Stanley Feld M.D. FACP MACE

The healthcare insurance industry did great with President Obama/Kathleen Sebelius’ new regulation to apply administrative expenses to benefit expenses.

You could never tell reading the disinformation published by the traditional media. The reports were confusing and not informative.

In my last blog I reported that the healthcare insurance industry is trying to influence the regulations for expenses to be counted as benefit expenses for the healthcare industry . The benefit expenses are subtracted from the premium revenue before the 80% medical loss ratio is calculated.

The expenses the industry wanted included are;

1. The cost of verifying the credentials of doctors in its networks.
2. The cost of ferreting out fraud such as catching physicians over testing patients or doing unnecessary operations.
3. The cost of programs that keep people who have diabetes out of emergency rooms.
4. The sales commissions paid to insurance agents.
5. Taxes paid on investments.
6. Taxes paid on premium income.

All these expenses are administrative expenses in my view. These expenses could create a competitive advantage to an individual company. If these expenses are permitted as benefit expenses, resources available for direct medical care would decrease from eighty cents to sixty cents.

Last week Kathryn Sebelius published a fact sheet outlining the details of the new healthcare insurance regulations. The new regulations are clearly to the advantage of the healthcare insurance industry.

President Obama declared;

“Today, many insurance companies spend a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead, and marketing.  Thanks to the regulations , consumers will receive more value for their premium dollar because insurance companies will be required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement.   If they don’t, the insurance companies will be required to provide a rebate to their customers starting in 2012.”

We saw previously that WellPoint had a Medical Loss ratio of 83% including the six expenses as benefit expenses.

The National Association of Insurance Commissioners (NAIC) was charged to develop uniform definitions and methodologies for calculating insurance companies’ medical loss ratios. The commission was to consider input from all stakeholders. The healthcare insurance industry made 160 comments. Consumer protection groups made only 30 comments.

These regulation will make the healthcare insurance marketplace to be more transparent and make it easier for consumers to purchase plans that provide better value for their money.

This last statement is fiction according to the details in the fact sheet. The healthcare insurance industry won. There was nothing in the traditional media explaining the significance of the regulations.

I will outline the categories in the new regulations. I will describe the defects in detail in the future. President Obama has made another complicated mistake that will destroy the medical care system.

1. Establishing Greater Transparency and Accountability

This information will provide consumers with meaningful information on how their premium dollars are spent, clearly accounting for how much money goes toward actual medical care and activities to improve health care quality.

Right off the bat, the government has permitted the healthcare insurance industry to count activities it categorizes as improving healthcare quality as a benefit expense decreasing the funds available to direct medical care.

2. Ensuring Americans Receive Value for their Premium Dollar

This is an unsubstantiated statement.

3. Providing Rebates to Consumers

Insurance companies that are not meeting the medical loss ratio standard will be required to provide rebates to their consumers.

This will not happen because the healthcare insurance industry still has a high percentage of overhead as a benefit expense counte toward the medical loss ratio.

4. Insurer Reporting Requirements

Beginning in 2011, insurance companies that issue policies to individuals, small employers, and large employers will have to report the following information in each State it does business:

· Total earned premiums;

· Total reimbursement for clinical services;

· Total spending on activities to improve quality; and

· Total spending on all other non-claims costs excluding federal and State taxes and fees.

Unacceptable expenses are not defined.

5. Activities That Improve Health Care Quality

· Following NAIC recommendations, this regulation specifies a comprehensive set of “quality improving activities” that allows for future innovations and may be counted toward the 80 or 85 percent standard

There it is. The healthcare insurance industry can count bogus profit activity in the benefit expenses counted against premium dollars to be spent for healthcare. This is the place of obscene salaries.

6. Timing of Reporting and Rebates

· The first report, containing calendar year 2011 data, will be due in 2012

· Insurers will be required to make the first round of rebates to consumers by August 2012 based on their 2011 medical loss ratio. 

· Expatriate and mini-med plans that report separately will be required to report data to the Secretary on an accelerated basis.

The delay in reporting provides time for modifications of the regulations to the advantage of the healthcare industry

Treatment of Taxes in the Rebate Calculation

• The regulation will allow insurers to deduct federal and State taxes that apply to health insurance coverage from an insurer’s premium revenue when calculating its medical loss ratio. 
• In the case of non-profit plans, assessments they are required to pay in lieu of taxes may be deducted.

The healthcare insurance industry was able to maintain most of its non-value added expenses to its benefit expense column.

The healthcare insurance industry won. Consumers lost and were once more deceived by President Obama.

There were also multiple accommodations made to the healthcare insurance industry in the name of the consumer.

Accommodations to Ensure Continued Access to Coverage by Consumers

Accommodations to Avoid Market Destabilization

President Obama faked us out once again. The press coverage sounded as if the healthcare insurance industry would not be in a position to take advantage of consumers anymore.

I predict consumers will be very upset with the results.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

As soon as President Obama’s healthcare reform law passed, rules and regulations had to be made by non-elected state regulators to interpret the new law.

For the healthcare insurance industry, the fight is now over the details. The healthcare insurance industry has graciously volunteered to help regulators craft these regulations.

Senator John D. Rockefeller IV, Democrat of West Virginia, sent a letter to regulators expressing his concern that the insurers could have too much influence on how the regulations were being drafted.

“The health insurance lobbyists failed to beat the health care reform bill in Congress — but with billions of dollars at stake, we cannot and we should not expect them to throw up a white flag and start looking out for the livelihoods of American families,” Senator Rockefeller said in a statement. “They’re working every angle of the implementation process to shirk their obligations under the new law.”

As stated in my last blog entry, the healthcare insurance industry is already increasing premiums without justification for a rate increase except actuary anticipation.

The individual State Boards of Insurance are supposed to regulate rates. The State Boards of Insurance have acted as if they are impotent in the past few years. President Obama has just given State Boards grants to regulate the new law.

“Senator John D. Rockefeller IV fears that insurers are affecting how regulators interpret the recent health care legislation.”

“The new law requires health insurers to spend at least 80 cents out of every dollar they collect in premiums on the welfare of patients, a critical issue for the companies’ bottom lines.”

State regulators are drafting the new regulations to reflect the laws mandate that 80 cents of every healthcare dollar be spent for patient care. This should result in a decrease in healthcare insurance rates.

In the past, Medical-Loss ratio meant a percentage of the healthcare dollars applied to medical care after the healthcare insurance industry’s administrative services expenses.

The healthcare insurance industry wants to keep it that way. They are going to do their best to help state regulators do the same.

Consumers are being ripped off. The healthcare insurance industry loads administrative services expenses with creative bookkeeping. The actual expenses are opaque. In 2008, administrative expenses in Minnesota were 65 cents of every premium dollar. After administrative expenses, if the healthcare insurance industry spent more than 90% of the remaining 35% of the healthcare dollars for medical care, the healthcare industry was permitted a rate increase by the State Board of Insurance.

DOUBLE CLICK ON EACH FIGURE TO ENLARGE

Figure 1 Sixty five percent of private insurance dollars in Minnesota went to administrative services including brokerage fees. Only 15% went to physicians and 20% to hospitals. Figure 2

Figure 2

"The social contract for medical care should be between the physician and patient. Private Insurers aggregate 32.6% of the dollars that Americans pay in the hope of getting care, and insurers pay out only 4.9% of the money collected from the nation’s Consumers to physicians. Insurers pay out only 6.5% to hospitals.  Administrative service fees could not possibly add 15% value to the care of a patient. The administrative service fee can and must be reduced markedly."

http://www.state.mn.us/mn/externalDocs/Commerce/Blue_Cross_anfd_Blue_Shield_of_Minnesota_051606085017_BCBSM.pdf

Figure 3

Figure 4

The math is complicated. As pointed out by a reader, government officials are not anxious to uncover the creative bookkeeping for good reason.

“No career politician (Republican or Democrat) would touch attacking the Insurance lobby. Both the Democrats and the Republicans like the campaign donations from healthcare Insurance companies. Neither will the media attach the healthcare insurance industry because it biggest revenue comes from political advertisement. Who pays for this political advertisement in an era where the “media is the message.”

The healthcare insurance lobby and Big Pharma contribute heavily to political campaigns.

The good news is the traditional media is losing its impact on consumers in the era of You Tube, texting and Twitter. The cynicism is justified. Politicians are not interested in listening to the needs of the people.

As soon as a politician is sincerely interested in consumers’ needs, he will win. Many thought President Obama was that man. Unfortunately, he has another agenda.

What are the healthcare insurance industry’s administrative expenses it wants to include in the new regulations before it has to spend 80 cents for every healthcare dollar.

1. The cost of verifying the credentials of doctors in its networks. This cost is opaque. It is automated but the healthcare insurance industry wants to charge full price year after year.

1. The cost to ferret out fraud by identifying doctors performing unnecessary operations,
   procedures, and tests. Who should decide on unnecessary treatments? Peer physicians in local hospitals and local communities should decide. These physicians are usually not paid and are supposed to be immune from liability.

1. The cost for programs that keep people who have diabetes out of emergency rooms.

The healthcare insurance industry should not be doing this. It should be paying physicians to develop Diabetes Care Teams to teach the patients to self- manage their disease. The healthcare insurance industry has not universally paid for Diabetes Education. The help desks maintained by the healthcare insurance industry are not effective. These help desks are not an extension of the physicians’ medical care. They tend to undermine physicians and the physician patient relationship.

1. Healthcare insurers insist that typical business expenses should not be considered part of the Medical-Loss Ratio. The healthcare industry is not satisfied with a 20% profit on every healthcare dollar. It has managed expenses to receive 65% of every healthcare dollar by loading the administrative expenses.

1. The healthcare insurance industry believes it should be entitled to expense sales commissions for insurance agents. The expense is already built into the premium. It wants to continue to expense the sales commissions.

1. It wants to expense taxes paid on investments. These tax expenses should be subtracted before the 80% is calculated.

It is bizarre because the insurance industry bought the investment with profits. The profits were then leveraged with mortgages. Now it wants deduct the taxes as well as the interest paid on the mortgages. This is an excellent example of Wealth building 101.

1. The healthcare insurance industry wants to expense the insurance reserves. What are the rules for calculating insurance reserves? There is a line in the financial statements reporting outstanding accounts payable. Are the outstanding accounts payable the difference between what physicians billed and the physicians’ reimbursement? Our regulators are not protecting consumers.

1. It is essential to the healthcare industry to influence the rules for calculating for the Medical-Loss ratio.

The new law requires the healthcare insurance industry to provide a refund if it does not spend 80 cents on each healthcare dollar after administrative expenses. If the industry can achieve proper administrative accounting rules, it can continue to expense 65 cents of every healthcare insurance dollar.

Medicare and Medicaid do not escape this 65% administrative fee. President Obama claims Medicare’s administrative fee is only 2.5%. CMS’s administrative fee is 2.5%. The 2.5% is the fee to administer the outsourcing of administrative services to the healthcare insurance industry. Medicare pays 65 cents of every dollar to the healthcare insurance industry for these administrative services.

It sounds complicated. It is complicated on purpose. The goal is to keep the taxpayer stupid. The healthcare insurance industry can then blame hospitals and physicians for the rising healthcare costs. Hospitals and physicians become the healthcare insurance industry’s scapegoats.

I think Americans are starting to wake up.

If you’ve let your President and Congressmen know how you feel, tell them again and again-and again. It might help.

https://writerep.house.gov/writerep/welcome.shtml

http://www.senate.gov/general/contact_information/senators_cfm.cfm

http://www.usa.gov/Contact/Elected.shtml

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

President Obama is playing a dangerous game with our healthcare system and the delivery of medical care in our country.

His ultimate goal is apparent. It is to develop a government controlled single party payer healthcare system. This goal makes Barney Frank and John Kerry happy. Physicians will be salaried employees of the government.

President Obama could not get congressional support for the present law unless he made secret deals. He also faked out many Senators and Congressmen with promises he could not keep. His healthcare law is also unconstitutional. He is in the process of trying to fake out the judicial system.

President Obama knows the bill passed will fail to achieve universal care at an affordable price. All he has to do is look at the failed Massachusetts healthcare reform act. It is obvious the healthcare reform law will fail.

Americans are already feeling the pain of his healthcare reform law. As the pain intensifies, Americans will be willing to accept anything the government has to offer. Heidi Klein described this strategy perfectly in her book “The Shock Doctrine.”

First, we will have the public option. The public option will fail. Next, there will be a total takeover of the healthcare systems by the government. The government will dictate the medical care Americans can receive.

I know it is hard to believe but I predict this is Obama’s ultimate goal.

President Obama has one problem in achieving his goal. . He does not hold the Aces or the Jokers in the deck. The healthcare insurance industry does. It hold the most important cards in the deck. It provides the administrative services for the government run healthcare systems. Therefore, the healthcare insurance industry controls the money and the hidden administrative overhead costs.

The healthcare insurance industry will increase in premiums to the private sector. If there is no private sector, it will increase premiums paid by the government. The government will raise the money by restricting access to care, rationing medical care and increasing taxes. Increasing taxes will be difficult because the government is bankrupt. With rising unemployment rates the tax base decreases.

I will walk you through the scenario as it develops. First, it is necessary understand the steps the healthcare insurance industry is taking to insure its secure hold on the Jokers and the Aces.

This year the healthcare insurance industry is increasing premiums once more as it is reducing patient coverage and decreasing physicians reimbursement to physicians. Where is the money going?

The increased premiums will choke the healthcare system. The result will be more uninsured patients. Small business is struggling to survive economically during this recession. They will be forced to drop coverage for their employees.

I received an email from a reader. The email tells the story. The reader described herself as a 40 year old MBA small business owner of a high tech company. She wants to provide healthcare insurance to her employees. Since she is also an employee of her company she feels it is also essential to provide healthcare insurance for her family.

This is her story.

As an employer, the options available are overwhelming. The information available to determine the differences in various plans is difficult to get to, analyze and understand.

Insurance premiums continue to go up yearly as plan options change. President Obama is wrong when he says if I like my plan I can keep it. My plan is not available.

As an employer, we’re trying to help our employees by contributing a similar contribution on % basis. We increased what we’re paying as an employer to cover the increase in price of this years premiums. We can barely afford the increased premium.

It’s equally difficult and confusing as an employee to determining the differences in the healthcare insurance plans available to me through my employer (me).

I’m use to PPO (choice of doctors – well, at least those within the network). HMO is less
expensive, but I don’t really know what the difference is in terms of care, services, hoops to go through to get a primary doctor for referral to other doctors.

As an employee I’m paying $1600/yr, and my employer(me) is paying $14,500 for medical coverage for my family. This is for a $1500 per person ($3000 family) deductible.

In essence I am paying $19,100 ($1600+$14,500 +$3000) plus my copay per year for less coverage than I had last year. Where is President Obama’s promise of relief?

For the lower deductible plan I was on last year ($1000 / person, $2,000/family) the price is $17,500/year plus $1600 from the employee plus $2,000 deductible for a total of $21,100 excluding copay.

Dental and vision plans are optional and separate from this, and add another $1600/yr for basic emergency coverage.

This is insane! Expensive, very hard to understand and navigate plan differences, and although I have plan options, I don’t really have any options outside of a certain band of options provided to me through my employer, unless I want to go it alone, do more research and spend time/energy managing my health care options.

Sincerely

Where are you President Obama when we need you? The healthcare insurance industry is setting us up. These are unintended consequences for the non retired. Wait until we see the consequences for the retirees.

President Obama’s reply would be “I am on my way.” I’ll bet he is.

He would say everyone will have to live through this pain until I can stuff a single party government payer down the throat of congress. At that time everything will improve. The government will run the healthcare system correctly. The government will salary physicians. This will Repair The Healthcare System.

I suggest Americans should not hold their breath.

If you’ve let your congressmen know how you feel, tell them again and again-and again.

https://writerep.house.gov/writerep/welcome.shtml

http://www.senate.gov/general/contact_information/senators_cfm.cfm

http://www.usa.gov/Contact/Elected.shtml

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Ann Braly’s (CEO of WellPoint), article in the Wall Street Journal on February 7, 2007 and the announcement of a 37% increase in healthcare insurance premiums by California’s Anthem Blue Cross(a WellPoint affiliate) illustrates several points.

1. The healthcare insurance industry wants Obamacare’s mandated insurance so it can service more enrollees.
2. It is easier to hate the healthcare insurance industry more than Obamacare
3. President Obama is able to ride in on his white horse and save Americans from the evil healthcare insurance industry.

Who wins?

1. The healthcare insurance industry.
2. The President and his goal to increase government. control over our lives and freedom.

Who losses? American citizens

1. Increasing government control over one-sixth of our economy

2. Increasing taxes in different ways.

3. Decreasing freedom to choose.

4. Restricting access to care.

5. Rationing medical care.

6. Infringement on our constitutional rights.

The healthcare insurance industry controls the healthcare system. It sets insurance premiums using defective accounting systems to determine an exaggerated overhead.

The States and their State Insurance Board control licenses to sell insurance. State Insurance Boards have not acted in the citizens’ interest in many states.

All the California State Insurance Board has to do is refuse Anthem Blue Cross a license to sell insurance in California. Anthem Blue Cross would lose 800,000 enrollees.

The healthcare insurance industry is the administrative service vendor for Medicare and Medicaid. The fees government pays to the healthcare industry are excessive.

The healthcare industry believes it adds value to medical care of patients.

“The reason costs are rising so fast, Mrs. Braly says, is because the way the health-care market is structured doesn’t give providers reason to control costs. The solution is to "reintroduce the consumer to the health-care equation," and on that front, she believes, insurers "are actually the part of the health-care delivery system that is there to create the value."

This is an important statement. Medical care is the relationship between patients and physicians. All the other stakeholders are secondary stakeholders. In Repairing the Healthcare System the most important issue to be resolved is how do you provide incentives to patients and physicians to control costs?

The solution is that consumers have to drive the healthcare system not healthcare insurance industry.

Government control of the healthcare system will not control costs. Programs that penalize physicians and patients will not control costs.

Patients can control costs and quality with the appropriate educational infrastructure. At present most patients choose their physician by word of mouth.

Healthcare costs can be controlled by consumers controlling their healthcare dollars. .

“Mrs. Braly thinks patients will make more cost-conscious decisions if they have the incentives and the tools—namely, the information about cost and quality that is the basis of any ordinary market. "Data just sitting there is not helpful, and its got to be meaningful, provided to the doctor and the patient in a meaningful way," she says. Far from simply being a bill-paying outfit or a hedge against risk, she sees WellPoint’s fundamental role as making "the health dollar more valuable, less wasteful, more efficient."

Mrs. Braly knows her company owns the healthcare dollar. She wants patients and physicians to be directed by her company to be more efficient. If they are they will be more valuable to her company’s bottom line.

I do not think she will reduce premiums. . I think increased efficiency will result in greater profits for WellPoint. Consumers have to be incentivized to be responsible for their health and healthcare. This is the only way you will reduce costs and decrease premiums. The government trying to force cost reductions will fail.

I do not think President Obama realizes he is being set up by the healthcare insurance industry. He believes he is setting the healthcare insurance industry up.

He has refused the Republican offer for a bipartisan effort at healthcare reform. It is almost as if he and the healthcare insurance industry are playing bad cop, good cop at the expense of the American people.

President Obama published Obamacare 5.0 on Monday four days before his so called bipartisan healthcare summit. His proposal is almost a duplicate of the Senate bill.

Michael Connelly, a retired constitutional lawyer, wrote a dynamite review of President Obama’s proposal which he dubbed Obamacare 5.0.

“After much anticipation, at least by the so-called mainstream media, the White House has released the new and improved version of Obamacare.

Since I have already had to read two previous versions of these monstrosities in the House and two more in the Senate, I call this version Obamacare 5.0 and it is actually an easy read.

It is not hundreds or thousands of pages long and it doesn’t take long for people to realize that it really changes very little.”

The President’s proposal makes the bill more palatable to the American public because he camouflages the implications.

“Some members of Congress have grown increasingly more concerned about the implications that these proposals have for freedom in this country. In that regard the proposal fails miserably.

This is all an attempt to hide the fact that the bill is still blatantly unconstitutional.”

Michael Connelly points out that President Obama’s proposal exceeds the authority granted to Congress in Article 1 Section 8 of the Constitution. It also violates the 9^th and 10^th amendments that protect the rights of people and the states.

His article is clear and precise. The critical details should be a wakeup call to all Americans. It is a must read.

I believe that President Obama’s proposal is in fact a ruse. It is designed to lure us into believing that the health care bill is actually about affordable health care when it is really about taking control of our lives and limiting our freedoms.

It is a cover for the fact that the Senate will try to pass this bill as a “budget reconciliation act” that will only require a simple majority in the Senate instead of the usual 60 votes.

We must act now to let our representatives in the House and Senate know that we are not buying
into these deceptions and that they will pay a price in November at the polls if this is forced on us.

During Nancy Pelosi’s call to action, she said if necessary they would parachute in and pass the bill.

President Obama’s proposal is a way to get a healthcare bill passed. If it passes it will cost Americans dearly. At this point he wants to pass any bill for the sake of saying he passed a healthcare reform bill.

His present proposal is the same as the terrible Senate bill. He will fail because he makes no attempt to be bipartisan.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Ann Braly’s ( CEO of WellPoint), article in the Wall Street Journal on February 7,2007 signaled an aggressive campaign by the healthcare insurance industry to force the federal government to subsidize healthcare insurance even more than it is presently.

The healthcare insurance industry wants the passage of Obamacare with the deal President Obama made with them. Part of the deal was to mandate insurance and increase deductibles from 20% to 30%.

“This scheme presented by Obamacare would have been, and might still be, imposed on the rest of the country.”

The original scheme (Obamacare1) was forced to be modified because mandating healthcare insurance was challenged as being unconstitutional.

Thirty two states have passed laws prohibiting healthcare insurance mandates. Mandates would be great for the healthcare insurance industry. They would increase the number of customers insured.

The more insured the lower the actuarial risk. The healthcare industry claims it could lower the cost of healthcare insurance. Obamacare 1 would also increase consumers’ deductibles saving more money for the healthcare insurance industry and increasing the burden to consumers.

At the request of several congressmen last year, including some Democrats, WellPoint mined its own actuarial data to model ObamaCare and found that it would as much as triple premiums for the small businesses and individuals who are most of the company’s customers.

WellPoint is declaring that Obamacare 2 will triple premiums. It is important to note that WellPoint did the math using accounting practices permitted by the government. The result is loading the overhead.

There is no evidence that any congressmen or the President has challenged WellPoint’s estimates until Mrs. Braly’s WSJ interview. No one has challenged the accounting methodology. The government is assuming the healthcare insurance industry numbers are correct. It would also be important to understand the math in the actuarial estimates.

The government should be looking at the defects in accounting methods. It should also look at the accuracy of the actuarial calculation.

“The White House political shop promptly compared WellPoint to a tobacco company.

President Obama uses political sound bytes all the time. His sound bytes have little substance. He should become aware of the fact that the average citizen is tired of his nice sounding rhetoric.

The healthcare insurance industry is ripping off the consumer and the government. The government should make the right accounting rules, incentivize the consumer and physicians to decrease the cost of healthcare and get out of the way.

Four days after Mrs. Braly’s statements about premium increases, Anthem, a California subsidiary of WellPoint, announced it was increasing its insurance premium by 39% for individuals insured.

I knew it would not stop at Anthem in California. The healthcare insurance industry is exempt from antitrust laws. I predicted that WellPoint’s argument is paving the way for other healthcare insurance companies to increase its rates.

“For example, Anthem in Maine was denied an 18.5 percent increase last year and is now requesting that state regulators approve a 23 percent rise.

Michigan’s Blue Cross Blue Shield plan requested approval for premium increases of 56 percent in 2009. And in the state of Washington, rates for some individual health plans increased by up to 40 percent until regulators cracked down.

Other states cited in the report were Connecticut, Oregon and Rhode Island.

The premium increases affect the most vulnerable part of the health insurance market, policies marketed individually to customers buying their own plans.”

The goal of WellPoint is to raise the rates on individual plans which have patients at risk for using healthcare insurance. Its position is the government should pay for the risk and that is the deal they made with President Obama before he changed the deal.

“According to the Census Bureau, only about 9 percent of Americans purchase coverage directly, while nearly 60 percent are covered under employer plans. Family premiums for those with workplace coverage rose 5 percent last year, even as inflation fell 1 percent, but nowhere near the rates seen in the individual market.”

The mandate to the healthcare insurance industry is they must accept all employees regardless of pre existing illness in group plans. They can raise the rates of group plans depending on the demographics of the group rather than community rate the group. Community rating should add a community pressure point to individuals that do not take care of their health.

Older self employed individuals cannot qualify for healthcare insurance under present healthcare insurance company rules. Even if they qualify for insurance these consumers have to pay for insurance with after tax dollars. The existing rules decrease individuals’ ability to afford healthcare insurance.

On top of that the insurance industry demands unconscionable premium increases. The solution is for State Insurance Boards to refuse to grant these companies a license to sell insurance in their state.

Another solution should be making healthcare insurance tax exempt just as employer insurance is tax exempt. Obamacare wants to make all insurance payments non tax exempt to increase government revenue while placing a bigger burden on individuals and groups.

The healthcare reform bill should change the rules so that all insurance is community rated and everyone is qualified to buy insurance regardless of preexisting illness. The bill should create ideal medical savings accounts for everyone so they become responsible for their own health and healthcare dollars.

“Insurers say the push for higher premiums reflects supply and demand. Medical costs keep going up, even in a weak economy. Many healthy people are dropping coverage or switching to bare-bones policies to keep their bills down. That leaves a higher proportion of people with health problems in the risk pool, forcing the steep rate increases.”

This is the reason to start from scratch with the Ideal Medical Savings Account. Medical Savings Accounts are an insurance product Democrats refuse to consider. It will decrease the power of the federal government’s ability to keep the citizens in a state of fear and them in power. (Shock Doctrine).

It is time for us to say we are not going to take this anymore.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Ann Braly, WellPoint’s CEO, launched a new offensive to protect the vested interests of the healthcare insurance industry now that Obamacare seems to be dead.

The healthcare insurance offensive began with her op- ed article in the Wall Street journal on February 7,2010. Readers will have a deeper understanding of the offensive if they follow the underlined historical links in this article.

It will destroy President Obama’s credibility, the practice of medicine, patient access to care and increase the number of uninsured. It will bankrupt the country if her offensive is successful.

The healthcare insurance industry is killing the goose that laid its golden egg.

WellPoint is the largest U.S. commercial health insurer by membership. Wellpoint’s affiliated health plans are in 14 states and insure over 34 million people or 11.1% of the population.

Wellpoint also has reimbursement contracts with 82% of the nation’s primary-care physicians, 84% of specialists, and 94% of hospitals.

Anthem Blue Cross is California’s largest for-profit insurer and is an affiliate of Wellpoint. Anthem insures 800,000 people.

Four days after Ms. Braly’s article blamed all the other stakeholders for the rising cost of healthcare insurance, Antham announced it will raise member premiums by as much as 39% on March 1.

The parent company, Wellpoint had a net profit of $2.7 billion in the last quarter of 2009 alone.

Since the healthcare insurance industry has an antitrust exemption I expect every other healthcare insurance company will raise its premiums. Extrapolating the profit to the entire population insured, the total net profit in the healthcare insurance industry would be 144 billion dollars. This does not include the inflated and wasted administrative expenses.

Somewhere between 35-65 cents of every healthcare dollar goes to administrative expenses. Assume that 50 cents of every healthcare dollar is expenses plus net profit to the healthcare insurance industry. The healthcare system consumes $2.5 trillion dollars. That means $1.25 trillion dollars goes toward expenses and profit. The profit is distributed to employees and stock holders.

President Obama says;

"I mean, to be fair, the status quo is working for the insurance industry, but it’s not working for the American people," Mr. Obama said recently.”

Ann Braly CEO of Wellpoint says;

“It’s hard to see how WellPoint could be to blame for surging health spending, Mrs. Braly says, when 85 cents out of every premium dollar or more "is paid out in the actual cost of care, doctors, hospitals, suppliers, drugs, devices." Confiscating the 2009 profits of the entire insurance industry would pay for two days of U.S. health care.”

The question is who is incorrect? Are Wellpoint’s financial statements incorrect or is Ann Braly’s sound byte incorrect? I think everyone would agree that $2.7 billion dollars net profit in the last quarter of 2009 is not shabby.

Wellpoint is using a well worn public relations technique by pointing a finger at the other stakeholders. All its administrative costs, additional reserves, and investment costs are included in the “85 cents out of every premium dollar figure.”

Wellpoint makes money on the money withheld from physicians for reimbursement. Wellpoint has held back reimbursement to physicians often. When it was sued in California (at an extra cost to the healthcare system) the settlement was for a fraction of the reimbursement owed. The settlement was a pretty good way of making money.

“You don’t need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.”

The healthcare insurance industry is the middleman that controls the healthcare system. The government through Medicare depends on the healthcare insurance industry to be the third party administrator for Medicare. The healthcare insurance industry sets the prices and the benefits using an unscientific social science called actuarial science.

“The health insurance model is closest to the parasitic relationship imposed by the Mafia. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection."

In order to control the healthcare system the healthcare insurance industry has managed to control the process of authorized treatment and reimbursement for the government and private insurance.

Mrs. Braly says;

“To actually be fair, the insurance industry was a cheerleader for the plan, at least until the policy substance congealed sometime in September.”

"Obviously, we’ve been involved in this discussion for a while—more than a year—and if you think about it we came to the table early, early on and said we’re going to be advocates for responsible, sustainable health-care reform done right. We really do have to get at the underlying question of health-care costs."

It is certainly to Wellpoint’s and Mrs. Braly’s advantage to have universal healthcare that is mandated and subsided by the government. Prior to September the healthcare insurance industry had it all set up with President Obama.

Universal healthcare would provide more customers and more premiums. The healthcare insurance industry also worked out a deal with the government to increase the deductibles from 20% to 30% so they could provide affordable healthcare insurance at a lower price.

The $2.7 billion dollars in profit for the last quarter drove me to look at the salaries and stock options posted on the web for officers of Wellpoint. Mrs. Braly’s salary was not available.

CEO, Divisional/Presidents’ salary was 1.18 million and 8.4 million dollars a year.

The CEO and Chairman of the Board made 23.9 milliona year .

Executive VP/CFOs’ made 8.42 million dollars a year.

Geographical CEO/Geographical President/Executive VPs’ made between 15.56- 6.39 per year

The stock options awarded are even higher.

In a March 2007 post I stated that “ UnitedHealthcare claims that costs are out of control. Why? Who paid their CEO $1.8 billion dollars over 8 years? The amount equals $300 million dollars a year or $821,917 a day in salary and benefits to one person. < a href="http://stanleyfeldmdmace.typepad.com/repairing_the_healthcare_/2006/11/administrative_.html">What are the other top executives at UnitedHealthcare receiving in salary and benefits? Do you think these salaries affect the cost of insurance?”

Consumers only realize that health insurance increases yearly. In November 2006 I wrote;

“No leader has the courage to step forward and do something about it. I have emphasized much of the leadership can be exerted at the state level by state boards that license the insurance industry, hospitals and physicians. No one has organized the people to protest. The excuse is that the healthcare system cannot be fixed. It is impossible to control physicians. I believe all these excuses are smoke to cloud the solution. The facilitator stakeholders are simply holding on to what they falsely perceive is their vested interest.
“A theory of limits applies here. In a voluntary market, healthcare purchasers–employers or taxpayers–will tolerate only so much cost growth. Then they’ll recede. It is preposterous to believe the well won’t run dry.”

All of these pricing mismatches and excess non medical value added costs can be eliminated by permitting patients to be in control of their healthcare dollar and selling pure insurance that is fairly priced. The Ideal Medical Savings Account system represents pure insurance in the form of high deductible health insurance and motivation for the patient to become an informed consumer.

The cost of processing claims could be eliminated completely. The service claims could be adjudicated instantly with a credit card. Thousands of diverse businesses adjudicate claims on purchases instantly daily at a low cost. The use of credit cards to pay for Medical Savings Accounts could provide an instant savings of $150 billion dollars in costs in the healthcare system. The losers will be the non competitive insurance companies. The winner will be the bright flexible company that puts the correct 21st century system in place.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.