Monday, March 3, 2008

Health Plans - Short Take on Health Plans

What – America’s health plans – those HMOs, PPOs, Point of Service Plans, and the newest kid on the block, High Deductible Health Plans. All belong to an organization called AHIP, Association of Health Insurance Plans.

Why – America’s health plans, whose 1500 members or so represent a $450 billion industry, are in political hot water. Critics say their administrative costs are too high, generating profits anywhere from 10% to 30%; they have failed to restrain overall health costs; they anger key constituencies – patients and physicians – through polices that pay less for less care; artificially lower physician fees or deny claims; rescind payment for legitimate claims, turn away those with pre-existing illness, refuse to pay for life-saving procedures; reward their executives outrageous compensation or allow dubious stock option practices ; e.g. the more than $1 billion set aside for Dr. McQuire of United Health; manipulate computer algorithms to lower “usual and customary” fees to punish out-of-network users by making patients pay the difference actual fees and usual and customary fees; and reward Medicare Advantage plans with above market margins – all in the name in profit. Most plans are for-profit organizations with stockholders who are keeping an eagle eye on quarterly profit statements.

When – The fate of health plans, and their reform, rests in the hands of voters, especially those on the left, who say plans ought to be put out of business. Given their powerful lobbies, their high profit margins, and the lack of any government or private organizations to duplicate what they do, transact the more than one billion health care transactions that occur annually, the demise of health plans is not likely to occur soon, if it all.

- How these plans manage their piece of the system (more than 200 million Americans covered), how they generate such generous profits for executives and stockholders (top executives generally earn $10 million or more), and how they use their sophisticated algorithms and vast databases to do what they do, remains a mystery to most.

- Managed care plans are generally strongest in the upper Midwest and the East and West Coast, in metropolitan areas with strong economies, and weakest in the American South and rural America, where there is less money to be earned.

Who – American employers and their human resource departments who use plans as surrogates to manage costs and assure quality and value

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