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Blue Cross and Blue Shield Assn. Pres. and CEO Patrick G. Hays believes that he was chosen to head the coordinating body because of his expertise in integrated delivery systems. Hays stated that he intends to make Blue Cross and Blue Shield the most effective national managed care alliance in the US by exploiting its geographic reach and excellent community relations. He stated that the health care system is undergoing substantial change due to legislative initiatives and market conditions.

Sources in the property and casualty insurance industry continue to push back the date when they expect their market to improve. At the start of 1994 insurance renewals are generally flat. Though health care reform, increased Bermuda reinsurance capacities and the reauthorization of Superfund could be reasons for optimism, most sources expect a hardening market now in late 1994.

Leading benefit consulting firms' revenue growth has narrowed to 2.6% during 1993, from approximately 7% per year since 1991. Firms were evaluated on a fee-for-service basis. Some firms, such as The Wyatt Co and William M. Mercer Companies Inc, reported a drop in employee benefit consulting revenues for 1993. Total consulting revenues are expected to amount to $2.9 billion for 1993, compared with $2.82 billion in 1992.

The numerous natural disasters during 1992 may force the insurance industry to raise property insurance rates to cover its losses. Those companies in the property and casualty insurance industry may also raise the rates for casualty policies to help stem the property coverage losses. Most of the losses are for personal lines insurance companies rather than commercial underwriters.

The top 10 employee benefit consulting companies have had slow revenue growth rates in 1992 due to the recession. Worldwide consulting revenues increased to $2.80 billion in 1992 from $2.63 billion in 1991, an increase of only 6.5%. Revenues in 1991 increased by 7.4% over 1990 revenues. Mergers and acquisitions helped increase the growth rates. Four of the top 10 consultants had revenue growth of over 5% while five of the top 10 had less revenue growth of less than 5% and one, Wyatt Co, had a decrease in revenue.

Health care expenditures in the US have skyrocketed. The US now spends 12.4% of its Gross Domestic Product on healthcare, a higher percentage than any of the major industrialized nations, yet health care results lag behind other nations and 35.4 million people lack health insurance. This health care crisis has led to a consensus among government officials, employers and the health care and insurance industries that reform is needed to contain health care costs.

The property and casualty insurance market will not experience any rate increases in the near future. The recession has kept rate increases low, even traditional market-changing events like natural disasters are not causing rates to rise. The failure of a major insurance company may be the only event that will trigger a rate increase, and no one in the industry can predict when that will happen.

Industry analysts state that health plan premiums will remain steady this summer for group health care renewals. Unlike traditional fee-for-service indemnity plans, no exorbitant double-digit increases are expected anytime soon and the market will remain oriented towards buyers. Although health maintenance organization premiums have increased by an average of 1-5%, large employers involved in strong purchasing coalitions are currently enjoying flat or even declining rates at midyear.

The Colorado Health Care Purchasing Alliance is the latest manifestation of a purchasing model which is increasing in popularity across the US. The group is composed of self-insured employers who have banded together to obtain the type of high-quality, cost-effective managed care plans normally reserved for larger employers. May large companies are realizing that the key to controlling health care costs lies in group purchasing.

Workers are more pleased with care received through health maintenance organizations than with care delivered by indemnity plans. This was gleaned from a large-scale opinion survey, which provided employers with valuable insights on which health plans meet employee expectations. The survey was the first such undertaking of a consortium of employers that covered a large group of workers and health plans.

A survey of employers found that many are reducing or eliminating retiree health benefits. In a sample of 2,395 companies, 1,767 of which had 500 or more employees, only 42% of the companies with over 500 had coverage for retirees under the age of 65, and 35% covered retirees aged 65 and older. The employers were reconsidering their retiree health benefit coverage because of Financial Accounting Standard 106 requirements that ask employers to account for the retirees health care plans for future retirees rather than a pay-as-you-go basis and rising health care costs.

Congress can learn much about health care reform from MinnesotaCare, the state of Minnesota's small group health insurance program that was enacted in 1992. MinnesotaCare provides health insurance coverage to small businesses and has expanded access to those Minnesotans lacking health insurance, but universal coverage has not been achieved and there are still political battles over the funding of the program.

Prices in the medical malpractice and hospital professional liability insurance market are stable and capacity is plentiful. An increase in competition in the market has exerted pressure to keep prices stable. Large insurance companies are increasing their exposure to the profitable malpractice and professional liability market to offset poor returns in the commercial property insurance sector. The biggest underwriter in the market is St Paul Fire and Marine Insurance Co, which writes $500 million in premia annually.

Organized labor's support of Pres Clinton's health care reform proposal, the Health Security Act, is unlikely to ensure its passage. Organized labor still has great political influence among Congressional Democrats, particularly those from urban areas, but it is unlikely that they can produce enough votes to ensure passage of Clinton's proposal. Labor unions stand alone among special interest groups in supporting Clinton's proposal, and may themselves be divided over their level of commitment to the proposal.

Data analysis provides employers with health care claims data that can be used to analyze employee health care plans to identify costs and quality. Data analysis is a good tool for identifying quality problems and actual cost drivers in managed care health plans. Health claims data analysis systems sold by data vendors can be used by employee benefits directors to evaluate the effectiveness of cost containment programs and to test the claims of health care providers.

Multinational corporations (MNCs) must be cognizant of the fact that their insurance policies issued by foreign insurers often exclude coverage for AIDS-afflicted employees. A William M. Mercer Inc study of 39 countries and 202 MNCs reveals that 69% of local insurers exclude AIDS-related illnesses from their insurance coverage but that only 20% of the MNCs were aware of the fact. MNCs should investigate whether AIDS exclusions exist in their policies and respond to those restrictions.

Corporate employee benefits believe that Pres Clinton's health care reform will create a major shift in their duties away from medical benefits administration. Benefit managers believe that Clinton's health care reform, by making businesses into payers, will free up their time which they can apply to the administration of non-medical benefits as there will be less of a demand to micro-managed medical benefits.

The Health Project, a consortium of health care experts from business, labor, academia and government, believes that the nation's health care costs can be reduced by a minimum of $180 billion if consumer demand for health care can be reduced. The Health Project feels that business must play a major role in reducing demand since it pays for over half of all health care. To reduce health care demand, the Health Project recommends that businesses educate their employees to become more consumer oriented towards health care.

Automation has made the task of administering employee fringe benefits easier for human resources departments. PC-based employee benefits modeling programs and telephone voice-response systems have become affordable for even small- and medium-sized companies. Interactive communications systems improve employee benefits communications and can be economical since it reduces manpower requirements in personnel departments.

Public concern over health care reform is focused on the development of strategies for overhauling the delivery system and implementing cost containment. Groups such as the President's Task Force on Health Care Reform are ignoring the fact that unhealthy living habits overburden the troubled health care system. Research indicates that 80% of all deaths are premature and that the adoption of healthier living habits by the populace would reduce health care expenditures.

President Clinton's plan to cut increases in health care costs at the federal level is worrying the medical providers. Costs could be transferred to the private sector. Clinton would place limits on increases in Medicaid and Medicare reimbursements, even though the level of services would not be cut. Therefore, providers would look for other ways to make up these costs. Some observers believe that this private-sector cost-shifting is a strategy by Clinton to alert the medical community to the importance of health care reform.

Centers of excellence provide high technology medical procedures at reasonable prices and with high quality results because of the volume of procedures performed. Employers who wish to use these centers are encouraged to evaluate them and their surgical teams before sending employees to them. Since transplants are now routine and not experimental procedures, employers must select medical facilities that will give them the most for their health care dollar.

Managed care remains a powerful mechanism for controlling health care costs. The managed care industry was in its infancy 25 years ago when there were only 30 health maintenance organizations (HMOs) in the US. Spurred by corporate demand for a mechanism to contain employee health costs, managed care has boomed and there are now 550 HMOs with a membership of 38.6 million. Unknown 25 years ago, there are now over 970 preferred provider organizations serving 89 million people. In addition, there are now 300-400 firms providing utilization review, a managed care technique.

Employers must force employees to use a managed care health program to control costs. Cost shifting and health care utilization review techniques have been exhausted as cost control methods. Major employee participation in a cost-controlled managed care health network should be encouraged and implemented with the least amount of manipulation to reap the greatest amount of benefits from the program.

Medical experts at the 1992 Group Health Institute suggested guidelines for group health insurers and self-insured employers trying to determine whether they should pay for costly new medical technologies. New medical treatments should be well through the approval process, not experimental. Medical diagnostic tests should be carefully screened to determine their necessity. Utilization surveys have indicated many medical services are unnecessary. If a payment decision goes to court, trial defense should highlight a new medical procedure's approval status.

The first half of 1992 found the cost of health care rising less quickly than in previous years but, as a component of the Consumer Price Index (CPI), it is still much higher than the average inflation rate. The CPI's health care sector's inflation rate rose 7.9% as of Apr 1992, the same rate as all of 1991. Overall CPI inflation rate increases as of Apr 1992 are 3.3% versus 3.1% for 1991 and 6.1% for 1990. Health insurance premiums will continue to rise, however, but those firms with managed care plans will find premiums increasing at a slower rate.

Settlements arising from the 1987 savings and loan crisis are expected to cause an increase in spring renewal professional liability insurance rates for large legal and accounting firms. Small and midsized firms have seen little or no change. Some insurers, such as National Union Fire Insurance Co, restrict or have stopped coverage altogether for firms with financial institution clients.