SIIA TPA/MGU Forum April 7, 2010 Charleston, SC

Transcription

1 SIIA TPA/MGU Forum April 7, 2010 Charleston, SC Our Industry Today Our Competition Recent Trends In Technology The Myopic Edge Closing the Discount Gap Ways to Win The Truth About Healthcare Reform Open Discussion

2 We have health insurance reform. It will drive costs up, not lower them. The trickle down effect will be worse than current state. We still spend too much, and still aren t rewarding healthy lifestyles/behavior. Politicians are clearly missing the boat. We need comprehensive reform focused on cutting the cost of healthcare itself. Aetna Cigna United Blues Other TPA s

3 The recession has hit them all. All are worried about reform. All are struggling for organic growth. Most have seen stocks strengthen. All have done a lot of cost cutting. All are driving better technology. Discounts gap are not as strong. Service levels are not great. They are starting to cut broker comp. (PMPM) Stock Prices: Apr 07 Mar million Medical Members 5.7% increase over million ASO Members 8.5% increase over 2008 Cash & Equivalents: $1.20 billion * Source: Fourth Quarter 2009 Financial Supplement

4 Stock Prices: Apr 07 Mar million Medical Members 5.5% decrease from million ASO Members 4.8% decrease from 2008 Cash & Equivalents: $924 million * Source: Fourth Quarter 2009 Financial Release Stock Prices: Apr 07 Mar million Medical Members 6.5% decrease over million ASO Members 4.8% decrease over 2008 Cash & Equivalents: $9.8 billion (entire company) * Source: Fourth Quarter 2009 Financial Release

5 Stock Prices: 2/2/07 2/2/ million Medical Members 3.9% decrease over million ASO Members 1.5% decrease over 2008 Cash & Equivalents: $4.82 billion * Source: Fourth Quarter 2008 Press Release, 2009 Investor Conference Press Release We have also felt the recession. Many consider no loss of business a victory. There has been more consolidation. Technology is still a challenge. Service levels remain excellent. Diversification has started. Flexibility is a huge asset.

6 Through the end of 2009, losses to self funded plans were significantly lower and gains were significantly higher than among fully insured plans (p 0.013). The percentage of covered workers in self funded plans has increased from 44% in 1999 to 57% in % of employees in firms of 1,000 4,999 FTE s are on self funded plans. 88% of employees in firms of 5,000+ FTE s are on self funded plans. As of December 2008, self insured membership was a significant portion of 9 of the country s top 10 Health Plans.* * Source: AIS Directory of Health Plans: 2009 Wellness Tools Population Management Tools Point of Service Payments Deeper Analytics Mobile Information The Cloud

7 We can review claims and eligibility at a much more granular level. This level of detail translates into considerably fewer errors. Fewer errors lead to better loss ratios for the clients. This all contributes to better provider relationships. BUCA s cannot do this. This is the TPA s edge! Seamless National Networks are an advantage but they are only necessary for multi state clients. Many local networks beat national discounts! Several non PPO plans are growing in select markets. We pay over $20 billion in access fees every year! Even the Blues are no longer the deepest discount in many markets (see next slide).

8 BCBS ranked second or lower in market No competitive data available TPA s don t get the best national networks. Focus on your regional or local area. Many providers will negotiate directly with you. Create useful data for your brokers and consultants. Show the ROI from your Myopic Focus.

9 While price, network, service, and brand are still important, increasing attention is given to new battlefield value criteria (e.g., data informatics, behavior change, productivity management, etc.) as a source of differentiation. Differentiating Factors Market rewards those that are able to reliably demonstrate these abilities Perceived Value New Battlefield Value Criteria Specialty Networks Multi-Year Sales Guarantees Integration Across Value Chain and LOBs Consultative Sales/ Account Management Behavior Change/Care Management Health and Productivity Management Custom Reporting Provider Transparency Clinical Guarantees CDHP/HDHP Data Informatics Online Tools BCBS traditionally lags in these areas High Market Reward Low Activities Low Market Penalty High Standard Performance Guarantees Brand/Image Traditional Medical Management Core Product/Offerings Flexible Underwriting Network Discounts BCBS traditionally Admin Cost Management performs well in Sales Effectiveness these areas Admin Service and Support Network Access Requirements to Play Market penalty imposed for lack of these items, but no rewards for having them Baseline Services Admin & Support Basic Cost Management Core Product Offerings Standard Performance Guarantees Basic Network Access & Discounts Solid Sales & Account Management Value Services Significant Data informatics Behavior Change/Management Health & Productivity Management Robust Online Tools On Demand Custom Reporting Clinical Guarantees Excellent CDHP/HDHP Specialty Networks Multi Year Guarantees Integrated Value Chain

10 This depends on the TPA s size, capabilities and market focus. Here are three scenarios: A small TPA, with basic capabilities & local focus. A mid sized TPA with some extra capabilities & a regional focus. A large TPA with extra capabilities & a national focus. Definitions Size under 20,000 medical lives. Capabilities at or below baseline.* Focused on their own back yard. Strategies Sell to a larger TPA or merge. Outsource to a larger TPA & leverage their tools. Change to an agency/tpa shift revenue. * See Administrative Services slide.

11 Definitions: Under 75,000 lives. A few value services.* Focused on their region a few multi state clients. Strategies: Differentiate find niche services. Cross sell ancillary products to diversify revenue. Drive technology, outsource above baseline and get lean & mean. Merge with another TPA. * See Administrative Services slide. Definition: Over 100,000 lives. Some value services.* A national focus many national customers. Strategies: Consolidate to one technological platform. Add above the line services. Cut costs stay lean. Boost customer service. Consider merging with another TPA or selling to a carrier. * See Administrative Services slide.

12 Most carriers want to be like TPA s. Our advantages exceed our disadvantages. Play to your strengths: Be flexible and nimble. Offer superb Customer Service. Have a Myopic Focus. Concentrate on Health and Wellness.

13 Questionable Reforms Coverage until age 26 No exclusions for pre existing conditions No lifetime maximums HHS determined annual maximums No co pays on preventative care Government controlled rate increases Restrictions on adjusted community rating Limits on HSA s and FSA s Increased Medicare payroll tax for large earners ($200K+) Several new taxes on insurers Positive Reforms Mandatory 85% Loss ratios Insurers who miss MLR lose tax deductions Tax exemptions for non profits and self insured plans Penalties for no coverage Transparency in market rates & pricing Local/regional Co ops If all providers met HIT requirements we could save $80 billion a year. If we eliminated punitive malpractice damages we could save $5 billion annually. If paid all providers at a Medicare Plus rate we could save $82 billion annually. If we eliminate PPO s we would save over $31 billion in access fees annually. If we had drug pricing parity with the world we could save $30 billion a year.

14 Close to 2,000 State mandates cost us $104 billion a year. If we eliminated commissions & paid all brokers via fee for service, we would save $43 billion annually. Wellness programs leading to a 25% decrease in national smoking and obesity would save $77.5 billion a year. If AHP s were passed we could save $1.2 billion a year. Drug rebates cost us $6.4 billion a year Lets start with these six steps: Price all healthcare off Medicare fees. Legislate worldwide equitable drug pricing. Limit all punitive damages. Establish national licensing. Create equity with federal plans. Drive healthy behavior. These items would help address issues of cost, and we could use the savings to deal with issues of access, without an increase in spending.

15 Economic issues will affect our business. We have strong competition. Brokers and consultants are our distribution channels we must educate them. We have many advantages use them. There are winning strategies. We must adapt and improve to win. Take advantage of health insurance reform.