gurumanjohn

Don’t Believe the Health Insurance Stock Euphoria

Without getting into partisan name calling that seems to be the requirement for blogging these days, I'd just like to point out that your analysis doesn't take into consideration a major new provision in the Amended Senate Bill. This "final" version calls for the creation of multi-state plans based on the OPM (Federal Employees Health Plan) management approach. It gives private health plans the task of establishing and running these competitive health plans in regions that cross State lines. This is a huge opportunity for the plans and just what they've wanted all along.
Now just because it's giving the plans something they've wanted -- access to new risk pools of members -- doesn't mean it's bad for consumers. In States with health plan monopolies or near monopolies, it will bring in much needed competition.
The bottom line is that access to these new members will drive plan stock prices much higher. And if you're worried about profit squeeze -- don't. There's plenty of profit margin left to go around.

Key Budget Changes in the Senate Health Bill

Dear Relaplan 1 - I'm confident the physician reimbursement "fix" will be reinserted in conference committee. As for giving Medicare payments to deadbeats, I'll make sure your name is taken off the list so you can pay for your own brain transplant.

Key Budget Changes in the Senate Health Bill

Some of these changes are pretty significant and several are positive steps toward restructuring the insurance non-system. For me, the big sleeper here is replacing the public option with multi-state plans run under contract by OPM. As I've said all along, the step that would eventually be taken to bring the big health insurers back into the fold is to allow them to actually operate the "public" plans. This does it in a very manageable and potentially effective way. But it will also do something equally important. It establishes the principle of Federal licensing of health insurers and would lead to replacing the individual State licensing programs. Many States, Nevada is a good example, do little or nothing to protect consumers from being prey for the insurers. This will give these consumers the ability to buy insurance across State lines and increase competition in a way that many (not all) insurers will welcome. It also will create larger pools of the insured, which will give them more bargaining power; yet keep the risk pools to a manageable size.
This could be among the most significant provisions in the legislation -- and one both Democrats and Republicans should ( remember I said "should") be able to get behind.

Why You Should Oppose the Proposed Medicare Doctor 'Fix'

Mr. Marron - You are right to oppose Sen Reid's Medicare "fix" proposal. However, your suggestion that Congress pass another "temporary fix" bill is just as bad, if not worse, than the fix you oppose. First of all, a series of "temporary" budget fixes contributed in large measure to the deficit situation we now find ourselves in, not just in Medicare, but in the entire Federal budget. Remember also, that these fixes were proposed and championed by Republicans for many years.

In truth, Medicare payment rates need to be raised for some physicians and reduced for others. Internists and other so-called "talk" specialties (a poor, but popular term) are underpaid. But the procedure oriented specialties are, in a great many cases, overpaid and paid more handsomely when they need to correct their own mistakes. That's why the Medicare payment issue must be resolved within the context of the entire health reform thrust. If that occurs, the solution will be either budget neutral or better.

Health Plan Stocks, Ted Kennedy and Healthcare Reform

I actually don't buy your doom analysis for the major health plan stocks. If health reform happens, it could be a very good thing for the major carriers. Even without their political clout ( and we all know it's very strong) expanding the reach of health insurance under any of the major plans on the table will expand the major carriers' market universe by anywhere between 20 and 40 million lives. Even at a lower margin, this will increase profits substantially. In fact, United's strategic plan is betting on this outcome. What if they enact a "public" plan you say? Even better. The chance of the government administering this "public" plan itself is extremely remote. They will hire at least two or three of the major carriers to administer it for them on an ASO (administrative services only) basis. So I believe you should moderate your doomsday analysis in the long term.

Thoughts on Adverse Selection and Health Care Reform

Thanks for raising the selection issue and the need for new approaches to it. As the former CEO of a leading healthcare management and strategy firm, I've been disappointed in the lack of real exploration of this issue.

I'd like to make a couple of points. First, the use of the term "adverse selection" in your blog isn't strictly correct. Adverse selection is when those who are "sicker" choose to join health plans or insurance programs more frequently than those who are "well". It is what insurance companies are trying to avoid. The term used by the first commenter, "anti-selection" is more accurate when talking about the young people (about 11 to 14 million of them) who refuse to buy insurance. There are essentially only two ways to deal with this segment. Either require them to buy insurance (or join a health plan) or refuse to treat them for emergencies unless they first give you the keys to their Ferrari.

In my mind, the greatest failure in this entire coverage debate (apart from dealing with the inefficiencies of health care) is in regard to small employers. The large insurers have been very skillful in obfuscating the cost to small businesses and the government has been less skillful in presenting ways to cover employees of small businesses ( who account for probably at least 20 million people). There is one solution to this problem -- and to the adverse selection problem as well -- that has not been discussed.

Right now, large employers are each charged based on the "experience" of their employee population. The rest of us -- small employers and individuals -- are (to simplify it a bit) "community rated". That means we're all thrown in the same messy pot in most States. As a result, the premiums for this group are much higher.

Under health reform each health plan or insurer (including a government plan, if any) should be free to (and required to) market to everyone. Then their entire member base should be rated as a whole, whether or not the individuals are in large corporations, small businesses or nothing at all. This would eliminate the cherry picking by plans and bring costs down substantially for small businesses and individuals. Surprisingly, it would not raise costs for large employers all that much. (Although they will initially deny this.) Under this plan, the only differences in premiums would be between offerors -- and the market would work to level these over time.

Thanks for raising this issue.
John F.

Thoughts on Adverse Selection and Health Care Reform

Thanks for raising the selection issue and the need for new approaches to it. As the former CEO of a leading healthcare management and strategy firm, I've been disappointed in the lack of real exploration of this issue.

I'd like to make a couple of points. First, the use of the term "adverse selection" in your blog isn't strictly correct. Adverse selection is when those who are "sicker" choose to join health plans or insurance programs more frequently than those who are "well". It is what insurance companies are trying to avoid. The term used by the first commenter, "anti-selection" is more accurate when talking about the young people (about 11 to 14 million of them) who refuse to buy insurance. There are essentially only two ways to deal with this segment. Either require them to buy insurance (or join a health plan) or refuse to treat them for emergencies unless they first give you the keys to their Ferrari.

In my mind, the greatest failure in this entire coverage debate (apart from dealing with the inefficiencies of health care) is in regard to small employers. The large insurers have been very skillful in obfuscating the cost to small businesses and the government has been less skillful in presenting ways to cover employees of small businesses ( who account for probably at least 20 million people). There is one solution to this problem -- and to the adverse selection problem as well -- that has not been discussed.

Right now, large employers are each charged based on the "experience" of their employee population. The rest of us -- small employers and individuals -- are (to simplify it a bit) "community rated". That means we're all thrown in the same messy pot in most States. As a result, the premiums for this group are much higher.

Under health reform each health plan or insurer (including a government plan, if any) should be free to (and required to) market to everyone. Then their entire member base should be rated as a whole, whether or not the individuals are in large corporations, small businesses or nothing at all. This would eliminate the cherry picking by plans and bring costs down substantially for small businesses and individuals. Surprisingly, it would not raise costs for large employers all that much. (Although they will initially deny this.) Under this plan, the only differences in premiums would be between offerors -- and the market would work to level these over time.

Thanks for raising this issue.
John F.

Post-Election Sector ETF Scenarios

There is at least one area in which Lydon and nearly every other Wall St. analyst publishing a blog is dead wrong about what will happen if (read when) Obama wins. Some health insurance stocks will gain, not lose. Under the Obama plan one or more existing health insurers will receive contracts to manage the new Federal plan. Obama has always said that he understands the health insurers must have a role if the plan is to pass Congress. So look for both United Health and Wellpoint, the two best positioned and largest health insurers, to do very well under the Obama plan. Others may also do well, but these two are the 800 pound Gorillas in the field.