Archive for April, 2012

Hospital Sticker Pricing Versus Reality

Sunday, April 29th, 2012

How does a hospital’s billed charge compare to what they actually receive from various payers? Is there a public data base that provides this information? Perhaps a visit to would be productive in your search for the truth.

We keyed in on Valley Baptist Hospital in Harlingen, Texas to check statistics posted on this website. We have no idea if the information is accurate, but let’s assume it is.

The payer mix at Valley Baptist is 45% Medicare, 25% Medicaid and 30% “Other”.

Most of us have been conditioned to believe that hospitals lose money on Medicare and Medicaid patients. Therefore, we are told, private payers, in this case we assume that to be the “Other” class of payers, pay more than other patients. While the former may not be true in all cases, the later is certainly borne out in the numbers here.

According to this website, all payers in the aggregate pay 72% off billed charges. Medicare patients pay 77% off billed charges while Medicaid patients pay 85% off billed charges, specific to Valley Baptist Hospital. That must then be true that “Other” payers pay a lower percent off billed charges, i.e., pay more than do government health plans. If you have a mathematical background, it is easy to come up with the average % off billed for “Other” payers.

How does this compare to Cost Plus Insurance? ( ) Cost Plus payment methodology is based on the greater of Cost Plus 12% margin or Medicare +20%. Under  Cost Plus statistics show the percentage off billed charges ranges from 70% to as high as 88%, sometimes more.

Hospitals do not lose money on Cost Plus reimbursement formula. They make a 12% margin.

This is useful information and is illustrative of hospital billing practices in comparision to what payers actually pay.

Thus, the fallacy of PPO discounts is exposed.


Editor’s Note: Proponents and supporters of the 50% Club now look like patsies – Molly Mulebriar, in a rare press release issued this morning, announced the formation of The 70% Club. She welcomes  and encourages 50% Club members to join. Membership is free and the savings are greater.

Comparison Shopping For Medical Care Exposes Systemic Chaos In American Health Care

Saturday, April 28th, 2012

What do hospitals charge to remove an appendix? The startling answer is that it could be the same as the price of a refrigerator — or a house.


Why Does Employee Jones Get More Than Employee Smith?

Tuesday, April 24th, 2012

Why would an employer who sponsors an employee welfare plan want to pay more for Employee Jones and less for Employee Smith? Yet, that is exactly what is happening in this convoluted health care system we have these days.

Employer sponsored group health insurance plans  today covers every doctor and every facility that employees have ready access to through extensive PPO networks, even though costs vary radically. For example, a  plan may  pay seven times as much for an MRI scan for one employee as they pay for another.

We can attest to the scan pricing differential on a personal basis. Last year we had a scan in Harlingen, Texas at a free standing MRI center – our PPO allowed amount was about $1,800. This year we had the same procedure at another free standing center in San Benito, Texas (4 miles away) and the PPO allowed was $300. Same PPO network, different providers with different PPO negotiated rates.

Should not all participants in a group health plan be treated equally?

Editor’s Note: This is why many of  our clients are moving away from PPO networks and paying providers a fair and reasonable rate for services. And, these Plan Sponsors pay the lowest market driven prices. If an MRI can be done for $300, and that is the best and lowest pricing available in the locality, then that is what the plan will allow no matter where Employee Jones or Smith seek treatment. If Jones goes to Harlingen for his MRI, the plan pays $300 and Jones pays the difference, $1,500.

Proposed Health Care Reimbursement Model


A Group Medical Plan Without A PPO & No Balance Billing Issues?

Monday, April 23rd, 2012

“Provider Freedom health plans allow you the full choice of health care providers without restrictions or penalties. There are no preferred providers or networks required. See the provider you choose!”

“You still receive the value of PPO-like discounts for all medical services. These discounts are arranged on your behalf directly with the provider of your choice to gain the highest level of discounts possible.”

“If there is a disagreement between your plan and a provider on the fee for a service, we will negotiate directly for you to ensure there is no “balance bill” to you for discounts taken. The only out-of-pocket expenses are normal deductibles and coinsurance. ”

Editor’s Note: This trend is growing. Many of our clients dropped their PPO networks several years ago and have since enjoyed significant savings.  For more information on how claims are negotiated and how balance billing issues  are resolved, write

Blue Cross Culls Network? Employers Customize Health Plans – An SBPPO?

Monday, April 23rd, 2012

 “The old model is not working,” BlueCross CEO Alphonso O’Neil-White said Wednesday .

BlueCross BlueShield of Western New York is teaming up with the region’s largest provider system to offer self-insured
employers with new tailored networks, in hopes of providing more efficient care that decreases costs.

The BlueCross and Kaleida Health initiative, which officials said is the region’s first integrated network of its kind, lets employers customize health plans, tailoring the doctors and hospitals covered under the plan, reported Business First.

“The old model is not working,” BlueCross CEO Alphonso O’Neil-White said Wednesday . “This is not the standard model where a health plan creates a product and throws it out there to the market.” See

BlueCross and Kaleida Health both admitted that the tailored networks will limit members’ choices of doctors and hospitals, but they believe the breadth and depth of services will lead to members accepting the restrictions.Although each participating employer’s health plan will differ, they will share common goals, for example, basing medical decisions on research, avoiding
unnecessary tests and procedures, tracking, using data to evaluate performance and stressing preventive care.

The initiative also could lead to BlueCross to create new provider payment systems, such as bundled payments that help cover non-reimbursed services, the insurer said.

Employer groups could begin creating their tailored plans in June and offering them to employees Jan. 1, Business

Editor’s Note: Is this is an SBPPO? – see , ,


Blue Cross Anti-Trust Probe Expands

Monday, April 23rd, 2012

The U.S. Justice Department is widening an investigation into alleged collusion and price-fixing between Blue Cross BlueShield health plans and hospitals in several states, the Wall Street Journal reports.

The investigation is focusing on whether certain Blues plans have struck “most-favored nations” deals with hospitals that would allow the increase of premiums while potentially locking out competition. Blues plans in six states and the District of Columbia have received civil subpoenas.

“The antitrust division is investigating the possibility of anticompetitive practices … in various parts of the country,” said a Justice Department spokeswoman.

Officials with CareFirst Blue Cross Blue Shield, which operates in Washington, D.C., Virginia and Maryland, has confirmed it has been subpoenaed by the Justice Department, as has Indianapolis-based WellPoint, Inc., the nation’s largest insurer and operator of Blues plans in Ohio and Missouri.

Last October, the Justice Department filed suit against Blue Cross Blue Shield of Michigan, claiming it had entered into deals with about half of the state’s acute care hospitals, essentially giving it favorable terms while requiring it charge other health
plans up to 40 percent more for charging for the same services.

In February, it sued United Regional Health Care System in Wichita Falls, Texas, claiming it used most-favored nation contracts to maintain rates 70 percent higher than other hospitals. The system settled the suit immediately, agreeing to drop the use of such contracts.

Blues Fined $1.6 Million For Fraudulently Concealed Fees – PPO Access Fee of 13.5%?

Monday, April 23rd, 2012

A circuit court jury has ordered Blue Cross Blue Shield of Michigan to pay the city of Holland $1.6 million for wrongfully charging it excess fees as part of an employee insurance program.

An Ottawa County Circuit Court jury ruled Blue Cross “fraudulently concealed” a 13.5 percent access fee on city employee
claims. For example, City Attorney Andy Mulder said, if an employee incurred a $100 medical bill, Blue Cross would charge the city for $113.50 without disclosing the administrative markup, reported the Grand Rapids Press.

Holland officials said they didn’t know about the fee until 14 years after hiring Blue Cross to run the program, as similar cases
against the insurer and other municipalities around the state went to court, the Holland Sentinel reported.

There have been at least 30 cases filed against Blue Cross over the fees throughout Michigan. “Most of them are pending in some fashion,” whether awaiting trial or on appeal, Holland attoney Aaron Phelps said, adding that Blue Cross hasn’t won any cases, noted the Sentinel.

Blue Cross said it will appeal the verdict. Spokesperson Helen Stojic said Holland officials knew of the network access fee
up front, despite claiming they were unaware for 14 years. “Not only were these fees known, the City of Holland received substantial discounts in hospital services which resulted in millions of dollars in savings in hospital costs for Holland taxpayers,” Stojic said, according to the Grand Rapids Press.

Editor’s Note: How does a consultant spread-sheet this?

PPO’s Eye Survival Strategies

Sunday, April 22nd, 2012

Tiered or carve-out networks. They realize we are on to them. That thick telephone book of providers they have touted in the past is fast becoming an albatrose. While the first 25 years of managed care the herd was rounded up,  expanded and fed well,  now the movement is to cull.

Hospital Bill Reduced! Amazing Discount Negotiated by PPO Brings Joy To CFO

Friday, April 20th, 2012

We just received a hospital bill incurred through a self-funded employee benefit plan located in the Lower Rio Grande Valley. The total billed charges were an amazing $264,665.00. The PPO allowed was $185,265.50, a wonderful savings of 30% off billed charges. This is great!

Or is it?

What did it cost the hospital to provide the services rendered? In looking at the CMS report filed by this hospital, their costs are of course lower. The difference is called a profit margin. We dont begrudge anyone from earning a profit do we? After all, nothing is ever free despite what you may hear sometimes.

And what about Medicare allowable for this claim? About 60% of this hospital’s admissions are Medicare recipients – it is assumed that 60% of admissions should generate a profit otherwise why accept Medicare patients – there is no law that requires the hospital to accept Medicare patients is there? Surprisingly, with the low reimbursement rates Medicare is accused of by many medical practicioners, in this case the hospital is actually making money off their Medicare book of business. And of course, in this claim the Medicare reimbursement would have been less than the billed amount.

So how does the PPO allowed of $185,000 compare to what Cost + 12% margin or Medicare allowed? Don’t tell the CFO this, but  he could have saved another $100,000 plus………………..he is smiling over his 30% PPO discount so why upset his day?

Editor’s Note: Stop loss insurance paid a portion of this claim. Unfortunately, if the Plan Sponsor had employed a common sense solution to his ever increasing health care costs, he would not have had the expense of a stop loss policy. If this is the only stop loss claim on this case for this year (remains to be seen), then the fixed cost to pay a portion of this particular claim would be about $350,000. In other words, not only pay more first dollar exposure (pre-stop loss retention level), this group will have paid a total of about $500,000 on a claim whose cost was less than $60,000.

What Is A Fair Reimbursement Rate For Hospital Claims?

Thursday, April 19th, 2012

Almost all hospitals accept Medicare patients. Medicare reimburses hospitals 100% of the Medicare fee schedule. As a private payer, what do we pay for hospital care as compared to Medicare? Do we know? Do you know?

You probably have no idea what your insurance plan is paying as compared to what Medicare would have paid for your claim. You dont have the data because you have not asked for it. You should.

Is guaranteeing the hospital a profit of 12% fair? Or 50%, 80%, or 500% fair? Is Medicare + 300% fair? Or +1,000%? What is a fair price to pay for your hospital care?

If you want to know what a fair price is, try asking your local hospital administrator. Or for a direct, no holds barred answer, write

Medical Insurance VS Confrontational Medicine

Thursday, April 19th, 2012

Since the 1970’s the health insurance industry has undergone fundamental changes. Transitioning from indemnity plans to Major Medical plans in the late 70’s was a milestone.  Initially, carriers kept the indemnity platform in place but added a major medical umbrella at a very low premium. And, the major medical policy was a $250,000 umbrella priced at less than $3 pepm.

Even with major medical in place, insureds were responsible with dealing with their providers on balance billing issues. This was not a problem at the time because balance billing was extremely rare, however when it did occur it was the provider who was viewed as the “bad guy” not the insurance company. The consumer effectively had “veto power” with skin in the game.

We used to call this Medical Insurance. But times have changed.

With the advent of PPO’s and HMO’s (Managed Care), the relationship between patients and their providers fundamentally changed. Secret and proprietary contracts inserted between providers and Managed Care Organizations became the norm whereas before such contracts did not exist. Patients became third party beneficiaries of contracts to which they were not a direct party  and they unknowingly lost control of their health care costs. They lost their veto power without knowing or caring why. Lemmings we all became – God Save The King!  ( Managed Care Under Siege )

Whereas we used to call this Medical Insurance, we now call it Managed Care, or PPO plans, or HMO plans. But times are changing again.

Employers are moving away from Managed Care as evidenced by the Cost Plus revolution ( ) in Texas (now spreading to other states).  They have become aware that managed care contracts do not save money at all; the opposite is true. Managed care contracts guarantee ever increasing health care costs through escalator clauses and outlier provisions (which effectively eviserates so called discounts). See – Health Care Strategies for Texas Political Subdivisions

Going back to the old indemnity plans, employers are beginning to pay claims using Medicare pricing as a benchmark.

Some providers are fighting back, attacking the patient through balance billing skirmishes intended to put pressure on Plan Sponsors to “cave in” to the financial demands of medical providers, especially hospitals.  But savvy Plan Sponsors are standing their ground and winning.

Inserting an attorney between a medical provider and an insured on balance billing issues is effective. It is much like inserting a PPO contract between a provider and a payor, the former to the advantage of the consumer. For the first time ever, consumers are represented by the payer who adopts this approach.

Some Plan Sponsors, in lieu of  placing an attorney between the provider and consumer, and are simply positioned to negotiate each and every claim as they arise.  Providers, especially hospitals, realize that most consumers do not have the financial resources to pay enormous, inflated, arbitrary medical bills and know that ultimately they will fail in getting accounts receivable down to a lower level on such accounts. Dangling “easy”  money at  hospital CFO’s to “make this claim go away” is really effective, and much less expensive than paying claims under PPO contract agreements. “Mr CFO, you are chasing $50,000 in balance billing from Joe Sixpack. We will pay you another $10,000 if you agree to stop hasseling Joe and his family, and agree to accept this as final settlement of this outrageous, inflated bill that is equivalent to 1,200% of Medicare or 2,000% above your cost as you have reported to CMS.” A five minute phone call usually resolves these issues.

Whereas in the 1970’s we called this Medical Insurance, we now call it Confrontational Medicine.

Editor’s Note:  Credit is given to Jeff Seiler, renowned insurance consultant from the Chicago area for coining the term “Confrontational Medicine.” His website is

Employers Question Value of Health Insurance Brokers

Wednesday, April 18th, 2012

Independent  insurance agents have traditionally provided valuable services to both the clients they serve and the carriers they represent. For years the independent agency system has been the dominant distribution system of choice in a vibrant market.

A once vibrant market is now something much different.

More employers are questioning the value brokers bring and the compensation they earn. Are brokers really that necessary anymore? Is the  level of broker compensation justifiable in view of services provided?

More  brokers now negotiate their services on a fee basis rather than on commissions. Many employers like this approach as it removes conflicts of interests to a large degree. Compensation is disclosed for the first time and brokers are incentivized to earn their money more than ever.

For health insurance brokers to continue to provide a service and get paid for their efforts, they must adapt. Reliance on commissions paid by insurance companies must be exchanged for reliance of income paid directly by the clients they serve.

The independent agency system can continue to survive if opportunities are realized and seized by experienced and seasoned professionals who  are willing to adapt. Otherwise, with fewer younger entrants entering into the profession, successful health insurance brokers will be a rare breed indeed.




MAS Announces New Health Insurance Plan That Makes Sense

Sunday, April 15th, 2012

BriarRe, in a strategic partnership with Mulebriar Administrative Services (MAS), has announced a new self-funded platform for group sponsored medical insurance plans. Central to the philosophy behind the vision expounded for years by Molly Mulebriar is the assumption that health insurance is not, and never was, intended to replace core American values and tradition American business practices.

The new program has been test marketed in San Antonio with select employer groups who successfully passed the Mulebriar Character & Personality Exam. A grade of A+ was a basic pre-requisite for program entry.  Successful candidates were CFO driven as opposed to HR driven in their decision making processes. High level of risk tolerance, strong management structure, ability to think out-of-the-box, corporate flexiblity to make mid-course changes as needed, and a strong backbone are essential elements to the profile of the Mulebriar client base.

Actuarial studies indicates that health care costs reduce in excess of 40% using the Mulebriar approach to health care. Benefits are enhanced overall to gain greater credit for actuarial considerations through proprietary risk management techniques.

Health care cost transparency is essential to the model. As part of scheme, Plan members are empowered to select any provider of choice on a cash basis, using a pooling source of funds available through an  electronic interchange.

TPA administration is $25 pepm. The TPA receives no other source of revenue thereby eliminating all potential conflicts of interest. Stop Loss cover is issued on a participating contract basis through several platforms available to the Plan Sponsor.

Editor’s Note: For more information and tuition rates (waived for Tea Party Members), write .


Risk Management – A Group Effort

Sunday, April 15th, 2012

RISK MANAGEMENT, almost by definition, requires a group effort.


California To Impose Restrictions On Small Self Funded Plans

Sunday, April 15th, 2012


A bill was amended this week in the California State Legislature in way that would effectively take away the ability
of smaller employers in that state to operate self-insured group health plans by restricting access to stop-loss insurance.


Government To Impose New Fee On Health Plans

Saturday, April 14th, 2012
WASHINGTON—Proposed Internal Revenue Service regulations would resolve numerous questions employers and others have raised about a fee that is to be imposed on health care plans issued by insurers and self-funded employers.

Fear Of HIPPA Sells

Saturday, April 14th, 2012

“The HHS Office for Civil Rights (OCR) can show up at your door and ask to perform an audit on short notice, and your organization will need to be ready, or face fines of up to $50,000 per day for each regulatory provision violated.”


Eagle Pass Independent School District Seeks WC Bids

Friday, April 13th, 2012

Eagle Pass ISD to seek Workers Compensation Insurance bids for 2012-2013.  For information  call (830) 773-5181.

The Rights Of Non-Participating Providers In A Managed Care World

Friday, April 13th, 2012

Rights Of Non-Participants In A Managed Care World – Assignment of Benefits for out-of-network providers can be a minefield for providers, and insureds. Self funded health plans should carefully address these issues in their Plan Document, especially those plans that have left the managed care world entirely (Like Cost Plus Groups in Texas).

Editor’s Note: While Managed Care may be  alive and well, many payers  and  providers are questioning the value of continuing the scheme.

Cash Health Plans Save 50% In Medical Costs

Friday, April 13th, 2012

Healthcare Solution: Go Back to Cash

The expansion of health insurance and government entitlements created “free money” and thus the explosion of healthcare costs. The solution is simple and “impossible”: we all pay cash.


Humana Pharmacy Has New Offerings For Self Funded Employers

Friday, April 13th, 2012

LOUISVILLE, Ky.—Humana Pharmacy Solutions has announced two new offerings for self-insured employers, the pharmacy benefits management unit of Humana Inc. announced in a statement Thursday.The new options include the Wal-Mart Rx Network, which directs employees to fill prescriptions at the international retailer; and the Rx4Value formulary, which swaps certain name brand drugs for generic. “This is all about predictability,” said William Fleming, president of Louisville, Ky.-based Humana Pharmacy Solutions. He added that by influencing where drugs are purchased and which drugs are purchased, the new offerings give employers a guarantee of what their prescription prices will be annually. The Wal-Mart-focused network averages 10% savings on annual prescription costs, while the formulary averages 15%. If employers choose to enact both plans, the average savings increases to 20%. The program is available to self-insured employers with a minimum of 500 employees. By early 2013, Humana plans to offer similar options to fully insured employers, said Mr. Fleming.For more information about the pharmacy benefits options, call 855-605-6383.

Wednesday, April 11th, 2012

City of McAllen

From: Sandra Zamora
Phone:(956) 681-1130
Fax: (956) 681-1138

Solicitation Number: 05-12-S47-80
Solicitation Title: RFP – EMPLOYEE BENEFIT PLAN(S)
Solicitation Status: Open
Proposal Due Date: 5/10/2012 3:00:00 PM


Managed Care Organizations Face Sanctions

Wednesday, April 11th, 2012

Is Meritain Doing The Unthinkable?

Tuesday, April 10th, 2012

Is Meritain, a wholly owned subsidiary of Aetna, nuts? Are they joining the ranks of the health care revolutionaries who are fighting the good fight, exposing arbitrary and capricious health care billing by greedy health care providers?

Meritain is a national TPA worth watching.

Medicaid Dental Care Economics

Tuesday, April 10th, 2012

Let’s look at Medicaid and the economics of unneeded dental work in restrained children’s sensitive mouths performed by the lowest bidders who work really fast.


Aetna’s Health Reform Weekly Report

Tuesday, April 10th, 2012

ObamaCare Spurs Self-Funded Growth

Monday, April 9th, 2012

The self-funded group health market is growing. Major health insurance carriers are predicting that by 2014 a majority of their book of business will be self-funded. Below is an excerpt of a advertising piece sent out by a major national third party administrator:

The “rules of the game” have changed since health reform legislation. Premiums are higher and commissions are disappearing. Fortunately, there’s still a way to score stable compensation and help your clients.

Introducing Funding Advantage. This alternative funding health plan changes the rules:

– Easy and safe way to introduce alternative funding to your clients – The predictability of a level monthly cost – Stop loss insurance fully protects employers from larger claims – your client’s only risk is not receiving money back at the end of the year! – Stable and fair compensation to you.


The TPA is Allied National and the stop loss carrier is American Alternative Insurance Corporation, a Best’s A+ (Superior) rated insurance company.

Editor’s Note: See “The Future is Now” – The Future 2014 Is Now

What To Do On The Day After ObamaCare

Tuesday, April 3rd, 2012

Excellent article – medical providers will begin to compete for business and post prices – Bowser says “It’s about time – My primary care vet has been publishing prices for years now boss!”

Buying Down An Aggregate Corridor

Monday, April 2nd, 2012

Many political subdivisions self-fund their employee health plans. In fact, most do. Few fully understand self-funding and many have no clue at all why they are doing so. Elections come and go, new trustees are elected who inherit past decisions, including the decision to self-fund made years ago by informed predecessors. In the process, perception  sometimes become clouded and delusional.

“Let’s go to bid, our health costs are going through the roof!” is a familiar tune. “Our TPA is screwing us, our claims are terrible. May the low bid get the business!”

So what is “low bid” to some in regards to a self-funded group medical plan? “Why, its worst case scenario your Moron! How much will we have to budget for in a worst case scenario with large on-going catastrophic claims, that is the question!”

A wise and seasoned group sales representative preys on groups like this. Ignorance is bliss it seems. “Your decision to purchase is based on worst case scenario?” asks Johnny “The Closer” Smyth. “Ok, I will have the lowest bid, bar none, guaranteed!”

It’s all about stop loss insurance. Aggregate insurance in effect provides a group unbrella policy that caps claims for the group. The aggregate retention is usually set at 25% higher than expected claims, although sometimes an underwriter will agree to lower that to 115% or 110% of expected (rarely done). Aggregate cover is cheap because exposure is low. Aggregate cover is a poor buy, especially for larger groups.

In comes “The Closer.” Johnny finds a side carrier to buy down the aggregate corridor to 105% of expected. Since aggregrate policies are usually limited to $1 million in cover, with a 5% corridor and a $350,000 premium, some underwriters salivate at the prospect of writing this worthless coverage. But, by adding this policy to his proposal, Johnny now has a bid that is 20% “cheaper” than his competition (to heck with fixed costs, not important to uneducated trustees).

Buying down aggregate corridors is dumb. But, if the client wants to buy it, who is to say we should not sell it to them?

Kidnap & Ransom Insurance

Monday, April 2nd, 2012

Along the Texas border with Mexico, particularly in deep South Texas, kidnappings are running rampant. Few are reported to authorities.

We have heard of three kidnappings that have occurred in South Texas during the past several months. . One was a business man whose family paid $1 million for his release (he now resides in the San Antonio area), another one was a Brownsville school teacher whose husband forked over $5,000 for his wife’s release, and one was a business man with interests in Matamoros whose family is still trying to negotiate his freedom.

With Mexico in chaos, roving bands of criminals are taking advantage of quick cash to be gained by kednapping. Where else can you earn $1 million for a few hours work?

Petersen International, a Lloyds correspondent, offers Kidnap & Ransom insurance. The last time we obtained a quotation, the annual premium was about $4,000                      .


Aetna to Exit Health Insurance Market

Sunday, April 1st, 2012

Aetna to announce plans to exit the health insurance market by 2013, citing increasing government mandates. Aetna’s core strategies will focus on property & casualty lines through aquisition of Sumpter Re and other global reinsurance carriers for additional capacity. Aetna’s announcement came a day after Humana’s health insurance exit strategy was clarified in a Humana press release.