Author: Joe Paduda

Mar
25

Coventry to be acquired by United HealthGroup?

Posted by Joe Paduda on Wednesday, March 25th, 2009 | Comments

Rumor is UHG is making a run at mid-tier managed care player Coventry Health. Forbes reported late today that Coventry’s share prices ticked up on the ‘news’.
I’m not surprised; as I noted several months ago Coventry is likely to be sold or dismembered this year. CEO Allen Wise has deep-rooted connections with UHG. Formerly an EVP at United, Wise was also a senior executive at MetraHealth and facilitated the acquisition of MetraHealth by UHG.
Coventry has been battered by news that it missed its medical loss projections a year ago, beginning a slide that continued with a major miss on Medicare numbers in the fall. Former CEO Allen Wise was brought in to assess the situation, a move that led to the dismissal of CEO Dale Wolf, a re-ordering of priorities, and renewed focus on the core small group HMO business (potentially at the expense of Medicare, Medicaid, Workers Comp, and National Account segments).
The deal wouldn’t be good news for providers; according to the Verden Group’s survey of physicians UHG is a mediocre performer in terms of policies, procedures, and reimbursement. Hospitals have a much more negative view of the huge plan, as UHG is considered the worst health plan to work with according to a survey by Davies.
If this comes to pass, there will be much more to consider. For now, it’s just a rumor.

Mar
24

Doing the devil’s work

Posted by Joe Paduda on Tuesday, March 24th, 2009 | Comments

Merrill Goozner reminds us of why so many dollars are wasted in the US health care system. The prostate cancer scare is exhibit one in the ability of device manufacturers, pharma, and advocates thereof to raise America’s health care costs with their voodoo medicine.
Prostate cancer is usually a very slow growing cancer; many men over sixty have it and few will die of it. Of course some will die young, but overall, far more men (and their loved ones) are harmed by misdiagnoses of prostate cancer and the potentially horrible effects of unnecessary treatment than actually benefit from early detection.
The ugly truth about prostate cancer testing is it doesn’t work. The most common test, a blood test known as PSA (Prostate Specific Antigen) is terribly inaccurate. Men who have been tested have no better survival rate than men who have not.
This isn’t my opinion, it is the finding of research published in The Archives of Internal Medicine in 2006. The authors found that neither a PSA test, nor a rectal exam reduced the chance of death from prostate cancer. And the latest data confirm that testing is a huge waste of money and is wildly inaccurate
OK, so what’s the problem? Men get tested, no harm no foul? Actually there are lots of problems. First they aren’t free – PSA tests range in cost from $70 – $200, dollars that could be saved or spent on more effective medical services. OK, what happens if you decide the heck with the cost, I’m going to get a PSA test. The PSA level can be abnormal even when a man does not have prostate cancer. Seventy percent of positive PSA tests are false positives; the patient does not have prostate cancer.
Not only is this a huge waste of money, but patients who undergo treatment (radiation and/or surgery) may well end up impotent (38% – 63%) or incontinent (13% to 52%) or have bowel issues (5% to 17%). As a fifty year old man, I don’t much like those odds.
What’s even worse is when regular people become unwitting advocates for these charlatans. As I noted several months ago, one of hte more ardent advocates of early prostate cancer screening is Ed Randall, host of the terrific ‘Talking Baseball’ radio show. I’m a big fan of his show, and equally angry about the damage Randall is doing to individuals, their families, and the nation with his unabashed, and ill-informed, support for prostate cancer screening.
I’ve contacted Randall in an attempt to discuss this, but never got a response. The title of this post may be considered inflammatory and over the top. So be it.
What does this mean for you?
Don’t get a PSA test.

Mar
24

Blunt’s performance as CEO of WSI

Posted by Joe Paduda on Tuesday, March 24th, 2009 | Comments

In my last post I reported my findings that former North Dakota state fund boss Sandy Blunt’s conviction on charges of authorizing sick leave, failing to get moving expenses repaid, and authorization of payment for small gifts and meeting coffee and danish is nothing short of outrageous.
But perhaps these were sought because the guy is a raving incompetent, and under an employment agreement the state couldn’t fire him unless he was a convicted felon, so they got what they could to kick him out.
Further investigation proves that this couldn’t be the case. Documents from an audit conducted by Marsh in Q1 2008 and other sources indicated the WSI made significant progress under Blunt’s leadership. A few of the findings are below.
– the percentage of claims reported in one day (one day!) increased from 6% before he got there to 45% due to a reporting incentive program he initiated.
– revisions to WSI’s safety programs led to a reduction in severe claims from .81/100 workers to .67.
– claim frequency dropped after Blunt created a financial incentive program for employers – before the program, frequency had averaged a 3% annual increase; after claims dropped 3.7%.
– Under Blunt, the fund’s operating ratio, or administrative expense ratio, was 16.2%, dramatically lower than the average state fund operating ratio of 24.5%. (Conolloy and Associates Report, 3/5/08)
– Paid loss trend was less than half of one percent per year, a remarkable result given medical trend in workers comp.
– WSI’s performance enabled North Dakota’s employers to enjoy the lowest work comp premium rates in the nation – a full 52% below the average state (Oregon Dept of Consumer and Business Services study)
There are lots of workers comp insurers, TPAs, and large self-insured employers that would love to have these kind of results.
Clearly the people who brought down Sandy Blunt did so for reasons other than incompetence. Outside the inevitable complaints from claimants complaining about mistreatment at the hands of their insurance company, the evidence seems to be squarely in Blunt’s favor.
Performance at WSI got better when Blunt was there.
Here’s hoping the new guy – you know, the one who was at least tangentially involved in the ‘investigation’ that resulted in Blunt’s dismissal, the one with zero experience in workers comp, can continue to build on Blunt’s successes.
Because he sure has a tough act to follow.
I don’t know why Blunt was targeted with trumped up charges, and fired despite his obvious strong performance. And I’m not going to try and find out.
The more I learn about this, the more I think I’d have to don a hazmat suit before digging any further, because this just stinks of something rotten in North Dakota.
And that smell is coming from whomever decided for whatever twisted and sick reason that a competent manager needed to be fired and have his life ruined.

Mar
23

Health care reform – have they lost their minds?

Posted by Joe Paduda on Monday, March 23rd, 2009 | Comments

Alas, lost in all the sound and fury about AIG and executive bonuses is the news that many stakeholders in the health care reform debate have lost their collective minds.
Bob Laszewski posted last week about the document signed by many of the more active health care reform groups/advocates suspending the ‘pay as you go’ requirements that require Congress to find sources of funding for new spending initiatives.
Instead, the signatories (including Phrma, the US Chamber, AFL-CIO, Families USA, and various physician and provider organizations) have called on Congress to ignore the final cost of health care reform.
It will come as no surprise that this is happening now, as health care reform is starting to move from the discussion stage to front-and-center. And the broad themes and feel-good goal setting is now being replaced by the much tougher discussion about who gets to pay for reform. As CQ Today reported on 3/9 suspending the PAYGO rules will allow Congress to “avoid tough choices that could splinter” the coalition of health care reform advocates that so far has been fairly unified in its support of reform.
It’s crunch time. Several House and Senate committees will be taking up health care reform legislation this week. We’re now going to get into the nitty-gritty of who wins and who loses – because there simply cannot be health care reform without cost containment.
We cannot afford the ongoing costs of Medicare and Medicaid, much less expand coverage, until and unless Congress and the President make some very hard decisions. Suspending PAYGO is nothing less than an effort to avoid making those choices – to saddle future taxpayers with yet another unaffordable obligation.
To date, the Administration and Congress have gone after health care costs by hitting the insurers and other peripheral players. Now it’s going to get interesting. The device manufacturers, drug companies, physicians and hospitals are all going to have to take a hit – a big one. There is just far too much care, too many medications and procedures, too many services and treatments that are unproven or downright useless. But these treatments all provide big bucks to device manufacturers, drug companies, and the providers who prescribe, dispense, and install them.
Health care reform will not happen until we attack costs.
Unless spineless Senators and Representatives give in to these stakeholders and abandon all fiscal responsibility.
Unfortunately there’s precedence for avoiding fiscal responsibility – Medicare’s Part D program, which now has an $8 trillion unfunded ultimate liability.

Mar
22

Blunt was railroaded

Posted by Joe Paduda on Sunday, March 22nd, 2009 | Comments

I’m still befuddled by the North Dakota state fund situation. Recall that former CEO Sandy Blunt was tossed out amidst accusations of malfeasance, corruption, theft – pretty much everything bad a CEO could be accused of. I’ve been digging into this, and it turns out the charges against Blunt were discussed in detail in a local ND publication, the Dakota Beacon.
The charges that led to conviction of Blunt on felony charges were in three areas –
– unauthorized use of sick leave by a senior employee. Sources indicate Blunt allowed a departing senior exec to take sick leave when that employee was not actually ill, but was on his way out of the organization. An investigation by the ND State Auditing Organization of the sick leave indicated the exec likely would have qualified for FMLA – and the sick leave authorization was not illegal. As a state agency required to report any potentially illegal activity, this is instructive, as the SAO’s determination came over two years before Blunt was charged and the agency never reported the authorization as problematic.
– failure to get moving expenses repaid – The same employee noted above left before hehad been with WSI for two years, and thus should have been required to repay about $7000 in moving expenses. Blunt had asked the WSI’s internal counsel for her opinion on requiring reimbursement, and in a written memo she advised that she “did not feel comfortable” seeking reimbursement becuase the employee had been asked to leave, and therefore the legal requirement to repay moving expenses did not apply.
– unauthorized use of state funds to pay for meals, gifts, trinkets, and entertainment purposes. Turns out Blunt merely continued to use the same processes that had been in place at WSI before he got there. And, as soon as he determined these might be against WSI’s policies, he stopped them. We aren’t talking trips to Pebble Beach here; we’re talking coffee and pastries for employee meetings, a welcome cake for his own welcoming party (that had been ordered before Blunt even arrived), a flower and small gift certificate for workers on their employment anniversary. These expenditures had been in place for years, had never been questioned before Blunt arrived, and had actually been authorized by WSI’s purchasing department.
This guy is now a felon because he continued purchasing practices that had been in place before he got there, stopped them when he found out they were questionable, perhaps authorized sick leave for an employee on the way out who would have qualified for FMLA, and somehow was responsible for getting that employee to repay moving expenses that the state’s own attorney didn’t want to go after?
My conclusion?
Blunt was railroaded on the basis of charges that at best look to be incredibly nit-picky, and at worst political manipulation of law enforcement by a prosecutor gone nuts.
I’ve changed my mind.
I’m not befuddled. I’m outraged.

Mar
20

AIG – are they buying business?

Posted by Joe Paduda on Friday, March 20th, 2009 | Comments

As I noted earlier, word in the market is AIG is aggressively pursuing P&C business, working very hard to hold onto current customers and aggressively cutting prices to get new ones. This is at least in part the reason premiums in the fourth quarter dropped by 22%.
AIG is the largest writer of workers’ comp, the primary provider of all P&C insurance to the Fortune 500 (97% have at least part of their insurance program with AIG), a major player in transportation where it is the prime insurer for many airlines, shipping, and trucking companies, probably the largest writer of construction wrap-up policies, and a major source of capacity in the excess and catastrophic market.
While I don’t know what the big insurer is doing in all these markets, I do know that they are aggressively slashing prices on both new prospects and renewals in the commercial markets in an effort to hold on to customers and add as many new ones as possible. Anecdotally, this is happening in Florida, Connecticut, Texas and New York; it may well be occurring elsewhere.
This runs counter to a piece in today’s WorkCompCentral. Regulators have been watching AIG for signs of potentially severe price cutting, and according to WCC:
“Orice M. Williams, the GAO’s director of Financial Markets and Community Investment, told the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises on Wednesday that her agency is in the middle of reviewing the AIG financial bailout. The analysis includes investigating how receiving money from the Federal Reserve Bank of New York and the U.S. Treasury Department has affected competitiveness in the commercial property/casualty market.
“According to some of AIG’s competitors, federal assistance to AIG has allowed AIG’s commercial property/casualty insurance companies to offer coverage at prices that are inadequate for the risk involved,” Williams told the panel.
But she said GAO so far has failed to confirm those allegations.
“State insurance regulators, insurance brokers and insurance buyers said that while AIG may be pricing somewhat more aggressively than in the past in order to retain business in light of damage to their parent company’s regulation, they did not see indications that this pricing was inadequate or out of line with previous AIG pricing practices,” she said.”
Brokers I’ve spoken with indicate the price-cutting is taking the form of AIG underwriters aggressively quoting most of the business submitted by brokers. In the past, AIG could be highly selective, using its acknowledged expertise in underwriting to carefully pick the risks it deemed worthwhile, and ignoring the rest.
No more.
Pressed by an urgent need to generate capital, several contacts indicate AIG seems to have all but abandoned underwriting discipline (at least in the commercial markets in the states noted above).
Meanwhile, many of our elected officials are screaming about the payment of bonuses that amount to one-tenth of one percent of all taxpayer investment in AIG. This is political grandstanding at its worst – and most counter-productive. Instead of fighting over who said what when to whom how, they should be watching more closely the business practices of the largest insurer ever to be publicly owned. Instead of calling for the offing of their heads, our politicians should be ensuring AIG continues to operate intelligently – and for the benefit of its shareholders, who are mostly we taxpayers. It is encouraging that Williams and her colleagues are watching this closely, but my sense is the price-cutting is more prevalent than her findings indicate.
What does this mean for you?
AIG may well generate more cash over the short term. And in the worst case, increase the chance that they will fail over the long term; in the best case, reduce the company’s value to future buyers thereby slashing the return we’ll get on our investment.

Mar
18

AIG bonuses – get over it

Posted by Joe Paduda on Wednesday, March 18th, 2009 | Comments

We’re all furious. You, me, the Feds, pundits and politicians. And that anger is not helping. In fact it is clouding our vision – and may well cause us even more harm.
Every minute we spend screaming about AIG’s bonus plan is a minute not spent on fixing the company up to sell off assets. Every ounce of energy spent on this is wasted.
I don’t know the details of the plan or how execs who left could still be paid or what the restructuring of the plan looks like (other than pushing half the payouts off and subjecting them to performance metrics). I do know the execs primarily responsible for the disaster are long gone and bonuses are being paid to those trying to clean up their mess.
I am quite sure everything possible is being done – within the law – to ensure our dollars are not used unless there is no other option.
Passing punitive legislation, faulting Geithner, citing changes in AIG’s condition, all miss the point. That point is we need to fix AIG so we can sell off AIU holdings, Alico, the auto business, and the rest and thereby recoup taxpayer dollars. To expect a Treasury Secretary dealing with the greatest financial crisis in eighty years to know every detail about the bonus plan at one division at one company is ludicrous. Trying to tax these bonuses when most are paid to people that don’t even live in the US is political grandstanding of the worst kind. Trying to weasel out of the contracts using tenuous arguments will do nothing but tie up AIG in litigation for years, likely extending the time it takes to wind down this operation and get our tax dollars repaid.
As I said Monday night on Nightline, the AIG Financial Products execs should not take the money and their decisions to do so (if in fact they have) are reprehensible. They are being rewarded for a monumental level of incompetence.
I’m disgusted, shocked and dismayed.
I also want my money back and if we have to pay these incompetents to recoup tens of billions of dollars to do that than I’ll suck it up.

Mar
18

Fraud in Florida’s small group market

Posted by Joe Paduda on Wednesday, March 18th, 2009 | Comments

Small employers are increasingly dropping health insurance. Premiums are prohibitively expensive and dire economic times are forcing owners to cut costs.
In an effort to control costs, some are resorting to what can only be characterized as fraud.
I recently returned from a trip to the Sunshine State, where I had the opportunity to meet with two prominent brokers. During the course of conversation one gentleman related the following.
An employer had contacted their cpa firm asking some questions about employee benefit payroll deduction requirements. To date they had paid 100% of premium but wanted to begin to have the employees contribute. This, in part, was the response the client received. Subsequent conversations between my colleague and the CPA firm indicated the broker that had taken the cpa firm down this path was doing it for others. In a separate conversation a my. Olleague had with a representative of another carrier, that person confirmed that this type of stuff was not uncommon. And we wonder why the cost of group is higher and is increasing at a faster rate ……..
Here’s the email the CPA firm received from the fraudulent broker.
“The cost of health insurance is a problem that we all are trying to grasp. We as employers are attempting to take care of our employees but control the ever rising costs. You have the ability to change your health insurance policy to either method the most common is a percentage of the single premium however, some employers use the flat dollar method as well.
I would recommend that you consider the change to HSA plans with the use of individual policies. The company can pay the premium or portion and contribute to or not to the HSA plan. The cost of individually underwritten plans are about half the cost of group plans. You can maintain group policy if you have employees that can not be underwritten as long as you have at least two.
We changed to this method this year including the full funding of the single person HSA and saved $10k. This savings does include the full family premium and HSA deductibles paid for two (XXX and me).
The negatives that you will have is the potential of uninsurable and the initial fear that the employees may have. The employee will have to pay the cost of benefits from the HSA account until the full deductible is meet then thereafter no out of pocket costs. The typical deductibles range from $1250 single to $2500 family. Even if you have not reached your deductible you will only pay the insurance companies costs.
The other negative is maternity benefits for individual plans are very weak (after one year on plan only pays $1500) so if you have any potential mothers this is something that needs to be considered.
I do have a contact if you need that assisted us with United Health Care in the transition. I personally believe that the HSA plans are the way to go.”
This is fraud.

Mar
17

AIG – should bonuses be paid?

Posted by Joe Paduda on Tuesday, March 17th, 2009 | Comments

No, they’re not eating cake or fiddling while Rome burns – but that’s the impression you’d get from watching TV or listening to the radio talking heads. I’m referring to the AIG execs currently in the pillory for accepting bonuses after losing $43 billion last year.
This is a rather significant digression from MCM’s headline topic, but one that is so topical that I spent most of yesterday doing television interviews on the subject. Yesterday morning I tried to make the point to Fox Business News viewers that 116,000 AIG employees not working for AIG Financial Products should not be tarred with the same brush used to paint AIGFP’s 450-odd workers. AIGFP lost $43 billion last year, or about a hundred million dollars per employee – likely a record for any erstwhile-profit making enterprise.
On Nightline last night, about fifteen minutes of interview were left on the editing room floor in favor of two sound bites – one of which had me noting that the AIGFP execs should not take their bonuses, as they did not, by any civilized measure, earn them.
Easy for me to say. In fact, this statement came after several minutes of back and forth wherein I described the high-pressure environment, the relentless competition, the brutally stressful world that is AIG senior management – not as a justification for getting bonuses for blowing $40 billion, but rather to show that individuals who survived in that environment very likely felt they had earned their financial rewards. Here’s an earlier post describing the cultural roots of the problems.
At the end of all the hysteria and hand-wringing, the bonuses are due and payable. Not paying them would result in litigation and further delay in cleaning up the mess. To date AIGFP has reportedly closed out fully a quarter of its CDS positions; in all liklihood this would not have happened if the staff was fired/shot/drawn and quartered. As AIG’s owners the faster they fix this the better for us.
Yes, the Obama Administration should do everything it can to limit those bonuses, but not at the expense of successfully winding down AIGFP’s positions. Lets be adults here, and to quote the President, not ‘govern out of anger’ but rather out of intelligence. Sure, it makes great politics, but that doesn’t get we taxpayers a dime of our investment back.
Cool, calculating, careful thought will.