Insight, analysis & opinion from Joe Paduda
In one answer to the question, where did Ohio’s Workers Comp premiums go?, the answer is to a contractor building Tommy Noe’s house on Lake Erie.
Noe, the defendant in a criminal trial, is alleged to have used workers comp funds set aside as reserves to pay future claims to help pay for his 4200 square foot house on Lake Erie. And another one in the Florida Keys, both of which were worth a million bucks each.
If anyone has photos of these places, let me know.
Coventry announced their third quarter earnings this week, and much of the news was good. Health plans have been experiencing declining medical loss ratios and strong pricing, resulting in solid profiits and increasing revenues, and Coventry’s results mirror the industry.
Before diving into the FH WC business, a caveat. Coventry is a very well-managed company. They run a very solid business, understand the group health, HMO, and Medicare businesses better than most, and have consistently delivered excellent results.
But, while all is good in group health, Medicare and Medicaid land, the same can’t be said for the First Health workers comp business.
The soft market, that’s what.
While I’m somewhat reluctant to cite bomb-thrower Robert Hunter of Americans for Insurance Reform, he does make a good point. AIR’s recent pronouncement that the med mal crisis appears to have abated in large part due to the underwriting cycle is correct.
My take is the med mal crisis is largely an invented one. Yes, it is a problem for specific specialties and in specific areas. But it is NOT due to large jury awards; it is a result of insurance cycles and pricing.
In what has to go down as perhaps the least surprising news of the political season, big pharma is panicked that Democrats are going to take over Congress.
Panicked may be too mild a word.
Tommy Noe, the political fund raiser/rare coin investor/investment adviser to the State of Ohio’s bureau of workers compensation (BWC), ought to be teaching negotiation seminars in his next life – that’s after he gets out of the pokey.
The deal he negotiated with BWC is far better than any I’ve come across or heard about, According to the article, Noe’s deal prevented any future BWC administrators from reviewing or rejecting his deal, as he did not want them to interfere with his investment “strategy”.
As well they should have.
The march off the cliff has begun in earnest. A new survey indicates underwriters are starting to hold their collective nose and write business that would not have merited a “no thanks” a year ago. As usual, larger risks are getting the best deals, but even small accounts are seeing discounts at renewal.
Bob Vineyard at InsureBlog has an excellent post on how out of touch most American health care consumers are when it comes to understanding the drivers of health care costs.
I hope these folks don’t vote.
There is quite a bit of interest among private equity and venture capital firms in the work comp managed care “space”. These investors seek to buy into companies that are poised for growth, that have a “sustainable competitive advantage”, solid management, long term contracts with customers, and a profitable business model.
A key to success for these investors is to find these firms before the other investors do, which means identifying good companies quickly. Analysts spend lots of time, energy, and brain power analyzing, assessing, and interpreting data. looking for the wheat among the chaff.
A much faster, and probably more accurate way, is to pick up the phone and call the company. Talk to the receptionist, someone in customer service and someone in billing. What they say doesn’t matter nearly as much as how they say it.
Good companies have energy, enthusiasm, and a desire to help that comes through the phone. Not so good ones have none of the above.
I’m suffering from a severe case of cognitive dissonance, brought on by completely conflicting statements in articles from a single source, the New York Times. In Friday’s business section, Alex Berenson notes that big pharma, led by Pfizer, Lilly, Novartis and Wyeth all enjoyed strong profit gains (free registration required) in the third quarter.
The profits were generated, in large part, by price increases in the US, where Lilly’s prices were up 11%, contributing to a 14% gain in US revenues. Fair enough, prices went up, so did profits.
In the next (virtual) breath, another NYT article quotes the Congressional Budget Office’s as concluding that a Democratic Congress’ efforts to reduce Medicare drug spending by negotiating directly with pharmaceutical manufacturers will not work because private industry is so darn good at negotiating prices. (polemics are mine, but you get the point)
If this continues, big box and discount retailers will be giving drugs away. With the recent announcements that Target is matching Wal-Mart’s $4 drug price deal, Wal-Mart is speeding up the roll-out of their $4 script program, and K-Mart has had a 90 day supply of 184 generics for $15 offer since May, the price war has started.
Among the criticisms of the Wal-Mart initiative is that only one of the 20 drugs most commonly prescribed is on the discount list. Regardless, the Wal-Mart move has shaken up the pharma market, and forced retail outlets to quickly figure out their stance.
