Day: December 17, 2008

Broker Strategy Exposed – Are Employers Stupid?

Below is a redacted email received yesterday from a TPA that exposes the methods utilized by some brokers to justify moving from a TPA to a national carrier because of “superior PPO discounts.”:

Here is a group that left a TPA and went to XXXX XXXXX on “promised discounts”.    The current broker was actually trying to show on this year’s renewal, that XX was a good choice.  Let’s really look at the big picture.  The Fixed costs were about the same at $38.00 PEPM.  What made the fixed costs look better was the supposed rebates on the Rx that got the fixed costs to “look” lower.  If you look at the claims cost for Rx it actually went up 4% but 2008 was an immature year.  By maturing this number up 20% the Rx cost actually went up 24% which is double trend.  What we also found out was this group has a lot of employees outside of Texas so the % of savings XXXX XXXXXX  charged is so far at $156,000 this year.  That is an increase of 25% to the fixed costs.  I guess somebody forgot to tell the client about this fee. 

Now the current broker showed a 4% decrease to the claims cost.  But wait 2008 is an immature year, therefore add 20% to this figure and you get a 16% increase in the claims cost.  The group was sold on an increase in PPO discounts which they probably got but the Medical claims went up along with the Rx claims and an increase in the fixed costs.   The renewal for 2009 on the aggregate is about an 80% increase! 

I have seen a couple of supposed studies from brokers who showed moving to a national carrier saved the group money.  Most of the time it is on a Powerpoint and the details are left out.  We need everyone to start looking at claims data because PPO discounts can be manipulated to be whatever you want.  We will be starting a website to post the PPO discount games along with studies like this and other data.  We need to share all of our findings because the national carriers have to back up their promises and it is not panning out.  We has taken over $40 million in claims from the national carriers and we have brought down the claims cost on average of 7% matured.   Data does not lie!

Editors Note:  We are in the process of gathering claim data from various groups that went from rental PPO networks to national carrier networks to determine actual claim costs under both scenarios. So far we find that the purported deep discounts to be realized through national carrier’s PPO networks  as compared to rental networks are not significanly different. Once we complete this documention, we will share it with those who may be interested in learning the truth about PPO discounts.