Interesting Times

Service providers work to provide security in an uncertain economy.

In these volatile economic times, it’s nice to have something you can count on. That’s why Unity Health Insurance and UW Health have created a unique business structure in which the insurance company, hospital and medical foundation are all part of the same organization.

Unity Health Insurance is a wholly owned subsidiary of UW Health, with Terry Bolz as president/CEO. Its board includes senior executives from both the hospital and the medical foundation.Terry Bolz

“With Unity, our medical director is employed by UW Health and is a practicing physician. It’s a different conversation when they talk about needed care for patients because the patient’s health is the top priority for both parties,” he continues. “Most insurance companies have doctors and nurses as direct employees. We have the integration that allows our insurance company to rely on the expertise of medical professionals when determining the best care for patients—there are no barriers.”

Until recently, Unity and UW Health had two computer systems. But as of September, all data are integrated, so insurance
information and the medical delivery records are on the same system.

“Patients can go to one portal and see their insurance and clinical records,” Bolz says. “All of our staff works together toward the same goals. “We’ve built a platform that will help us go forward as health care reform takes effect,” he adds. “We’re as patient-centered as you
can get. We can see and take into account everything about patients.”

In recent years Unity has seen people’s health care usage patterns change. “There’s a flattening of utilization, but I’m not sure I have a direct answer as to why,” says Bolz. “As the economy changed, people became less certain about their incomes. I suspect people are making buying decisions differently—they don’t want to use their co-pays or deductibles.”

He’s also seen some smaller employers drop coverage. “There’s been a push-back on premiums, and fortunately we’ve been able to lower our increases,” Bolz says. “Utilization had been up annually for the last thirty years, with people demanding more and more services, and premiums have gone up well over fifty percent as a result. Now, with lower utilization our costs are down and we’re able to pass the savings on to consumers.”

Demand is down for many elective services and things with out-of-pocket costs, such as office visits and pharmaceuticals. Patients working for employers able to offer more generous plans, with lower deductibles and co-pays, have higher utilization. “Some employers have very generous plans, with one hundred percent coverage,” notes Bolz. “Others can’t provide that. It also depends on the local market and what's required to keep good employees.”

He is concerned about employer plans that make it unaffordable for people to get preventive care. “That’s our focus,” he says. “We want to see people get preventive care and head off more serious health issues.”

The health care reform act requires employer plans to cover one hundred percent of wellness services and preventive care. Bolz sees that as one of the most positive aspects of the reform. “As a health care provider, we work very hard to make those services affordable now, but reform will make it easier,” he says.

He’s positive about quite a few provisions of health care reform. “Its financial incentives focus on making certain people have access to primary care. The reform does a nice job of moving dollars from high-end specialty services to primary care, so salaries will go up and doctors will move into those areas, like family medicine and internal medicine. Right now we’re facing a shortage in primary care physicians.”

The health care system won’t reform overnight, he warns. “It took us sixty-five years to create this system and the reform puts a process in place to change it over ten to fifteen years.”

Unity has many of the elements in place now to meet health care reform requirements. “But one of the things that’s essential to making the reform effective is the individual mandate to buy health insurance,” Bolz says. “Without that in place, the reform package can’t work because only those who need medical care will buy insurance.”

The reform does present challenges. “The ‘essential coverage package’ will be hard for smaller employers to afford,” says Bolz. “They’ll have no choice but to raise premiums.”

And that will present difficulties for both employers and employees in these volatile times. Regardless of the challenges, whether from increased competition, utilization trends or reform, Bolz believes Unity’s positioned to be successful now and well into the future.

“We’re embracing the challenges and creating a model that changes the way health care is delivered. Guaranteed access to
UW Health, great customer service and innovative wellness solutions are all things our members can count on from us,” he says.

Consider Stocks

There are insurance products everyone needs—health, home, life insurance if you have dependents—but when you look at investment-type insurance products, such as annuities, it gets more complicated. These days, some people are gravitating to insurance products as lower-risk investments with guaranteed payouts.

“Under certain circumstances insurance products can be helpful, at other times, not,” says Marilyn Holt-Smith, owner and president of Holt-Smith Advisors. “There are many professionals available to help you evaluate your individual situation and decide what investment instruments make sense for you. But as with any investment professional, make sure you understand how they’re getting paid and whether they haMarilyn Holt-Smithve fiduciary responsibility [to act in your best interests].”

As with insurance plans, there’s no one-size-fits-all investment portfolio. In volatile times or anytime, the appropriate positioning strategy for portfolios depends on your individual tolerance for risk, your assets and your personal goals, Holt-Smith indicates. “In times like the summer of 2011, it’s very important investors understand themselves and how they feel about their portfolio asset values fluctuating. The markets are adjusting to news on a daily basis, but that doesn’t mean you should change your investment strategy daily.”

“Long term investors should get excited about stock market volatility as it creates interesting opportunities,” she continues. “It means they can buy stocks at cheaper prices. With the recent stock market pullbacks and the low-interest-rate environment, investors should be considering stocks relative to other choices.”

Instead she’s seeing the opposite. “According to recent data, many people are pulling out of stock mutual funds and going into bond mutual funds,” she says. “Currently, ten-year Treasury bonds are yielding about 2.1 percent. Inflation increased 3.6 percent over the past year. If that rate continues, bond investors will suffer significant losses in terms of purchasing power.

“You can buy dividend-paying stocks and earn more from the dividends than from a ten-year Treasury,” she adds. “Stocks have gotten so cheap that for many investors they’re a better deal than bonds. ”

The stock market is full of bargains for long-term investors, and people have to decide if they’re better suited to be long- or short-term investors. “If they’re not the type of person who’s tuned into the market, constantly watching the daily, weekly and monthly trends, then they should be long-term investors,” says Holt-Smith. “They should buy quality companies with steady, long-term earnings growth and attractive dividends.”

Investors have to do their homework to ensure they buy stocks from good companies—those with solid fundamentals and strong earnings potential. “If you’re not comfortable monitoring or don’t have time to watch the financial markets and companies you’ve invested in, work with a professional who does,” Holt-Smith suggests.

Her firm keeps watch full time. “We’re very selective about the types of stocks we buy,” she explains. “When you’re in a stock market index fund (like the S&P 500), you basically buy all the companies, good, bad or mediocre, that make up that index. However, if you want to do better than the index, you cherry-pick to own only the companies with the best characteristics. We expect companies with better characteristics to do better than the market index over time.”

Holt-Smith Advisors manages three in-house equity strategies that cover large cap growth, large cap value and mid cap growth. They screen companies based on various factors, including expected revenue and earnings growth, price/earnings ratio, and PEG ratio (price/earnings to growth), dividend yield, as well as industry characteristics and strong management teams.

“For each company we develop a thesis statement about why we’d want to own the company—the business’s strengths and risks. We set disciplined target prices that establish our upside expectations. If the company doesn’t fundamentally perform as we expected in our thesis statement, it’s a candidate for sale,” Holt-Smith says.

Her team combines its in-house stock-picking skills with a variety of exchange traded funds. “With the volatility in the market, it’s important to have a reasonable level of diversification,” Holt-Smith notes. “And you should always have enough emergency cash that you don't have to pull money out of your stock portfolio during bad times. It’s long-term money, not money to be spent in the next year.”

— Judy Dahl

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