Health Care Reform Bulletin # 13

Sent: Wednesday, April 18, 2012 6:07 PM
Subject: Health Care Reform # 13

The content for today's bulletin doesn't come from outside experts but from Businessolver's own internal SME (Subject Matter Experts).

Health Care Reform Delegates
Each client service teams appointed a delegate responsible for health care reform. Led by Mandy Abbas, the delegates assembled the knowledge from the bulletins (and other sources) into a presentation deck to address the main points of PPACA and explains how Businessovler helps clients manage them. 

Super Shout Outs to Dave Sorensen, Angel Hower, Mike Parsch, Andrea Bohnenkamp, Wendi Reeves and Mandy Abbas

You can access their highly information yet approachable presentation by visiting: S:\Businessolver\Healthcare Reform

Bulk Buying vs Insurance Theory

Someone asked this question about exchanges:

"The article from Buffalo Bulletin states:

"If I joined a group that had buying power of hundreds or even thousands, then I’d have the same choices as IBM and McDonald’s"

Isn't that argument really bogus, because groups of any size will be largely self funded and exchanges will be offering fully insured products thus still making the types of products large companies have available still unattainable by the little guy?"

This is an excellent question as it allows us to revisit Bulletin # 4 (Exchanges). The promise and purpose of the exchange (or PEO) is that the concept of strength in numbers (the larger the group, the greater the discount.)

While this economic law works for most items (including  Jimmy Buffet tickets), insurance isn't one of those items. One of the reasons is the issue of risk management which is a large factor in insurance but not in other items. Suppliers can offer discounts for large groups due to the fact that the cost for each item is relatively consistent. The actual costs for the tickets for section 203 in a stadium are going to be as section 204.

With medical insurance, the cost of insuring one individual is radically different than another even if they appear to be exactly the same. It is for this reason that there is underwriting of policies. At a very basic level, underwriting compares the risk to the cost of providing a benefit. The higher the risk, the greater the expense and associated premium.  You can learn more by visiting this site.

Exchanges will need to strictly manage the size and type of employees enrolled in their plans. If the exchange has only unhealthy members, the rates will increase which will drive the good risk out (because they can find better rates on their own) which will increase the percentage of unhealthy members and the cycle is repeated.

Self funded or fully insured exchanges are impacted by the quality of the members as much if not more so than the quantity. If IBM was doing a poor job of managing their employees health, they may have fewer options than a well managed state run exchange.

Unfortunately, the government run exchanges will be focused on the uninsured or under insured market which means that they will be starting with the worst risk pool and then hope to lure others into plan based on better rates. Unless they are receiving state or federal money (your money), this new exchanges would defy the bedrock of insurance theory that have been around for thousands of years.

The little guy will not be able to buy the same plan as IBM or McDonald's in part to size but more because of the laws of risk management.

Have a question, thought or comment? Agree with the assessment? Reply to this email or post your thoughts on ask.businessovler.com