Nonprofit health insurers feel the heat

  • Article by: JILL BURCUM , Star Tribune
  • Updated: April 3, 2011 - 9:28 AM

Some of it is coming from an 'extremely bright' but 'eccentric' ex-industry insider.

David Feinwachs is a whistleblower on the health insurance industry in Minnesota.

David Feinwachs is a whistleblower on the health insurance industry in Minnesota.

Photo: Elizabeth Flores, Star Tribune

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Minnesota's nonprofit health insurers are one of the state's most powerful lobbies.

Right now, a recently fired St. Paul attorney and his Internet video are key reasons they're playing unprecedented public policy defense.

David Feinwachs is a wonky, 60-year-old former attorney for the Minnesota Hospital Association (MHA).

His low-tech video raises pointed questions about the nonprofits' profits from public health programs (yes, nonprofits earn profits).

Those video queries, not to mention the free time this longtime lobbyist can now spend at the State Capitol, are causing serious headaches this year for Minnesota's main health plans -- Medica, HealthPartners, Blue Cross Blue Shield and UCare.

Feinwachs is also suing the Minnesota Council of Health Plans in a defamation case stemming from his termination by the MHA last fall.

Feinwachs, who is quietly being cheered on by many Minnesota providers and hospitals, has spurred bipartisan legislative scrutiny of the plans and helped set the stage for promising policy changes.

Gov. Mark Dayton recently called on plans to give back to the state some of the surpluses their profits have allowed them to build up. So far, only UCare has made a "donation" of $30 million.

Dayton also recently unveiled reforms aimed at the insurers, which are paid by the state to manage health programs that provide medical care to more than 500,000 poor, disabled and elderly Minnesotans.

This outsourced care management is a $3 billion-a-year business here. Among the changes: deeper auditing of plan expenses and a more competitive contracting system.

Both are key issues highlighted in Feinwachs' video, which was made last fall in a Bloomington conference room on his own time in coordination with the Minnesota Provider Coalition.

While Dayton's office said last week that Feinwachs had not been contacted or consulted, former Minnesota Attorney General Mike Hatch said the public pressure on the plans generated by Feinwachs shouldn't be underestimated.

"Let's put it this way, you don't want to have David Feinwachs on your ass,'' Hatch said. "He's very good. He's extremely bright. He is an advocate.''

Feinwachs is generally well-regarded by health care insiders, particularly for his work on the state's pioneering law regulating hospitals' reporting of "adverse events."

But some also say that Feinwachs is eccentric, sometimes confrontational and unwilling to admit that there's anything good about managed care.

Just about everybody I interviewed asked: "You know he's into guns, right?"

Feinwachs says he's a gun collector and that his father, a Nazi death camp survivor, said it's a good idea for Jewish boys to carry one.

An advocate for single-payer health care, Feinwachs makes no apologies for his guns or his opinions. The video and the lobbying, he said, are "a mission of education.''

To those who want to prove him wrong or crazy, his message is: Bring it on. Just bring along the data to do so.

The MHA has declined to comment on Feinwachs' termination. The Council of Health Plans, citing the lawsuit, declined to comment on Feinwachs personally.

The plans, however, contend that they disclose reams of information already, that public program margins vary annually and that cumulative earnings on these programs are thin.

They say their surpluses are of an appropriate size to assure financial strength and the ability to fund care whatever the condition of the economy or the state budget.

But in 2009, the state health program business was lucrative. The plans averaged a 4.1 percent margin, compared with 1.6 percent for their commercial insurance policies, according to a Star Tribune analysis.

Data for 2010 released Friday showed the plans' operating margin was 3.84 percent of revenue -- or $130.8 million -- on state public programs. The plans said their 10-year average operating margin is 1.77 percent of revenue.

"We continue to welcome an independent analysis that will demonstrate the value health plans bring to Minnesota and individuals served by public health care programs,'' the Council of Plans said in a statement last week.

The recent profitability of these contracts, combined with the state budget deficit, means Feinwachs could not have picked a better time to push to open the health plans' books and figure out if the state is paying them too much.

He contends that the state does not have enough data and questions whether Dayton's reforms go far enough. Feinwachs also wants to know why plans want to continue managing state health programs if their average margin is so thin.

Jargon and dense concepts make Feinwachs' video and message hard to understand. My initial reaction was that this was straight out of the "The X Files,'' the TV show about out-there conspiracies.

But anyone who watches the 31-minute video will conclude that he's asking provocative questions without easy answers.

Stephen Parente, a University of Minnesota finance professor and health policy expert, has seen the video. While he's uncertain that Feinwachs is going about his crusade in the best way, Parente said that more transparency and deeper auditing of plans in Minnesota and elsewhere are needed.

Detractors certainly can't question Feinwachs' credentials. He served as an MHA attorney for nearly 30 years. He also holds a Ph.D. in health services administration as well as two master's degrees and teaches at the U.

Organizations that have expressed support for Feinwachs' transparency crusade include the Minnesota Medical Association, the Minnesota Nurses Association and the Minnesota Association of Professional Employees.

At a time when benefits are being cut for the state's most vulnerable, Feinwachs' call to look everywhere for efficiencies first is one that ought to be heeded by guardians of the public purse.

* * *

Jill Burcum is a Star Tribune editorial board member and editorial writer. Follow her on Twitter @jburcum.

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