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.