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Mid- 2008 Forecast for 2009 Health Reform

CONTEXT: I have been writing these mid-year forecasts in addition to the end-of-year forecasts for almost 30 years. The reason for the mid-year version is that you are starting to talk with clients & brokers about January 1 renewals and new business. SPBA's goal is always to position you to be the most knowledgeable in your marketplace. I am happy to say that SPBA has a near-perfect record of its forecasts turning out to be accurate. So, we hope that you will use your knowledge to be an opinion-shaper and information resource not only with your clients, brokers, etc., but also with public opinion in your marketplace. (TPAs who show their knowledge are a magnet for new clients.) Adapt the thoughts in this forecast for your own thinking and comments for clients & your community. Each year, the hype has said that there is some threat about to overwhelm the employee benefits health market & TPAs. During much of the 1980's, it was the "certainty" of National Health Insurance and government mandates favoring HMOs. Then it was Managed Care, the Clinton Proposal, and more recently, State-by-State "solutions". A handy way to envision health reform proposals is to think of waves at the beach. They (waves and health reform ideas) look big and ominous as they approach, as if they will wipe out everything. However, they collapse under their own weight, and then disappear back into the ocean. THE CURRENT SCENE: In the Summer of 2008, and looking ahead to 2009, we are in a more thoughtful time. There is no one "solution" being touted, and there is more reality-awareness than in the past, because what were seen as the major savior a year agoÉstate-by-state reforms, such as MassachusettsÉhave either failed to be approved when state legislatures saw the cost numbers, or those passed are struggling with costs and unanticipated related problems. SPBA advised you last year that it would not work. Right now, there are two different concepts evolving. One is a push to make the purchase of insurance a nationwide choice. By that I mean that a person in Utah could purchase insurance in Maryland if it seemed like a better deal. The purchase of insurance would no longer be a state-by-state process. The upside is that it will curb or possibly reverse the trend of state legislatures to add on expensive mandates. States will want to be the cheapest source, and thus attract customers from around the country. On the other hand, some Insurance Commissioners will see their fiefdom (and premium tax funding) shrink. It will take awhile for each state's Commissioner & Governor to figure out if they are apt to be a winner or loser in this concept, and that will determine who will be supporters and opponents of this. States have a very powerful ear in Congress, because the Congressmen usually rose from, and are friends with, state officials. Meanwhile, there is also a growing encouragement for individualism in the purchase of health coverage. There is overlap of interest with the nationwide concept described above, but it might also replace the current employer deduction for providing health coverage with some sort of individual deduction or tax credit. When the Reagan Administration & Congressional tax committees first pushed to repeal the employer tax deduction in the 1980's, all of us in the employee benefit community bitterly fought it as counter-productive on many levels. There is still the question whether employers will refuse to offer benefit plans and/or is the cost too much to absorb? We remain concerned that patients would lose the many huge legal & logistical protections of employer-based group benefitsÉand will individuals make the effort to get coverage?? We fear that the number of uninsured will increase as the price increases, and protections decline. However, many employers want to retire from health benefits. Just to prove how goofy political & policy-maker thinking is about tax-favored employee benefits, consider this: On the one hand, we are constantly hearing how there are not enough benefits, so Uncle Sam & states add more and more mandated benefits employer plans must offer. On the other hand, employer plans are blamed for the economic evil of "overinsurance"; making coverage too accessible and cheap so that beneficiaries use too much care and thus create the increase in health expenditures. So, we're damned if we do and damned if we don't; go figure! The key to keeping your perspective is to realize that government policy and the health debate is schizoid. The philosophical impetus of conservatives for replacing the employer tax deduction is to create equal opportunities for tax-favored health coverage for self-employed and unemployed, which is often coupled with encouragement of HSA-like Consumer Directed Health Plans (CDHP). Note on CDHP & MSAs: Much of the opposition to this concept stemmed from politics. CDHP & MSAs were originally conceived (separately) by both conservative Republicans as well as some liberal Democrats. However, they came to fruition as a pet project of the current President Bush, so it was an easy knee-jerk reaction to condemn them if you were opposed to Bush & Republicans. However, as they become more popular with average users, and with Bush moving off the scene, they will be judged for themselves, and not be used as a political football. Also, the cultural change has already started of HSA owners taking more responsibility for health costs and not being afraid to discuss cost-effectiveness with providers. That cultural change is in early stages, but it is growing (and this patient awareness & responsibility is probably the only thing that can save the nation from the spiral of unrealistic expectations, crazy political promises, and runaway medical pricing schedules). Of course, there is still the chorus of people calling for government-run health programs as the nirvana for all. However, the true facts about the economic non-sustainability and "human" costs (various forms of waits & rationing) are becoming more widely known, even among strident proponents. Even a significant percent of the people who can get current government benefits such as SCHIP heavily subsidized or free don't take it. So, government health coverage is not a success story. Meanwhile, politically, be realistic and keep in mind that the first priority of politicians is to get re-elected, and they are realizing that cost over-runs (a.k.a. need to drastically raise taxes) and furious voters denied instant care and choice will emerge within one election cycle. Before, it was assumed that the bad repercussions would not arise for years and years, and thus no political backfire. However, now politicians see that it would be the next election, and memories would be fresh of who imposed this on the voters. So, government-run universal health coverage access is becoming mostly a wishful-thinking echo from the past. However, because it always seems so easy and popular to be the Santa Claus of healthcare, there is always the threat that something can slip through. This is why SPBA constantly urges you to pre-educate your Congressmen and state legislators and public opinion in your area. IMPACT ON YOUR BUSINESS: Notice that none of these things kill or pinch the existing employee benefit system or the market for TPAs. In fact, the future will probably play to the strengths of TPAs. Innovation and high-quality personalized service will be the key to success in any marketplace that has more choices and more focus on each plan participant. That's the hallmark of TPAs, and a handicap for large bureaucraic entities in the marketplace. There will also be some expanded market/service opportunities outside of the traditional ERISA and employment sphere. We are already hearing about TPAs being approached by states & localities to administer the health services to jail inmates, and some other never-foreseen types of markets and services are popping up. If the individual market grows, that may also become a new market area. For the future, the funding vehicle will be often less important than the personalized service factor. So, if you're asked if TPAs and our market are on the eve of destruction, you can laugh and say that TPAs are merely opening a new chapter with talents of quality & personalization which have always been the strength of the TPA profession. NOTE: Like any opportunity, it takes attention & work to turn it into maximum profit. You need to be proactively informed & innovative. You need to participate.