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3
Obtain a copy of the Wall Street Journal. Locate the “Stock Tables”
section of the Journal. Review the column headings in the tables
and locate the names of various stock exchanges that are included
in the findings. See if you can find the abbreviated names and the
stock exchange symbols for healthcare companies that are publicly
held.
A
Alternatively, explore the websites of three or four publicly held
healthcare organizations. Somewhere on the website they should
identify their stock exchange symbol. Then go onto a web-based
stock exchange listing of the market for the day, locate the symbols,
and determine their current stock prices according to the listing.
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1. Select an organization: either from the Case Studies
in Chapters 27-28 or from one of the Mini-Case Studies in
Chapters 29-31.
2. Prepare a list of measures that could be
benchmarked for this organization. Comment on why
these items are important for benchmarking purposes.
3. Find another example of benchmarking for a
healthcare organization. The example can be an
organization report or it can be taken from a published
source such as a journal article.
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Case 9
Dropping Small-Group Insurance Products
CASE CONTRIBUTOR Scott D. Musch
Situation
A large, publicly-traded national health insurance company, GreenHealth, announced its
decision to drop a number of small-group insurance products in Virginia because of fi-
nancial losses. Originally scheduled to occur in four months, GreenHealth has agreed to
allow customers affected by the decision to continue on their existing products until their
scheduled renewal dates, at which point the products will be stopped. The company will
continue to offer a number of small-group products in the state, although the remaining
product options will generally have higher premiums and less attractive benefits.
Paul Dennis, VP of Small Group Products for Green Health, advocated for the deci-
sion to drop the products instead of proposing a rate increase, which would have required
GreenHealth to justify the increase to the state. The change will have a significant im-
pact on the company's small-group product line in Virginia and will result in lower risk
membership and lower revenues through reduced premiums, but also higher carnings. The
small-group market for GreenHealth has been losing money for the company for the last
two years. The products being dropped are the ones that have the most consumer demand,
including the company's most popular health insurance plan, Work Health EPO (exclusive
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group insurance products
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small-
l-group market for GreenHealth has been losing money for the company for the last
two years. The products being dropped are the ones that have the most consumer demand,
including the company's most popular health insurance plan, WorkHealth EPO (exclusive
provider organization). The products that will be retained are much less cost competitive in
the market. Small employers in Virginia do not have many plans left from which to choose.
Green Health originally planned a hard stop of the products in four months, however, the
insurance regulators pushed back and Green Health compromised with allowing the cov-
erages to end on renewal dates. The regulators had an issue with ending the coverages
abruptly as it would have affected customers' deductibles and out-of-pocket maximums.
Paul, in defending the company's decision to regulators and consumer advocates, ar-
gued that the small-group market in the state has been dysfunctional for a long time. The
primary issues include community rating for premium rates (meaning everyone pays the
same price), guaranteed issue (meaning health plans cannot turn individuals or groups
down, regardless of preexisting conditions), and no requirement that anyone within a mar-
ket buy insurance. Paul specifically cited adverse selection, hospital rate increases, and
low premiums for mandated products as reasons. Recently it has become very difficult for
health plans to obtain rate increases. Virginia is one of a number of states that has authority
to deny proposed premium increases and under the Patient Protection and Affordable Care
Act (PPACA), the Centers for Medicare & Medicaid Services (CMS) now has authority
in conjunction with states to review potentially unreasonable increases in health insurance
premiums to determine whether rate increases are justified. Under PPACA, CMS can pro-
vide states with supplemental funding to strengthen a state's rate review process.
PART II
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Background
Clear search E
According to America's Health Insurance Plans (AHIP) organization, small groups are clas-
sified as companies with 2 to 50 employees. Insurance coverage for small groups generally
is fully insured. Employers purchase an insurance contract from a licensed health insurer
or HMO, which assumes the full financial risk for paying healthcare claims. Small-group
health insurance is offered on a guarantee-issue basis, meaning a small business cannot be
denied coverage due to the health status or illness of its employees or their dependents.
A majority of states have adopted premium rating rules that place limits on rate adjustments,
including for such factors as health status and claims experience of the enrollees of a group.
Next Steps
Green Health has approximately 300,000 small-group members in Virginia. Paul anticipates
that the company only risks losing one-third of those covered lives since he expects many
of the affected employers will switch to one of the higher cost products that GreenHealth
will continue to offer. Small employers in Virginia do not have many other plans from
which to choose. In general, small employer-sponsored insurance coverage will undergo
significant changes under PPACA starting in 2014 when the health insurance exchanges
are in place. Paul recognizes that given the significantly higher premiums and lower ben-
efits offered by the products that remain, the company's membership losses could be much
larger than anticipated. In 2011, with the 300.000 small-group covered lives, GreenHealth
earned $1.4 billion in premiums but reported a medical loss ratio of 89.5%. The company's
administrative expense ratio in Virginia hovered around 12.8%, generating a negative oper-
ating margin of 2.3%. Assuming a loss of 100,000 covered lives, Paul estimates the small-
group product line in Virginia will swing to a positive operating margin (see Table 9-1)
despite the monive fixed administrative leverans that thereomnanand experience from
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