industry has been built upon the fear they created among the buyers (employers) and sellers (docs/hospitals) of medical care for years. With both sides willingly brainwashed by the middleman, there’s no way doctors or employers will be able to help mitigate the new fears being spread among their respective patients and employees. Both sides need to step up with courage to eliminate the managed care middleman and do business directly with each other.

Wall Street Running Healthcare! Oh, No!

Nick Gier’s article in New West provides a neat perspective of the insurance industry’s profit motives that drive ever-rising healthcare costs in the U.S. Nick is a Professor Emeritus at the University of Idaho, and his unabridged version of the article, “Do You Want Wall Street to Control Your Health Care” can be found on his website along with a YouTube on the same topic.

Nick’s synopsis of the situation is right on target. Unfortunately, managed care middlemen in the U.S. have only gotten stronger amidst all the healthcare debate. They’ve done a nearly perfect job of shifting the emphasis away from themselves and onto medical providers as the reason for the healthcare crisis. Whether blaming over-utilization, runaway technology, cost-shifting from Medicare, or other indictments, managed care companies have successfully (and somewhat ironically) convinced employers (the ultimate buyers in the healthcare equation) that they (the managed care companies) are victims, too. Amazingly, employers readily buy this lie and continue to swallow ever-increasing premiums from those same companies.

Over the past 15 years, my firm has specialized in negotiating direct agreements between major employers and medical providers, effectively eliminating the managed care middleman. The results have been astounding. One of my largest clients with 45,000 covered lives has had seven straight years of flat medical trend, that is, annual inflation in healthplan costs of less than 1%. Today, their per-employee-per-year medical cost runs 65% below the national average. With a success story like that, you’d think other major employers would be beating a path to their door to find out how they, too, can achieve the same results. They’re not.

Managed care companies have so effectively convinced employers that theirs is the only cost-containment approach that can possibly work, that my clients’ success story is greeted with skepticism and disbelief. The response I get, from the mostly misinformed HR executives that decide health plan policy for their companies, goes something like this: “AJ, Blue Cross (or United, Aetna, Cigna, etc.) get the best deals (e.g. deepest discounts, etc.) from doctors and hospitals. There’s no way we, as one employer, could negotiate anything better.” That may be true, but it completely obfuscates the fact that the managed care company’s “cut” (in terms of administrative/network access fees and other middleman “skims”) erodes any discount, and ends up costing the employer much more than they’d have with their own directly-contracted provider networks.

Celebrating Ten Years in Business!

In the summer of 1999, I started A.J. Lester & Associates, Inc. with a commitment to excellence in client service. Ten years and many satisfied clients later, we’re now celebrating the tenth anniversary of our fulfillment of that commitment. Our clients have been served with professionalism, respect, and integrity. Their success, as a result of our efforts, is proof-positive that client-centered attention always works. For them and for us.

On behalf of my entire firm, I wish to express my sincere thanks to those clients we’ve served over the past decade. May your company’s success and your own personal prosperity continue for many years to come!

It's the Middleman, Stupid!

Employers complain about rising healthplan costs. Doctors and hospitals complain about declining reimibursements. The public’s complaining about 46 million uninsured Americans. Politicians complain that there are no easy answers.

Everyone’s complaining about healthcare, except the managed care companies!

But, why should they complain? After all, Blue Cross, United Healthcare, Cigna, Aetna, and the other cash-bloated behemouths continue to rake in huge profits in their role as the proverbial “middleman” in the healthcare equation. Their CEOs earn eight-figure incomes and major shareholders are still fat and happy in the midst of the worst economic downturn. They’ve gained complete control over the buying and selling of medical care in this country to their own selfish ends, yet people still complain as if there were some other reason for this country’s health care crisis.

Since the HMO Act of 1973, HMOs, PPOs, and the handful of insurance companies that came to dominate the managed care industry have methodically isolated the buyers and sellers of medical care from each other in true middleman fashion. First, they built their networks by negotiating discounted rates with doctors and hospitals. Next, they built their memberships by getting employers to offer those networks as the limited source of medical care for employees and dependents. Along the way, managed care companies convinced medical providers and employers that neither side could do business with the other without going through the middleman.

As the nearly perfect middleman, commercial managed care has isolated employers and providers from each other by virtue of “proprietary” agreements. That is, neither side knows the contractual terms or financial details the middleman has with the other side. The middleman, and the middleman alone, dictates how much doctors get paid and, in turn, how much those services cost the employer. By revealing nothing to either side, the middleman effectively “skims” the difference. That’s where they make those un-Godly profits.

What's On My Mind is Worth Your Time

Welcome to A.J. Lester’s Blog, the blogsite for A.J. Lester & Associates, Inc. It’s here that you’ll read what’s on my mind as it relates to employee benefits, healthcare, insurance, and business in general. I’ll post information, opinions, advice, and observations on a wide range of topics, all based upon and influenced by my 30+ years as a health benefits consultant.

A.J. Lester & Associates, Inc. is about to celebrate our tenth year in business. I’m proud of what we’ve accomplished in the past decade, especially the tens of millions of dollars we’ve saved our corporate clients in health plan costs. We’ve done this by focusing on the narrow, but vital, niche of direct provider contracting. That is, negotiating direct managed care agreements between our employer-clients and medical providers. This cuts the HMO and PPO middlemen completely out of the picture and allows the ultimate buyers (employers) and sellers (doctors & hospitals) to do business directly with each other.

Our accomplishments with direct provider contracting speak for themselves. Visit our website, www.ajlester.com to learn more about what we do and our success in doing it.