California Pension Fund Hopes Riskier Bets Will Restore Its Health
July 24, 2009
A forum for Ohio educators, sharing thoughts regarding their health care and pension system (STRS Ohio). Researcher John Curry manages a clearinghouse of related e-mails, articles, announcements, etc. His daily mailings include many items that do not make it to this blog. Contact John (email@example.com) if you wish to be on his e-mail list. Kathie Bracy: firstname.lastname@example.org.
"What I saw happening over the past few years was a steady movement away from the concept of insurance and toward "individual responsibility," a term used a lot by insurers and their ideological allies. This is playing out as a continuous shifting of the financial burden of health care costs away from insurers and employers and onto the backs of individuals. As a result, more and more sick people are not going to the doctor or picking up their prescriptions because of costs. If they are unfortunate enough to become seriously ill or injured, many people enrolled in these plans find themselves on the hook for such high medical bills that they are losing their homes to foreclosure or being forced into bankruptcy.
As an industry spokesman, I was expected to put a positive spin on this trend that the industry created and euphemistically refers to as "consumerism" and to promote so-called "consumer-driven" health plans. I ultimately reached the point of feeling like a huckster."
Although by most measures I had a great career in the insurance industry (four years at Humana and nearly 15 at CIGNA), in recent years I had grown increasingly uncomfortable serving as one of the industry's top PR executives. In addition to my responsibilities at CIGNA, which included serving as the company's chief spokesman to the media on all corporate and financial matters, I also served on a lot of trade association committees and industry-financed coalitions, many of which were essentially front groups for insurers. So I was in a unique position to see not only how Wall Street analysts and investors influence decisions insurance company executives make but also how the industry has carried out behind-the-scenes PR and lobbying campaigns to kill or weaken any health care reform efforts that threatened insurers' profitability.
I also have seen how the industry's practices -- especially those of the for-profit insurers that are under constant pressure from Wall Street to meet their profit expectations -- have contributed to the tragedy of nearly 50 million people being uninsured as well as to the growing number of Americans who, because insurers now require them to pay thousands of dollars out of their own pockets before their coverage kicks in -- are underinsured. An estimated 25 million of us now fall into that category.
What I saw happening over the past few years was a steady movement away from the concept of insurance and toward "individual responsibility," a term used a lot by insurers and their ideological allies. This is playing out as a continuous shifting of the financial burden of health care costs away from insurers and employers and onto the backs of individuals. As a result, more and more sick people are not going to the doctor or picking up their prescriptions because of costs. If they are unfortunate enough to become seriously ill or injured, many people enrolled in these plans find themselves on the hook for such high medical bills that they are losing their homes to foreclosure or being forced into bankruptcy.
As an industry spokesman, I was expected to put a positive spin on this trend that the industry created and euphemistically refers to as "consumerism" and to promote so-called "consumer-driven" health plans. I ultimately reached the point of feeling like a huckster.
I thought I could live with being a well-paid huckster and hang in there a few more years until I could retire. I probably would have if I hadn't made a completely spur-of-the-moment decision a couple of years ago that changed the direction of my life. While visiting my folks in northeast Tennessee where I grew up, I read in the local paper about a health "expedition" being held that weekend a few miles up U.S. 23 in Wise, Va. Doctors, nurses and other medical professionals were volunteering their time to provide free medical care to people who lived in the area. What intrigued me most was that Remote Area Medical, a non-profit group whose original mission was to provide free care to people in remote villages in South America, was organizing the expedition. I decided to check it out.
That 50-mile stretch of U.S. 23, which twists through the mountains where thousands of men have made their living working in the coalmines, turned out to be my "road to Damascus."
Nothing could have prepared me for what I saw when I reached the Wise County Fairgrounds, where the expedition was being held. Hundreds of people had camped out all night in the parking lot to be assured of seeing a doctor or dentist when the gates opened. By the time I got there, long lines of people stretched from every animal stall and tent where the volunteers were treating patients.
That scene was so visually and emotionally stunning it was all I could do to hold back tears. How could it be that citizens of the richest nation in the world were being treated this way?
A couple of weeks later I was boarding a corporate jet to fly from Philadelphia to a meeting in Connecticut. When the flight attendant served my lunch on gold-rimmed china and gave me a gold-plated knife and fork to eat it with, I realized for the first time that someone's insurance premiums were paying for me to travel in such luxury. I also realized that one of the reasons those people in Wise County had to wait in long lines to be treated in animal stalls was because our Wall Street-driven health care system has created one of the most inequitable health care systems on the planet.
Although I quit my job last year, I did not make a final decision to speak out as a former insider until recently when it became clear to me that the insurance industry and its allies (often including drug and medical device makers, business groups and even the American Medical Association) were succeeding in shaping the current debate on health care reform. While the thought of speaking out had crossed my mind during the months leading up to the day I gave notice, I initially decided instead to hang out my shingle as a consultant to small businesses and nonprofit organizations.
I decided to take the shingle down, though, at least for a while, when I heard members of Congress reciting talking points like the ones I used to write to scare people away from real reform. I'll have more to say about that over the coming weeks and months, but, for now, remember this: whenever you hear a politician or pundit use the term "government-run health care" and warn that the creation of a public health insurance option that would compete with private insurers (or heaven forbid, a single-payer system like the one Canada has) will "lead us down the path to socialism," know that the original source of the sound bite most likely was some flack like I used to be.
Bottom line: I ultimately decided the stakes are too high for me to just sit on the sidelines and let the special interests win again. So I have joined forces with thousands of other Americans who are trying to persuade our lawmakers to listen to us for a change, not just to the insurance and drug company executives who are spending millions to shape reform to benefit them and the Wall Street hedge fund managers they are beholden to.
Take it from me, a former insider, who knows what really motivates those folks. You need to know where the hard-earned money you pay in health insurance premiums -- if you lucky enough to have coverage at all -- really goes.
I decided to speak out knowing that some people will not like what I have to say and will do all they can to discredit me. In anticipation of that, here are some facts:
I still consider all of them my friends. In fact, the thing I have missed most since I left is working as part of a team, even though I eventually came to the conclusion that I was playing for the wrong side. Being a consultant has its advantages, but I have missed the camaraderie. After a few months, I thought that maybe I should consider working for another company again. At one point, a former boss told me that another insurer had posted a PR job and encouraged me to contact a former CIGNA executive who worked there about it. Against my better judgment, I did, but I immediately decided not to pursue it. The last thing I wanted to do was to go from one big insurer to another one. What the hell was I thinking?
I'm writing this because, knowing how things work, I'm fully expecting insurers' PR firms to quietly feed friends of the industry (which include a roster of editorial writers and pundits, lawmakers and many others who fall under the broad category of "third-party advocates,") with anything they can think of to discredit me and what I say. This will go on behind the scenes because the insurers will want to preserve the image they are working so hard to cultivate -- as a group of kind and caring folks who think only of you and your health and are working hard as real partners to Congress and the White House to find "a uniquely American solution" to what ails our system.
I expect this because I have worked closely with the industry's PR firms over many years whenever the insurers were being threatened with bad publicity, litigation or legislation that might hinder profits.
One of the reasons I chose to become affiliated with the Center for Media and Democracy is because of the important work the organization does to expose often devious, dishonest and unethical PR practices that further the self interests of big corporations and special interest groups at the expense of the American people and the democratic principles this country was founded on.
After a long career in PR, I am looking forward to providing an insider's perspective as a senior fellow at CMD, and I am very grateful for the opportunity to speak out for the rights and dignity of ordinary people. The people of Wise County and every county deserve much better than to be left behind to suffer or die ahead of their time due to Wall Street's efforts to keep our government from ensuring that all Americans have real access to first-class health care.
The Wall Street Journal ran a great article yesterday on what I would consider a major problem for public pensions, and it’s called spiking. Spiking occurs when a public employee substantially increases his or her pay in the year or two prior to retirement for the purpose of locking in a higher pension payment. If you’re a public employee, particularly a younger employee, this practice may jeopardize the security of your pension.
How does spiking work?
Sounds like a great deal. I mean who wouldn’t want to do that? The problem is that it undermines the funding legitimacy of the entire system and puts the pensions of other hard working public employees at risk.
Why? Because when someone spikes their benefit, the pension system most likely has not received enough contributions during that person’s working career to support that benefit.
Who Cares. Why would you care? Well, if you’re also a public employee relying on a pension, that money for the spiked benefit has to come from somewhere. It’s not free.
What Can You Do. If you’re concerned about this practice and how it might affect your benefits, you may want to check into whether spiking is happening in your plan. To the extent the data is publicly available, it’s in your best interest to pressure those running the system to look into how much spiking is occurring. Shining a light on this issue may go a long way toward correcting the problem.
Bottom line. Pension plans only work if you fund them adequately. When some people game the system, it creates more risk for others.
"On second thought, it might be good to give members of Congress who vote against a public insurance option the choice of enrolling in one of the limited-benefit plans being promoted these days by insurers -- including the huge for-profit insurance companies that now dominate the industry. The premiums for these plans are a little lower than plans that offer comprehensive coverage, but they often don't cover things most of us have grown to expect. Little things like hospitalization. Such a deal."
Here's Wendell's article, in its entirety:
I think Democrats ought to call their bluff and pledge to be the first to sign up. If they do, they will have to shove me out of line. I would love to have the option of enrolling in a public plan that offers a decent standard benefit package at a more affordable price. I am sick and tired of knowing that only 80 cents of every dollar I pay in premiums to my private insurer goes to pay doctors and hospitals for care they provide. (This figure is down from 95 cents in 1993 before the industry came to be dominated by a cartel of hugh for-profit insurance companies like the two I used to work for.) I am eager not to have to donate 20 cents of every premium dollar to cover my insurer's sales, marketing and underwriting expenses and to help make the CEO and the big institutional investors and Wall Street hedge fund managers even more obscenely rich than they already are, thanks to the inflated premiums we have to pay.
Here's what Politico reported:
Rep. John Fleming (R-La.), a family physician, kicked off the quixotic bid last week, urging House members to give up their right to participate in the much-revered Federal Employees Health Benefits Program if they support a government-run program as part of the health care reform package.
Sens. John McCain of Arizona and Tom Coburn of Oklahoma are pushing the same concept in the Senate, preparing separate amendments that would require members -- and maybe even their staffs -- to sign up for the public option. With Democrats firmly in control of Congress, the idea is not likely to gain traction. Proponents of the public plan say the resolution would do exactly what Republicans have warned against, undermining the private insurance system by moving people into a public plan.
But the effort has caught fire in the right-wing blogosphere and on talk radio, serving as a rallying point for conservatives opposed to one of the top priorities of Democrats... Newt Gingrich's Center for Health Transformation is promoting Fleming's resolution on its website and started an online petition titled "Good Enough for Congress."
After Democrats call their bluff, I would counter with this: Every member of Congress who votes against the public insurance option must enroll in one of the high-deductible plans like the one that CIGNA forced me into a few years ago, against my wishes. (I am a former CIGNA employee, so CIGNA was both my employer and my insurance company.)
Opponents of health care reform raise the specter of the government forcing us out of health care plans that we like. In reality, our employers and insurers are doing this to us already. While employed at CIGNA, I was in a PPO that I liked, until the company decided a few years ago to force all if its employees out of their HMOs and PPOs and Point of Service plans and into what the industry refers to, misleadingly and euphemistically, as "consumer-driven" plans. It was a take-it-or-leave-it deal. If I didn't want to enroll in the high-deductible plan that CIGNA offered, I could join the growing ranks of the uninsured or try to get coverage through the individual market. That wasn't really an option. I was in my 50s and could not find a decent plan that I could afford, because insurers are free to gouge us when we reach a certain age.
In a high-deductible plan, enrollees have to spend a lot more money out of their own pockets before their insurance coverage kicks in than they had to spend in their HMOs and PPOs. These plans are fine for people who are young, healthy, and not accident-prone. and wealthy. It also helps to have a better-than-average income. In other words, a high-deductible plan might be exactly what you're looking for if you don't really need decent insurance now and can afford to shell out thousands of dollars of your own money in the event you get hit by a bus. The rest of us, however, might want to steer clear of this sort of plan -- if we had the choice.
More and more companies are doing what CIGNA did -- forcing their employees out of the plans they like and into plans they don't. Another big insurer, United Healthcare, did the same thing to its employees a few years ago. If it hasn't happened to you yet, just wait. Insurers are eager to send HMOs and PPOs to the ash heap of insurance history, which is where they sent traditional indemnity plans several years ago.
On second thought, it might be good to give members of Congress who vote against a public insurance option the choice of enrolling in one of the limited-benefit plans being promoted these days by insurers -- including the huge for-profit insurance companies that now dominate the industry. The premiums for these plans are a little lower than plans that offer comprehensive coverage, but they often don't cover things most of us have grown to expect. Little things like hospitalization. Such a deal.
Now you see why the insurance industry insists on being able to charge older folks a lot more for coverage than younger folks and why it is insisting on "benefit design flexibility." They want to have the flexibility to "design" and force us into plans that cover less and less and cost us more and more. That, readers, is what your private insurance company has in store for you if Congress fails to pass meaningful health care reform legislation.
By the way, insurers including CIGNA are now also marketing these limited-benefit, high-deductible plans as "voluntary." This means that your employer would allow you to enroll in these type of plans at the workplace but make you pay the entire amount of the premium. That's right, employers in the future will not have to contribute one thin dime toward your coverage. Future, heck, many are already there. A growing number of employers are already "offering" these plans to their employees. CIGNA offers such coverage under the brand name Starbridge, which "enables companies to offer a limited-benefit plan that is affordable and does not require employer contribution." The underwriting guidelines for Starbridge make it available only to employers who have at least 70 percent annual employee turnover and who have fewer than 65 percent female employees. Also, the average age of the workforce has to be 40 or younger. You're right if you think the profit margins on these plans are high. How could they not be? Cha-ching!
I encourage every member of Congress, Republicans as well as Democrats, to do a little research into what Big Insurance has in store for us before voting on legislation this summer or fall.
This is why I left my job and why I am speaking out.
Dennis Leone Urges STRS Board to Prepare for Significant Stock Market Downturn
The following excerpt is taken from:
Ohio Retired Teachers Association (ORTA)
By Dennis Leone,
STRS Retiree Board Member
Among a number of items Dennis reported and discussed in his quarterly report was,
………………………….I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn………………………
Was he being too cautious or too prudent or both?
And why not!
STRS was in the driver’s seat.
When Dr. Leone suggested what he did, STRS was not only meeting the 30 Year Funding Period, but was ahead of it, by June of 2007,
THE FUNDING PERIOD WAS AT 26.1 YEARS!
Now, IS IT AT INFINITY?
At a funding period of 26.1 Years, STRS would have been able to afford current benefits for years to come. Even with returns of 4% or 5%.
One does NOT NEED TO HAVE EXPERTISE!
GOOD JUDGMENT WILL SUFFICE!