Array Bulletin: Service & Market Updates for August 2009

We hope you have enjoyed the summer. Now that autumn approaches, we will resume monthly distribution of these updates. This month's newsletter clarifies the difference between the WA State Health Insurance Pool (WSHIP) and the Basic Health Plan (BHP), discusses how wellness programs are ill-suited for high-turnover workforces, and examines the relative administrative costs of Medicare in comparison to private insurance.

WSHIP Not Freezing Enrollment

We have spoken to concerned brokers who heard about the enrollment freeze in Washington State's Basic Health Plan (BHP). These brokers confused BHP with the Washington State Health Insurance Pool (WSHIP).

Basic Health Plan is the state-sponsored health plan offering low cost health insurance to Washington residents who have earnings below an income threshold. Due to budget concerns the state has reduced its funding for BHP. Consequently, BHP has frozen enrollment and now has a waiting list for new applicants.

WSHIP is a separate entity and is for residents who were denied individual health insurance in the private market. WSHIP is not state sponsored and continues to accept applicants. WSHIP posted the following statement on its website:

"Recent news reports about cuts to the state budget and Basic Health Plan enrollment do not pertain to WSHIP. WSHIP is not state-funded and is not anticipating any cuts in enrollment."

Therefore, anyone denied private individual health insurance continues to have insurance options through WSHIP.

Wellness Programs Ineffective for High-turnover Workers

Since it generally takes wellness programs a few years to change employee behavior, these programs are not an effective solution for high-turnover employee populations. In essence, if an employee will only be at a company for a year, investing in a wellness program with a three-year return doesn't make sense.

Implementing a fixed-cost health benefits program is an ideal solution for workforce segments that will not be employed long enough for a company to see the rewards of a wellness program. High-turnover employees still affect the claims experience of their health plans, which is why a fixed-cost solution like ours is a great way for companies to cap their liability on high-turnover employees, and still offer health benefits.

The Administrative Costs of Medicare

Recently there has been much attention devoted to the relative administrative costs of Medicare in comparison to private health insurance. Medicare administrative costs are about 3% and private insurance averages 12 - 13%.

This discrepancy is misleading. Medicare helps an older population that incurs higher medical costs than the younger and healthier populations that private insurance typically serves. Because total medical costs are higher than medical costs for private insurance, the administrative costs for Medicare end up being smaller as a percentage, but not as small in absolute terms.

Two other differences between the administrative costs of Medicare and private insurance are that carriers average a 3% profit and spend 4% on consumer services and marketing, according to a study by PricewaterhouseCoopers entitled The Factors Fueling Rising Health Care Costs 2008. Though marketing and profit add to the cost of private insurance, the administrative price differences between private insurance and Medicare aren't as large as generally perceived.

Please contact me directly if you have questions or comments on the issues above, or if you have any groups you would like to discuss.

Sincerely,

Christopher Moneta

Director of Sales

1-800-640-7086