The following post appeared on AOL's Motley Fool- OXHP Message Board (that was a mouthfull):
Subject: Re: SHORTERS-STATES-PAYSON
Date: Fri, Mar 6, 1998 18:10 EST
From: RayCuello
Message-id: <19980306231001.SAA18138@ladder02.news.aol.com>
I've just received an update from my benefits 'broker', who IMHO has all along been not only on top of the OXHP situation, but has remained rather neutral about the whole thing. I have found this not surprising, because he is acting much in the manner that an agent would act, and is/should be just as willing to put me and others in any plan that is comparable. Having said that, here is the jist of what his four page letter indicated:
He and others met personally with Dr. Payson, which I find rather comforting. Even though my calls, and probably your calls are not returned, and understandably so, those who are deemed as critical to the business are getting first hand information and access.
In NYC area, even to this day there are no networks as comprehensive as the OXHP network, however, others are gaining ground, and OXHP is intimately aware of this fact.
There have been net clients added to the network, as opposed to leaving the network. This is consistent with what OXHP has been publicly saying, and is an astounding fact in view of the delicate situation. Goes to my prior post of the parallels with AOL vis a vis the fact that people are not stupid, and generally recognize when they are getting a good deal, and will stick with same.
It appears that KKR chose not to invest due to disagreements with some of the terms of Dr. Payson's employment agreement. Like I said before, contrary to what people may have though, KKR did not 'see something scary in the financials at the last minute' type of thing. Again, refer to prior post.
The risk of bankruptcy was basically removed by Michael Price, again see my prior post. It was further removed by TPG, although it is a contingent financing, the first guy at the plate is always the toughest. The 'delay' and anxiety that some feel IMHO is due to the company trying to get the best deal possible among probably a variety of sources, not due to their not finding anyone that will step up. Good for them I say.
Oxford will make substantial changes, which we are already seeing, but only on those products that have a problem. Again, they have stated this. The commercial business has not been a contributor to these problems. This is where we eat, and these are the people we don't want to piss off. Oxford knows this intimately well. They expect increases of 7-9% on the New York (3 to 50 life) community rated business, and 3-5% on groups of 50 employees or
more. As usual, rate changes in companies over 50 employees will be negotiated dependent upon actual experiences with such companies. They will not change the methodology of contracting with providers to a cap basis, which is a real spook for providers and would damage the relationship therein. Again, contrary to the 'arrogance' that has been depicted, Oxford knows this.
As they have stated, a sizable share of the loss is the Medicaid program, and as a result they have eliminated such in CT (4/1/98), NJ (7/1/98), and PA (1/13/98). Look out NY, it's the big magilla and is coming soon. I think they are holding this out for leverage IMHO.
Individual medicare, also a big underwriting loss, will either be capped or eliminated.
Because they are required to write individual policies in NY, and it is a big loser (only those who need it sign Cobra, etc.) they are basically pricing for risk with 50% and 64% on HMO and POS contracts respectively. This will significantly positively impact the bottom line.
Although they expect they will be tightening the belt, Dr. Payson expressed his commitment to not reduce service, and continue to add DGM, DGSMs, and claim analysts. The turnaround continues to improve, now even below the prior 18 days.
Bottom line, the nuts are no longer in charge of the nut house. Sorry if some of the above is repetitive, but, I just thought the fact that it came firsthand from the healthcare brokerage community was of some significance.
Keep smilin.
End of Post
Seems like Payson is doing some good PR work with the brokerage community.
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