Day: August 21, 2012

San Benito ISD Embarks Upon On Bold Experiment

The San Benito Independent School District is seeking proposals for TPA services to administer an alternate plan of benefits utilizing direct provider contracts. The intention is to offer this plan as an alternative option to their existing Blue Cross PPO plan.  To that end, San Benito ISD will, in effect,  have two plan administrators, Blue Cross and a yet to be named TPA.

We know of no school district in Texas that offers separate health insurance plans using different plan administrators. We suspect that the purpose of doing so revolve around access to  PPO negotiated rates.

Blue Cross maintains their own proprietary provider network, available only to their customers. As far as we know, Blue Cross does not rent out their network to competitiors, at least not at this time. Their biggest selling point, often rehearsed by salaried sales representatives in competitive situations, is their purported “deep provider discounts that no other competitor can touch”

Unfortunately, it is nearly impossible to prove Blue Cross’s claim of superior discounts in the aggregate. Conversely, on a case by case basis, it is easy to prove that the opposite is true. Thus is the world of secretive and manlipulative PPO contracting.

Based upon the San Benito RFP seeking TPA services to administer the district’s direct provider contracts, two conclusions are forthcoming: (1). San Benito ISD has determined that their direct contracts are better than those contracts BCBS has negotiated and (2). San Benito ISD can control health care costs by aggressive steerage through their on-site clinic referrals.

The RFP indicates lower costs and better benefits for those employees who select the Alternate plan, “Managed Care Plan”  (See San Benito Health Benefits ).  This can only be calculated through empiricle data. An actuarial study (by a licensed, independent actuary) would be well advised although we have no information whether such an exercise was performed in this instance.  Nevertheless, our assumption must be that San Benito ISD has performed their due delligence to determine the cost basis and risk involved in formulating this alternate set of benefits, taking into account provider discount differentials between BCBS and the district’s negotiated rates, as well as the impact of the on-site clinic and controlled referrals.

San Benito ISD is not the first South Texas school district to move away from third party negotiated provider contracts.  The Rio Hondo and La Feria Independent School Districts cancelled their PPO agreements in 2011 and instead negotiated direct contracts with willing area providers. Over 400 local physicians have agreed to their pricing model for example. Plan savings have proven significant.

Numerous examples of provider savings realized by Rio Hondo and La Feria ISD, include MRI’s for $300 instead of $2,500 or more through various PPO contracts. Hospital contract/s based on Medicare RBRVS as a benchmark in lieu of discounts off arbitrary, inflated billed charges.

Other South Texas school districts should take note. Rio Hondo, La Feria, and now San Benito school districts are taking a proactive approach to reigning in their health care costs using proven and prudent business practices.

Editor’s Note: The key to the San Benito business plan is their on-site medical clinic. Direct contracting in conjunction with on-site medical care is a powerful weapon in controlling runaway medical costs.  We applaud San Benito ISD for their efforts.

From a Mid-West Insurance Consultant:

Bill, Just so you know, BCBS does allow some TPAs to pay claims that use their networks. This happens with labor unions. However, the Blues re-price the claims and the TPA pays the re-priced claims without ever seeing the billed charges. They make sure no one knows the real discounts.