Insurance: Feb 21, 2012

Tuesday, February 21, 2012

Consumer Federation: Insurance Companies Shifting Risk to Homeowner and Taxpayers

New Health Insurance Co-ops Win $639M in Federal Loans

(Source: By Harris Meyer, Kaiser Health News) - WASHINGTON - Seven organizations will total $ 639 million in federal low-interest loans to launch new, consumer-directed health insurance plans in eight states, the federal government announced Tuesday.

The new plans and approved by the 2010 health care law, is scheduled to open for business in 2014. They will be available on the new state health contribution exchanges, or marketplaces mandated by law. They primarily serve Americans under 65 years of individual and small group insurance markets.

Several loan recipients will be announced in the coming months, with the goal to launch at least one nonprofit co-op plan in each state, according to the Centers for Medicare and Medicaid Services, which administers the program.

The seven loan recipients are freelancers CO-OP in New Jersey, New Mexico Health Connections, Midwest Members Health in Iowa and Nebraska, Common Ground Health Care Cooperative in Wisconsin, Freelancers CO-OP in Oregon, Montana Health Cooperative, and Freelancers Health Service Corporation in New York.

Interest rates will vary between 0 percent and 1 percent, based on the current rate on treasury securities of the same duration. The funds will be disbursed over time, as plans meet state-set milestones for progress. A CMS official said the agency has an "early warning system" to spot if a co-op plan is facing economic problems and require intervention.

The new plans are created by public health activists, medical associations, corporations, hospitals, managers, unions and others. They are betting that Americans want a local, consumer-friendly alternative to commercial insurance companies.

"People from all walks of life are dissatisfied with the status quo, and believe that our health care and health insurance system can be improved dramatically," says John Morrison, a former Montana Insurance Commissioner, who is on the board of the proposed Montana Health Cooperative and also heads the National Alliance of State Health cooperatives.

Plans will be started under the Health Act, Consumer Operated and Oriented Plan (CO-OP) program. The goal is to increase competition among insurers, potentially reduce premiums and improve health care quality and customer service. In many states, managing only one or two insurers majority of health insurance.

Some experts are skeptical that these infant health plans can compete effectively against the big, established insurers. They warn of the difficulties in recruiting experienced insurance executives and quickly enroll a large enough and healthy enough membership to make the plan financially viable. Many nonprofit insurance plans launched under the federal initiatives in the last 40 years went bankrupt or were sold or converted to for-profit status.

"It's safe to say that the existing plans is wasteful and drive costs out of selfish reasons," says Peter Kongstvedt, a Virginia-based health care consultant. "The truth is that it is not easy to get costs down. It's hard for me to believe (co-op plans) may be more effective."

Nevertheless, the number of credible organizations who have stepped forward to start the co-op plans impressed others. "I'm really surprised. I thought it would just lie there and it has not," said Jeff Goldsmith, a veteran health care industry analyst also based in Virginia.

Congressional Democratic leaders made co-op program plan as a political compromise, as it became clear that their preferred approach - creating a public insurance plan to compete with private insurers - would derail passage of the entire health care bill.

While consumer-directed health insurance companies have a long history in America, just back in the day, covering about 2 million Americans. The largest and best-known survivors are the Seattle-based Group Health Cooperative and Minnesota-based Health Partners. These plans are not necessarily cheaper than other types of health plans, but they are well regarded in terms of quality and responsiveness.Richard Popper, CMS official title co-op program, would not reveal how many organizations have applied for loans. The average loan is expected from the government totaling $ 15 million for startup costs and $ 100 million for state insurance reserve requirements, with repayment required within five years of start-up loans and 15 years for reserve loans. Some of the startup plans are expected to fail and the government last year predicted a nearly 40 percent default rate on loans.

"There will be a large number of casualties in this first group, but we need more health plans," Goldsmith said. "I think it's worth a shot."

Applicants Popper said, include medical and hospital groups, communities and agricultural organizations, small business coalitions, unions and even some large employers. New applications can be submitted throughout 2012, until the $ 3.4 billion federal loan money is fully engaged.

While the new co-op plans primarily to serve individuals and small groups purchasing coverage in the exchanges, up to one third of the new co-ops "activities can be large employer groups and Medicaid recipients. The health insurance industry presses for ensure the co-op plans kept all the same rules as other insurers. "Our primary focus is on maintaining a level playing field," says Robert Zirkelbach, spokesman for American Health Insurance Plans, the industry's Trade Group.

Co-op sponsors say that in contrast to most existing insurance companies, their plans to pay providers to manage patients' health, with a strong focus on primary care rather than just paying for individual medical services.

Some co-op sponsors say their plans will be able to offer lower premiums because they do not have to generate profits for investors. By law, the co-op plans apply any surplus to lower prices or improve quality or benefits for their members.

The New York-based Freelancers Union, which got loans to start co-op plans in New York, New Jersey and Oregon, which already runs a nonprofit health insurance in New York with 25,000 members. Sara Horowitz, founder and CEO of the union, said her plan prices are 40 percent cheaper than the competition, but the plan still reported profits the past two years. "If you do not have private shareholders or investors, you have the economic infrastructure to break even and be sustainable," she said.

Some co-op sponsors plan innovative ways to negotiate lower provider rates. Richard Milt Berger, director of the Montana Health Cooperative, said that if necessary his plan to send members to quality providers in neighboring states to charge lower prices for procedures such as knee replacements. In Maryland, the leaders of the proposed Evergreen Project co-op plans to set up clinics with salaried doctors and other providers to meet the Group Health Cooperative in Washington State.

Some co-op sponsors believe they have a market advantage because of their provider affiliation. Dolores Green, executive director of the Riverside County Medical Association, which is co-sponsoring the proposed Pacific Co-op Health in two southern California counties, said her organization already has expertise in administering health plans for self-insured employers.

While other co-op plans must struggle to line up a strong supplier network, Green organization already has a preferred network of 2,000 physicians and other suppliers.

Green said doctors want to start a co-op plan, because they are deeply dissatisfied with existing health insurers. "They want to sit down with the community and be able to say, 'This is our plan. What are the health needs here and what works for our community?" That's what's exciting for the doctors, "she said .
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Indian ships to lose insurance due to Iran sanctions, may look to China

Indian companies will find it difficult to obtain replacement insurance coverage to continue to import Iranian crude oil by new EU sanctions come into force, industry sources said.

State-run Shipping Corporation of India, the largest tanker owner in the country, the EU will lose its insurance coverage for tankers operating in Iran from the first July, in which European insurers will be prohibited from indemnifying ships carrying Iranian oil.

Indian maritime companies are likely to be hardest hit in Asia of the penalties which the other two major buyers of Iranian crude, not China and Japan, do not trust the European insurance companies, but are covered by national providers.

India, China and Japan is Iran's three largest oil purchasers.

"We are covered by P & I clubs in the EU," Sunil Thapar, Director, Shipping Corp. of India told Reuters, referring to customer-owned Maritime Protection and Indemnity insurance groups.

"These clubs will not be able to provide us with cover for vessels to Iran from July. It will be difficult for Indian shipping companies to transport Iranian crude, unless alternative arrangements are made," he said. SCI owns 39 oil tankers.
Fewer opportunities

. P. Moller-Maersk, Singapore-based SAMCO Shipholding, and many other international maritime companies have halted new agreements with Iran, leaving Asian oil importers to rely more on domestic and state-run companies to manage shipments from Tehran.

All but one of the international P & I clubs, which together cover 95 percent of the world's tankers from contamination and personal injury claims covered by the sanctions because they are based in Europe or America.

That leaves India companies with few options - Japan P & I clubs, insurance companies in China, Russia and the Middle East or Singapore and Hong Kong.

Iranian insurance coverage is not an option, as sanctions against the country's financial system makes it impossible to collect payment, there should be a requirement, says Jim James, a Hong Kong-based lawyer with law firm Norton Rose.

"We continue to offer insurance for oil tankers. It does not matter whether vessels calling at Iran," said an official with Japan P & I club, which primarily provides coverage of national shipowners and represents about 7 percent of the global P & I coverage.

But switch to Japan P & I club can take months as members have to weigh the risk of a potential new player, especially one who wants to do business with Iran, maritime lawyers said.

The most likely alternative is China, which has a large enough market to provide the necessary insurance coverage.

"The Chinese market is a little different. You have some very large insurers, who may decide it is good business, and China is not included in this scheme," says Iain Anderson, a Singapore-based lawyer with Ince & Co.

"But they too dependent on the international reinsurance to spread risk. So unless they are willing to either lower their sights on the level of reinsurance security - or go network account on the risk -. They will meet the same problem"

Europe and the U.S. implements tougher economic sanctions in the hope of isolating Iran and forcing it to halt its nuclear program the West fears will be used to develop nuclear weapons.

Iran, the largest producer in OPEC after Saudi Arabia and is the world's fifth largest oil exporter, says its nuclear program is exclusively for peaceful purposes.

The sanctions have made it harder for Iran to sell its crude, and it will export a six-month low volume of fuel oil to East Asia in March. The amount will probably fall further as the EU embargo approaches.

Since fewer insurers are able to offer coverage, rates could go up significantly for tankers carrying Iranian crude oil, says Karam Jo, assistant manager for marine underwriting in Korean Re.

Singapore and Hong Kong insurance companies could also be opportunities, but many of them have ties to the West.

"It will also be very difficult for an Asian market insurer. They also have to be comfortable that their footprint around the world keeps them out of the current sanctions regime," Anderson said.

Tuesday, February 21, 2012

Consumer Federation: Insurance Companies Shifting Risk to Homeowner and Taxpayers

New Health Insurance Co-ops Win $639M in Federal Loans

Indian ships to lose insurance due to Iran sanctions, may look to China

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