Message From Mark Mark Gaunya – January 2010

| January 1, 2010

January 2010

Happy New Year everyone – I hope your holidays were spent with family, friends and loved ones – and that you were able to take a break in the action and recharge!

2009 was a very challenging year for almost everyone.  The economy was mired in the midst of a deep recession and businesses all across the Commonwealth struggled to keep their doors open – and keep their costs down and in line with the loss of business.

Rising healthcare costs continue to be one of the biggest challenges for most businesses – and the impact of MA Healthcare Reform continues to unfold.  Healthcare reform is a complicated challenge and one without a simple solution.  Most agree that making health insurance accessible to everyone is relatively easy – but what about the cost?  It’s the “pink elephant” on the table that few seem to fundamentally understand or really want to tackle.  It is electrically charged with a diverse set of stakeholders.

Our legislators appear comfortable pointing the finger at health plans – and it has become all too easy for them to “vilify” the health insurance industry for spending too much on administrative costs and paying insurance brokers too much money to “sell” their products.  This simply isn’t true and it is our duty to set the record straight and educate the public.  If we don’t address this misperception, we run the risk of being “cut out” of the equation, effectively extinguishing our businesses.

Now, you’re probably saying, “Mark that will never happen” – and I hope you are right.  But can we stand by and HOPE that doesn’t happen?  Hope if not a strategy and change is not a destination.  Do your clients think your expertise will be unnecessary?  Here’s a great article that may help you educate them on the value of what you do.  Do your clients think your services are too costly compared to everyone else across the country?  Here’s a commission analysis for several metropolitan areas across the country provided by United Benefit Advisors (UBA) that shows where MA ranks – we’re near the bottom.

Health insurance isn’t expensive because brokers get paid too much money and health plans are making too much profit.  Health insurance is expensive because healthcare is expensive – and healthcare is expensive because we have some of the best medical care in the world right here in our backyard.

Tackling rising healthcare costs IS the next phase of healthcare reform in MA and there are many in government circles that believe the discounted fee-for-service provider reimbursement methodology encourages providers to order more healthcare services than necessary – essentially suggesting that providers place their financial interests ahead of their patients’ well-being.  Politicians in MA are calling for a legislative solution to “solve” this problem, which they call “Payment Reform.”

What is payment reform?  It could mean making new laws that change the way healthcare providers are paid for their services and transferring the risk and responsibility of managing the services they provide to their patients with a set amount of dollars to work with for each patient.  This “new idea” isn’t so new – it’s called global capitation and it failed in the early 1990’s for two reasons: (1) providers don’t manage financial risk well; (2) in many cases, patients did not get the care they needed because the financial resources to deliver that care were gone – i.e., rationing of care.

Fundamentally, this “solution” doesn’t work because it completely ignores the patients “demand” for services.  Sound economic models address both supply and demand – payment reform only deals with supply.  What about demand?  Patients (consumers) should be engaged, educated and empowered.   We all have a responsibility to live a healthy lifestyle and – when we access care – take the time (except in the case of a true emergency) to make informed decisions.

What is driving costs?  Let’s start with the best kept secret in Washington DC.  The federal government doesn’t pay its fair share for healthcare services.  In fact, by most estimates Medicare/Medicaid (45% of all insured) pay $.75 for a $1 of healthcare.  In turn, healthcare providers charge private health insurers $1.25 to makeup for the shortfall.  This is known to you and me as cost shifting and it is a BIG reason healthcare costs continue to rise so precipitously.

What about inflation?  According to the Department of Labor, the consumer price index (CPI) or general rate of inflation in 2009 was 1.8%.  It was recently reported by the Centers for Medicare and Medicaid (CMS) that nationally, healthcare costs rose by 4.4% – their lowest level increase in more than 50 years.  In MA, health insurance premiums are trending at 10-12% or 5-6x greater than general inflation.  Why the disparity?

In MA, most of us know that roughly $.90 of every premium dollar is spent on healthcare products and services.  What is not so well known is that provider contracts are not linked to CPI – they have their “own inflation factor” that doctors and hospitals negotiate with health plans.  In many cases, the cost of a healthcare product or service rises much faster than CPI – and that variability is determined by the terms of the provider contract.  Why does healthcare need its own inflation factor when every other industry is subject to CPI?

In 2010, the MassAHU Board of Directors will continue to be actively involved in healthcare reform, so we can answer these types of questions and do our part to educate the public.  We will attend many meetings with local, state and federal legislators, local health plans and other key stakeholders to ensure that healthcare reform focuses on supporting policies that are market-based and build on the core principle of “shared responsibility.”   We will advocate for our role in health insurance and educate those that believe we only sell products rather than develop, implement and service customized solutions for our clients that meet their employee benefit and budget needs.

We want to hear from you – now is the time to make a difference by getting involved!  Please contact one of our board members or email at if you are interested and want to learn more.

Thank you,

Mark Gaunya

Category: Our Commitment

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