These days everyone is talking about insurance. When business people discuss the newest hot topic, most of them have health insurance and workers' compensation on their minds.
Health care, in particular, has exploded into the headlines because it affects virtually everyone. Many people feel hopeful that help has arrived in the form of reform programs that have been proposed at the state and national levels.
Both Gov. Chiles and President Clinton have made health care reform a top priority. Last month Gov. Chiles unveiled his proposal to provide health coverage to all Floridians. President Clinton is expected to propose a specific plan to Congress soon that would include many elements of Chiles' plan. The United States spent $838.5 billion on health care in 1992, accounting for 14 percent of the nation's gross domestic product. Floridians spent $31.4 billion on health care in 1990, a tripling of the cost from 1980.
To deal with the escalating cost of health care, Chiles proposes a partnership between government and business to create health-purchasing alliances. State and local governments as well as businesses of all sizes would band together to shop for medical services at the best price. It is well-known that government, business, and the public are fed up with spiralling health care costs and are demanding change in the way medical services are delivered.
'We have a great opportunity now to do the right thing,' says Dr. Neil Natkow, president and CEO of Family Health Plan, a full-service HMO based in Miami Lakes. 'Health care is getting painful enough for everyone to realize that action is needed. For reform to work, everyone must have the same set of objectives and the same set of rewards,' according to Natkow. 'Let's get the insurance companies, physicians, laboratories, trial attorneys, and all other interested parties to recognize that we have a problem that must be solved. Recognizing that we have a problem is the first step to fixing it. I believe we have made that first step toward treatment.'
Chiles has taken the first steps to brighten the health care picture in Florida. The governor has said that every man, woman, and child in Florida is entitled to basic health benefits. His 'managed competition' proposal to create large purchasing alliances is expected to increase pressure on medical providers to make their services more affordable for all.
'Managed care is a cost-effective way to get quality care,' says Steven Cohen, president and CEO of HIP Network, a not-for-profit health maintenance organization headquartered in Fort Lauderdale. 'The patient volume of HMO physicians allows them to provide care at a lower cost,' he says. Under the HMO concept, the large volume of patients guaranteed to physicians who are part of the plan allows them to offer lower rates for their services.
Although the public may equate HMOs and other managed care entities with limited choice, most plans offer large panels of caregivers from which patients may choose. HIP Network, for instance, offers 1,800 physicians and great flexibility in switching doctors. Most plans offer a great deal of diversity. Besides excellent general practitioners, managed-care panels include qualified specialists in various fields, and managed-care facilities offer their clients easy referrals to health care providers that best meet their needs.
Managed care offers the best hope for controlling costs, according to Barry Miles, corporate vice president/director of employee benefits at Palmer & Cay Carswell. HMOs are tracking increases of 9 to 10 percent, while standard indemnity hikes are in the 22 to 24 percent range, according to Miles.
HMOs offer patients a wide variety of services for free or at reduced cost.
For instance, hospital services such as surgery may not require any deductibles at the time of service, while an office visit may require a copayment of $5 or $10, depending on the fees set by the particular HMO.
As medical costs increase, many businesses have converted to HMOs and other managed care organizations. The reduced cost associated with managed care makes it an affordable option for more and more people. Chiles' managed care proposal is getting the attention of businesses as they seek to find a way to lower health care costs and provide care to more people at the same time.
'I agree philosophically with Chiles that health care should be available to all,' says David McKinney, president and CEO of Orlando-based J. Rolfe Davis Insurance. 'There must be something right about it because John Shebel and Gov. Chiles see eye-to-eye on this.' McKinney believes that anything short of national insurance would be a move in the right direction.
The health care plan that the Clinton administration has discussed is expected to keep medical costs across the board from rising as quickly as they have been.
Kathelen Spenser, senior vice president of public relations for AFLAC, supports the concept of health care coverage for all. Her company provides supplemental health coverage to clients in all 50 states, as well as Japan, Canada and the United Kingdom. 'We believe that every citizen has the right to basic health care and the right to supplement that basic health care,' she says. 'The other countries we do business in have national health care programs and we provide supplemental coverage.' Health insurance reform is necessary, Spenser says, but preserving choice is an important component of any plan.
Health insurance now goes beyond the traditional doctor and hospital coverage. With an aging population in the state and around the nation, there is an increasing need for other medical services, such as eye care. Some plans now include vision care, and many more companies are considering adding this option. Vision care providers are waiting to see what is included in Clinton's health care reform package.
Allen Garrett, president of the non-profit Vision Service Plan, is cautiously optimistic about a national health plan. 'We don't know how Clinton will come down on vision care as part of his plan,' says Garrett. 'As the nation's largest vision care plan, we practice managed care. Clinton seems to be a proponent of this philosophy. The inclusion of eye care as part of a health care plan is important to us.' Although many Florida employers do not include eye care as part of a medical package, it's catching on, Garrett says. 'In other states it's already established as part of employees' health plans,' he notes. 'If employers are given a chance, they will include eye care as part of a cafeteria plan. This option is growing dramatically in Florida. We hope to see it in a national health plan.'
Many businesses are excited about the prospects of participating in a changing health environment. Cleveland Clinic, which provides managed care health insurance, is one of those companies. Remarks Gib Gerlach, director of marketing, 'We want to take advantage of recent and future changes in the regulatory environment by introducing new and innovative products. This could include an open panel and a wide variety of other managed care plans. The time is ripe for new products to be introduced,' he says. 'We want to be active in helping employers design benefit plans that will meet their objectives,' adds Gerlach. 'We're carefully monitoring health plans being proposed at the state and national levels. We're optimistic about the changes. We think the proposed plans will bring about true managed care.'
Coping with Workers' Compensation
Workers' compensation is another challenging area for most business people. Escalating rates prompted by the large amount of litigation and high medical costs are a major concern. Possible solutions are around the corner.
A comprehensive proposal designed by a coalition of state businesses, insurance companies and government agencies is being introduced into the Florida Legislature this session, according to Jon Shebel, president of Associated Industries of Florida. A final draft was completed in early January.
'For employers, workers' compensation is at the same level of concern that health care is,' says Shebel. Health care and workers' compensation reform will be given equal attention in the Florida Legislature, says AIF's president. There are similarities in bills being proposed on both issues. 'The issues are related because 50 percent of the cost of workers compensation is the medical component,' he points out.
Buddy McCue, executive director of the Florida Association of Insurance Agents, says he hopes the Legislature will pass a reform bill that will stem the tide of the medical costs portion of workers' compensation and reduce the amount of litigation. 'We're very hopeful that something will be passed this session,' he says.
Joan Collier, vice president of the Florida Chamber Fund, says members of her organization will be attending legislation-related hearings and offering input to reform proposals. The Chamber Fund is a workers' compensation insurance management company that is licensed by the Florida Chamber of Commerce. Collier is concerned that the medical portion of a workers' compensation claim costs more than that of a health insurance claim for a similar injury. Explains Collier, 'A broken leg costs more when treated under a workers' compensation claim than under a regular health claim. That's unfair to the public. It shouldn't cost any more. A broken leg is a broken leg.'
Jim Bos, senior vice president of marketing for Sarasota-based FEISCO, deals primarily with workers' compensation. 'We're optimistic about a new bill being proposed,' he says. 'There may be some rate decreases in the future. This bill is based on legislation passed in other states, particularly Ohio, that have had positive results. In Oregon there have been three rate decreases, which is fantastic.'
Bos believes that the 1993 Florida Legislature will take action on '24-hour coverage.' Under this concept, insurance coverage for workers' compensation, group health, disability and life are packaged with a single benefits provider/administrator. 'We wonder who will regulate it, but we think it can work,' says Bos.
Summit Consulting is a third-party administrator for workers' compensation claims. 'The most recent rate increase of 8 percent shows that the system is working,' says Bill Bull, president of the Lakeland-based firm 'The system pays medical costs that are increasing at rates of 18 to 20 percent. Workers' compensation rates went up only 8 percent.'
There is a coordinated effort statewide to reduce workers' compensation costs by 50 percent in 1993, according to Bill Runkle, assistant bureau chief of the Bureau of Property, Financial, and Risk Services in Tallahassee. This effort came in the form of a Cabinet resolution proposed by Insurance Commissioner Tom Gallagher toward the end of last year.
'Workers' compensation claims cost the state $25 million to $35 million dollars,' states Runkle. 'A cut in half would be a significant savings.' His agency is responsible for the prevention, management and reduction of insurance losses, especially in the area of workers' compensation. Workers' compensation accounts for 65 percent of the insurance dollars spent by the state, he says. Much smaller percentages are spent on general liability, auto liability, civil rights and property insurance. 'We would like to be a trendsetter for the nation in getting our workers' compensation costs down,' adds Runkle.
The Effect of Hurricane Andrew
Damage from Hurricane Andrew is estimated at $20 billion. Eight insurance companies folded in the wake of the most costly natural disaster in history because of the sizable number of claims. 'Hurricane Andrew has definitely had a big impact on the insurance industry,' acknowledged Buddy McCue of FAIA.
As soon as the disaster hit, insurance companies were in South Florida to help clients. Companies set up offices in trailers and agents trekked the area door-to-door to assess damage and write checks.
Property damage insurers were impacted severely. Health insurers played a major role in the disaster, too. Many hurricane victims were injured and sick. Health insurance representatives were there to bring people to makeshift hospitals and offer comfort. While insurers in other fields may not have been directly impacted by Hurricane Andrew, they also offered assistance to their clients.
'We did what we could to help our clients in southern Florida who were affected,' says Collier of The Chamber Fund. 'We made sure their billings were handled efficiently. We gave them extra time to pay premiums.'
'We had 200 claims in Hollywood,' states Ken Hill, executive vice president of Poe & Brown, based in Tampa. 'We were fortunate that our clients escaped damage, for the most part.'
'We had a few major clients that were affected,' says McKinney of J. Rolfe Davis Insurance. Client Holiday Inns incurred $7 million to $10 million in damage, he acknowledged. 'The hurricane will affect the availability and cost of property coverage in Dade and Broward counties and throughout the rest of Florida. Carriers are looking more closely at the geography of the state to spot risks. We haven't been affected yet, but writing will be restricted,' predicts McKinney.
There's a bright side to Hurricane Andrew, says McKinney. 'Disasters show that insurance is a humanitarian business. We help people get back on their feet. We give them money for housing, food and whatever else they need.'
Most in the insurance business are positive about the road ahead. McKinney sums it up: 'As an industry, we're in good shape. We have highly qualified people because of strong state licensing laws. I'm very upbeat about the future. The new administration in Washington and the insurance industry have endorsed a public/private partnership to solve the health care problem. The Florida Legislature will be addressing workers' compensation to try to get a handle on medical costs.'
How They See It
1. We need to 'manage' care. 'Sometimes I think HMOs look too much like indemnity companies with a concentration on the payment of premiums and the processing of claims,' laments Dr. Neil Natkow of Family Health Plan. 'We should be more concerned about managing the care of the patient,' he says. Natkow believes a case manager should be responsible for taking a patient through the entire medical process. The case manager would make appointments with an appropriate caregiver with the necessary equipment, follow up to make sure the patient met with the caregiver and elicit feedback from the patient to see if the service was acceptable. This process would ensure that the whole system is looked at, not just the small part of the body where the problem is. According to Natkow, a case manager would make sure that care is rendered with quality in a cost-effective manner.
2. We need to be committed to the concept of health maintenance. 'We should look at the preventative aspects of the health process and be willing to fund treatments that lead to better health,' says Natkow. Maintenance programs are more cost-effective in the long run.
3. We must bring the patient back into the process in order to cut costs. Medical care costs $3,100 per person per year. John J. Emerson of Acordia Benefits of Florida suggests that employers give their workers that amount of money to buy their own insurance. 'If we get consumers involved again, they will start asking questions about their medical bills,' says Emerson.
4. We must create an incentive to get workers' compensation claimants back to work. More than 50 percent of the cost of workers' compensation is on the medical side. 'The main problem is that workers' comp is the only coverage left with no deductible,' remarks Bill Bull of Summit Consulting. 'With the present system you can't keep costs down. It's not in the claimant's interest to get well,' he says. The system must be changed to encourage employees to return to work quicker.
