Cadillac Insurance Center Owner Utilizes Current Legislation to Save Michigan State Employers and Taxpayers Millions on Annual Healthcare Expenses
Michigan public employees express strong opposition to proposed Health Care Bill No. 5345, which mandates a uniform, state-run public employee health benefits program. Cadillac Insurance Agency saves customers millions utilizing current legislation.


LANSING, MI, March 07, 2010 /24-7PressRelease/ -- Challenging the merits of proposed House Bill 5345, which mandates a state-run, uniform public employee health benefits program, Cadillac Insurance Center, Inc. (CIC) owner, Brian Cote´, appeared before the Michigan House of Representatives Standing Committee on Public Employee Health Care Reform during their last session of 2009 in an effort to convince state officials that the goals set forth in the proposed bill are already being accomplished through the same, current federal and state legislation that enabled him to slash Michigan public sector healthcare expenses by $5.5 million over the course of the past year.

Michigan House Speaker Andy Dillon's proposed House Bill 5345 (HB 5345) seeks to create a $5 billion public employee pool for Michigan's 400,000 public employees in order save the state $900 million in annual healthcare expenses. Under Dillon's plan, the governor will appoint a 13 member board to adopt a uniform public employee health benefits program. The office of the state employer will be required to conduct collective bargaining at the state level, make recommendations, research, review, and administer the program. Dillon asserts that economies of scale will be achieved by pooling this large group together to gain greater collective bargaining power.

According to Cote´, whose company currently manages healthcare benefits for 100 Michigan public sector groups, the proposed bill has numerous shortfalls. First and foremost, he explains that the savings is overstated, because HB 5345 credits itself for expense reductions that can be obtained through current state and federal legislation. Cadillac Insurance Center, Inc. has successfully utilized Health Reimbursement Arrangements (HRA) under IRS Code Section 105 in combination with Michigan's Public Act 106 (PA 106) to slash public sector healthcare expenses while maintaining employers' current benefit levels.

CIC is one of a handful of dually licensed Third Party Administrators (TPA) within the state of Michigan, empowering them to customize employee benefits by conducting an examination of their needs to optimize savings. CIC frequently utilizes HRAs in order to accomplish this goal and to allow employers to choose the options they feel best meet the needs of their employees. Ultimately, employees maintain the same benefits, with the same carrier, at a fraction of the price.
The second legislative component that has enabled CIC to drastically reduce its clients' healthcare expenditures comes from Public Act 106. PA 106 requires Michigan's state employers to seek out competitive healthcare bids once every three years. They must determine if there are alternative carriers who offer more competitive deals or if there are other creative ways to save money, such as implementing a HRA. Heeding the advice of PA 106, many of the state's smaller groups have already banned together in order to obtain more competitive pricing from insurance companies. Cote´ addressed the committee directly: "Unlike House Bill 5345, you're not going to have to ask if PA 106 will work or if it will save the state money. I'll show you where millions of dollars are being saved right now. In the last 12 months, 50 of our public sector groups have saved a combined total of over $5.5 million. That's a direct savings to their budgets and to the taxpayers, which equals $2600 per employee per year. How does it happen? They are required to under PA 106."

Making good on his promise to show the committee that the current legislation is tested and proven, Cote´ provided CIC customer testimonials and case studies. He prefaced the testimonials by stating, "In each of these examples, employers were able to keep the same benefits and the same carriers without compromising their union contracts. We went to market and got a better deal with the same carrier."

Tim Dolehanty, Isabella County Administrator, was able to replace his county's outdated contract to realize immediate, significant savings. "By consulting with an agent versus continuing to work directly with the carrier, we saw an immediate 14 percent reduction in healthcare spending (for 266 employees), equaling nearly $100 per month, per employee, totaling over $300,000 annually." Chuck Clarke, Benzie County Administrator, had a similar experience. "With the involvement of an independent agent, we immediately were able to have the insurance company write off over $360,000 in what the carrier termed was owed to them and also reduced our premiums by over $100,000."

"If you look at what you're trying to accomplish and what's already been done, PA 106 is really providing a nice solution. I think the challenge lies in the compliance," Cote´ said. He believes that savings for the state can be fully realized if PA 106 can require groups to take the lowest bid by either utilizing a HRA or accepting a lower cost, exact benefit match program with a different carrier. He advised that penalties for non-compliance must also be enforced.

Further questioning the need for HB 5345, Cote´ testified that the bill's intended $900 million annual savings could actually cost the state more than what it currently spends by failing to account for up to $500 million in start up costs and severely underestimating the large administrative costs of up to $370 million per year. "The bill suggests that it can manage this program for less than 1 percent of the total costs. I don't know of an insurance plan in the country that can manage it at that cost. Based on my experience, a 20 percent error in insurance isn't uncommon. And if my numbers are right, a $5 billion pool is about a $1 billion mistake," Cote´ stated.

Cote´ questions whether a 13 member board can effectively meet the needs of 400,000 public employees throughout the state. "If HB 5345 is enacted, there will be a replacement of current employer and employee advocates," he stated. It's no surprise that Cote´ takes particular issue with HB 5345's provision to completely cut out the independent insurance agent. "Of the 13 member board, who will be out there to help the employee when you've got to manage a $5 billion plan? How does coordination of benefits work when you have both spouses who are employed? Who's going to run around to get a claim paid that should've been paid?" he questioned. According to Cote´, claims management is no small issue. "I would say that 40 percent of our total business effort is helping employees understand their benefits or just trying to help them put out fires." And there are plenty of fires - "Over the last 12 months, we have saved our 100 public sector groups just under $900,000 in misbilled medical claims alone. Your current bill is going to cut the independent agent out. Not only do we help employers save money on the front-end, but on the back-end as well by protecting the integrity of the program," Cote´ pointed out. He concluded his testimony with a question to the committee. "A big part of HB 5345 and a big part of the savings is cutting the agent out. I guess I'd like to ask you - do you believe there is some value in the case studies that I'm providing? I believe there is. I know to those districts, those were real dollars put back into their budgets each year as a result of the savings."

Cadillac Insurance Center, Inc. manages the benefit needs of over 500 groups throughout the state, including 30 percent of Michigan's counties. Formally recognized as Blue Cross Blue Shield's largest agent in West and Northern Michigan, Cote holds one of only 12 seats on the BCBS state agent advisory board. His firm recently celebrated its 27th year of service, operating from five locations in Cadillac, Grand Rapids, Manistee, Petoskey and Grayling. For more information, contact them at (888) 775-1293.

The Michigan House of Representatives Standing Committee on Public Employee Health Care Reform continues to deliberate over the pros and cons of proposed House Bill No. 5345. They have broken into work groups to further explore the full ramifications of such a bill and have not yet scheduled their next meeting for 2010.

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