We’re hearing a lot about “cost plus” or “Medicare-based” reimbursements for providers under various insurance plans.
Sierra-Berkshire Associates, Inc., is a Reno based actuarial consulting firm for insurance carriers, Physician Hospital Organizations, Independent Practice Associations, Plan Sponsors, TPA’s and marketing organizations. One aspect of their work is designing group health insurance plans for insurance carriers.
In 2005, well before the market began to move away from managed care contracts, Sierra-Berkshire designed a program to approximate Medicare coverage features, employing an approach to medical expense treatment that already had wide acceptance by consumers and by the medical community. After all, most hospitals and doctors accept Medicare patients and almost never balance bill. So if a provider is happy to accept Medicare and the fees paid to them, they should be quite satisfied with the plan Sierra-Berkshire designed.
Attached is the Business Plan for the product developed by Sierra-Berkshire in 2005. Apparently the concept did not fly with the carrier/s and the product was never marketed.
One of the principals of Sierra-Bershire writes: “We were too visionary in 2005 . . . no carriers were interested in our concept. Funny how stupid ideas become smart as wisdom is gained from the suffering of pain.”
Editor’s Note: The ComparaMed Care Plan would sell today, fully insured or self-funded. If almost all hospitals and doctors accept Medicare and don’t balance bill patients, why should they object to a Medicare Look-Alike Plan that provides the same exact benefits with the same exact reimbursement rates? “Hey doc, since you take Medicare patients, accept assignment of benefits, and dont balance bill, you should have no problem with my insurance either.”
In a nutshell, a private insurance exchange is an online marketing tool. You may look up rates, but underwriting will ultimately determine what the real rates are going to be. Don’t get too excited about these exchanges – you already experienced a similar version over the years, it’s called a spreadsheet. But, as you will see in the commentary below, some get quite excited about the ability to purchase insurance in the privacy of their homes without a pesky salesman breathing down their neck.
It stared in the early 1990’s when a mid-west third party administrator started paying a client’s medical bills using Medicare as a pricing benchmark. Over time more clients did the same. Through trial and error this TPA became very good at paying claims using benchmarks instead of relying on managed care contracts that typically rely on negotiating charged based fees. (Negotiating charge based rates is the same as negotiating for a new automobile off the sticker price.)
Their clients have enjoyed significant savings and continue to do so.
Short term medical policies have traditionally been doing the same for years as have most dental plans.
Cost Plus Insurance is gaining momentum with Group & Pension Administrators leading the charge. Since 2007, GPA has successfully managed their clients health care costs using this approach, saving 40% or more in real claim dollars, much to the displeasure of the last four remaining health carriers in the state. Over 100 Texas employers, to date, have adopted the Cost Plus model.
Competing TPA’s, taking note of GPA’s success, are entering the market with variations/hybrids of the Cost Plus program.
It is apparent – getting away from managed care makes economic sense.
Editor’s Note: In-network charges are more than out-of-network charges? How can that be possible?
An implied contract is a contract agreed by non-verbal conduct, rather by explicit words. As defined by the United States Supreme Court, it is “an agreement ‘implied in fact’ as “founded upon the meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.”
Although the parties may not have exchanged words of agreement, their actions may indicate that an agreement existed anyway.
For example, when a patient goes to a doctor’s appointment, his actions indicate he intends to receive treatment in exchange for paying a reasonable/fair doctor’s fees. Likewise, by seeing the patient, the doctor’s actions indicate he intends to treat the patient in exchange for payment of the bill.
Editor’s Note: Almost no one ever pays a hospital’s full charge. Managed care contracts routinely pay much less than Charge Master rates. So does Medicare and Medicaid. Under an Implied In Fact Contract, the premise of consideration is based on fair and reasonable reimbursement. Thus is the foundation of Cost Plus Insurance (www.costplusinsurance.com )
Health plans, struggling to hold down costs, have finally given up, switching from U&C to a methodology based on Medicare’s RBRVS system, albeit one paying at 150% – 250% of Medicare – again for out of network care.
In a study released Thursday, the Cambridge, Mass.-based WCRI said California’s medical costs per workers comp claim increased 8% per year from 2005 to 2009.
What will life be like after ObamaCare is quashed by the Supreme Court? Will business as usual take hold with health insurance brokers resurrected from the dead and new carriers eagerly entering the market for quick and easy profits? Will government finally “back off” and let the market correct itself?
Lt. Col. Rusteberg, May 1944, London
West Point 1934
Two Silver Stars, One Bronze Star, Presidential Unit Citation (Battle of Hatten), Purple Heart. American hero.
The President of the United States of America, authorized by Act of Congress July 9, 1918, takes pleasure in presenting the Silver Star to Lieutenant Colonel (Infantry) Edwin Rusteberg (ASN: 0-19542), United States Army, for gallantry in action while serving with Headquarters, 1st Battalion, 242d Infantry Regiment, 42d Infantry Division, in action on 9 January 1945 at Hatten, France. As Commanding Officer of the First Battalion, 242d Infantry Regiment, during the action at Hatten, France, Colonel Rusteberg planned and executed the defense of that area with outstanding success. In spite of point blank fire from enemy tanks supported by Infantry that raked his positions with fire, Colonel Rusteberg by personal example held his troops in position and withstood the enemy attack. Fighting side by side with his men in the face of overwhelming odds without mechanized or artillery support, Colonel Rusteberg by his courageous leadership, tenacity and devotion to duty played a major role in the successful defense of the town of Hatten.
General Orders: Headquarters, 42d Infantry Division, General Orders No. 131 (1945)
Action Date: 9-Jan-45 Service: Army Rank: Lieutenant Colonel Company: Headquarters Battalion: 1st Battalion Regiment: 242d Infantry Regiment Division: 42d Infantry Division
Editor’s Note: The Hero at the Battle of Hatten was Vito Bertoldo. I tracked down his son who lives in California. His son served two tours in Vietnam as a Marine. He is a retired California State Highway patrolman.
Col. Rusteberg, years after his retirment from the Army, related a story about Vito. On the voyage across the Atlantic to North Africa, word came up from the ranks that one of the cooks, Vito Bertoldo, wanted to become a rifleman. Seems he was not getting along with his fellow cooks and wanted a transfer. Request granted. Little did Vito’s superiors know that Vito would go on to win the Congressional Medal of Honor during the Battle of the Bulge.
The U.S. Supreme Court is expected to hand down its opinion regarding the individual mandate contained in the Patient Protection and Affordable Care Act. Their ruling on the constitutionality of requiring every American to purchase health insurance may affect how health reform moves forward.
But one thing the ruling will not significantly alter, in all likelihood, is the development of state-run health insurance exchanges.
Here are five things to know about state-run health insurance exchanges.
Editor’s Note: Private health insurance exchanges will compete with government sponsored exchanges.
Editor’s Note: Health care upon demand is viewed by many as an entitlement funded with other people’s money
Insurers are facing high costs for many common medical services because doctors, hospitals and drugmakers are raising prices faster than inflation, according to a new report released Monday from the Health Care Cost Institute (HCCI).
Health care data could fill 60 million of these
Think of it as a health policy wonk’s dream: Football stadium after football stadium packed to the brim with…health insurance claims data.
I’ve been waiting to hear from Governor Patrick on one of the most controversial health care cost control issues on Beacon Hill: what to do about hospitals that charge three, four or five times more for an MRI (and hundreds of other services) with little or no difference in quality.
Two reports from Attorney General Martha Coakley and at least two from the Governor’s administration (the latest here) say that inflated prices based on the market clout of major teaching hospitals are a major factor driving health care costs in Massachusetts.
Now we have some insight into the Governor’s position on this dicey problem. During a Greater Boston Chamber of Commerce breakfast Tuesday, the Governor was asked whether he wants a provision in the final health care costs bills from the House and Senate that would deal with what’s often called “price disparities” among hospitals? The Governor framed the problem as one of “market clout” and said dealing with the market clout of top Boston hospitals is in the hands of AG Coakley.
The AG, said Patrick, “has tools today to address these imbalances and we have to look to her office to use those tools.”
I called Patrick’s office to clarify. What “tools?” An aide says the Governor was referring, loosely, to the AG’s ability to file anti-trust charges against hospitals.
Does the AG agree that she could use anti-trust law to fight market clout in Massachusetts and close the price gap that she says is driving up health care costs?
Here’s the statement I received from Coakley’s spokesman, Brad Puffer:
“The Governor, the Legislature, and our office all agree that there are important market dynamics that should be addressed through greater transparency and appropriate oversight. While it is true that our office has law enforcement tools at our disposal, law enforcement is just one of many mechanisms that must be used to ensure a competitive marketplace. There are many actions that may not rise to the level of an anti-trust violation, for instance, but that still may not be in the best interest of a healthy market. We believe a better mechanism should be in place – one that better tracks data about market consolidation to identify problems early and then is able to act on that data short of involvement by law enforcement.”
Coakley has said in the past that the state needs something more precise than anti-trust laws to close the gap between what hospitals with a lot of market clout and those with little or no clout charge in Massachusetts. She offered the legislature a remedy during a speech last November to the Massachusetts Association of Health Plans.
Starting in 2015, if the market has not corrected unwarranted price variation, the administration should be able to reject health plan contracts with excessive or inadequate provider price variations.
Health plans should be prohibited from paying provider rates that differ beyond a certain band. One example would be 20% above or 20% below the plan’s average price for the previous year.
The Senate rejected this idea altogether. The House has a 10% surcharge on hospitals whose prices are 20% above the median price for services. I haven’t seen a firm list of hospitals that would have to pay this surcharge, but I’m told that Massachusetts General, Brigham and Women’s, Dana-Farber and Children’s Hospital are among those that would have to pay the tax unless they could prove that their quality or the unique value of the service justified their higher price.
There’s a lot of concern on Beacon Hill about government taking a heavy handed approach to controlling health care costs. But many health care leaders say that if one of the main drivers is the prices that brand name hospitals can and do demand, the state has to do something to limit what these hospitals can charge if it hopes to contain health care costs.
Martha Bebinger covers health care and other general assignments for WBUR. She was a Nieman Fellow at Harvard University, class of 2010. View all posts by Martha Bebinger →
Editor’s Note: Unbundling components of a self-funded health plan makes sense, and saves money. Unfortunately many TPA’s have “veto” power over selection of subcontractors. This kind of TPA control may affect the financial health of the Plan Sponsor as well as fiduciary duties.
From A South Texas Insurance Consultant: Damn, why did we not think of this approach????
From A Midwestern Insurance Consultant: Whoa! What a friggin genius!
While cost increases for families enrolled in employer-sponsored preferred provider organizations have slowed since 2010, average total costs per family still hit an all-time high, according to a report released Tuesday by Seattle-based Milliman Inc.
“I received your balance due notice indicating I owe $[Amount Due] on the account. Please be advised that I do not believe the charges to be a reasonable price for the services rendered.”
If you are a political subdivision and need the expertise of a qualified insurance consultant but you just don’t have the time or patience to seek a competitive RFQ, then Edinburg Independent School District may well have done the work for you.
The Edinburg Independent School District is currently in the process of selecting an insurance consultant to assist the district in their insurance needs. Ten (10) insurance consulting firms are competing for the business.
The vetting process appears to be over and the district has now ranked the contenders as follows: https://v3.boardbook.org/Public/PublicItemDownload.aspx?ik=32420281
The Brownsville Independent School District is also considering hiring an insurance consultant ( http://blog.riskmanagers.us/?p=7913 ) will the same consultants vie for the business? If so, will they be ranked the same?
Since the services of an insurance consultant are professional services exempt from state bidding requirements, some consultants do not participate in public bids as a matter of design. Submissions become part of the public record and can provide usefull data to competitors. And, if your ranked poorly you forever bear a Scarlet Letter.
Editor’s Note: Many of these contenders compete for business against each other throughout Texas. While one school district may rank a contender #1, another district will rank the same contender #2, or 3, or 4, etc. Does this prove that consultants are ever changing from good to bad, from bad to good, or good to better depending on the position of the Sun, Moon and stars?
Attendees will learn industry secrets that others in the managed care industry are afraid to tell you. You will learn how other Texas employers have reduced their health care costs by 40% or more while improving benefits at the same time. You will learn unique riskmanagement techniques that are proven and quantifiable. You will become empowered.
If a medical provider, such as a hospital, won’t publish their charges or even tell a prospective patient what an upcoming visit will cost them, why then should a patient tell them what they are willing to pay for the services rendered?
In essence, the hospital is saying to the patient, I won’t let you see my prices but I want to see your checkbook (proof of insurance) before we do business.
So you show your checkbook (proof of insurance) to the admissions clerk. You also sign a document allowing your bank (insurance company) to send payment direct to the hospital once a claim (demand) is filed. A section of the document states that whatever your bank (insurance company) does not pay, you are responsible for any unpaid balance.
Unknowing to the clueless insurance clerk, you have not told them how much is in your checking account – you only showed them that you have one. That’s fair, because after all the insurance clerk did not disclose what the visit would cost, so why should you disclose how much is in your checking account! Fair is fair as they say in Buffalo Breath, Montana.
By entering into an Assignment of Benefits, the hospital has legally “stepped into the shoes” of the Plan Document (PD). The PD governs how claims are to be paid, upon what basis and parameters stiplated therein. It also outlines, as required under ERISA, an appeals process for providers to follow should all or part of their demand is denied.
The hospital files a demand for $250,000 to your checking account. The bank president writes a check off your account for $50,000 and sends it to the hospital. That was all the money availble to be paid on this claim, no more and no less.
Unfortunately, the hospital is not happy and demands that the you pay the balance, or $200,000. But, since they accepted assignment of the claim, the Plan Document became the undesputed rule book. What now?
One of the rules requires the hospital to file an appeal, or a series of appeals to recoup moneys denied by the payer (the payer is now the insurance policy, not the patient).
The patient, through the Assignment of Benefits, has effectively established a contract with the provider.
Fortunately for the hospial, under ERISA, providers have 60 days to appeal. Failure to appeal a denial within the 60 day period can result in the forfeiture of a provider’s right to reimbursement or even access to court. A provider may have to complete two or more levels of appeals before they can file a lawsuit in federal court to pursue their legal right to reimbursement.
With Cost Plus and Medicare based reimbursment plans growing in the market, the phenomenon of balance billing is playing hard on the minds of human resource directors. HR directors fear balance billing as much as Superman’s adversion to Krytonite. But an assignment of benefits, in the view of some legal experts, is consideration in full, leaving balance billing issues mute.
Statistics show that under Cost Plus Plans and Medicare Based Reimbursment Plans, only 7% of providers ever file an appeal. That means 93% have effectively given up their legal remedies under ERISA to recoup denied revenue.
If Assignment of Benefits were not in play, then the insured would be the recipient of eligible claim dollars. Imagine Joe Sixpack receiving the $50,000 check. He could then negotiate with the hospital – “I’ll give you $40,000 for payment in full or nothing at all buddy. Your charges are outrageous!”
Isn’t this how automobile insurance works? You get a check from the insurance company, then go out to shop for the most competitive repair shop in town? You may even pocket some easy cash along the way.
From a Texas provider:
– Great points, Bill. If prices aren’t openly discussed, they will only increase
“At some point in time health care is going to so dominate commerce and so dominate costs in the United States, so dominate our economy it’s going to cause our economy to collapse. What we’ve gone through in the last couple of years is going to be nothing compared to what we will go through when health care is 25 to 30 percent of every dollar spent in the United States. And that’s only going to be in the next 10 to 15 years.”
Under an Assignment of Benefits, the patient and provider have dictated the terms of their own contract.
“There’s no incentive for the sticker price to approach the “real” price because there is no real price.”
Written by Jeanne Pinder •Published on February 24, 2012
“……..I think we should turn XXXXXXXXX over to the District Attorney’s office to be prosecuted for price gouging. I’m pretty sure that’s a criminal offense…………..”
CVS Chief Executive Larry Merlo told Reuters that the boost from his rivals’ fallout could be long lasting.
The power of a Plan Document under an Assignment of Benefits – Farmers-Home-Furniture-Order