Archive for June, 2012

Supreme Court Ratifies Cost Plus Health Insurance

Friday, June 29th, 2012

The Supreme Court ratified Cost Plus Health Insurance yesterday. The era of guaranteed “Cost Plus” contracts for health insurers has begun anew. The health care law, now ruled constitutional, calls for explicit spending of 80 to 85 cents of every health care premium dollar on health care services.

With hospital stock prices spiking yesterday, it is apparent hospitals embrace the concept of Cost Plus Health Insurance. Effective 2014 hospitals are guaranteed that every patient will bring added value to their bottom line. A fundamental change in cost shifting strategies will become evident.

Insurers are ecstatic over the ruling. They will hedge their bets by inflating premium. Insurance companies know that if premium is too low,  claims  will exceed the mandated threshold allowing the  consumer to “win” while the insurance company eats the loss. But, if premium is high, insurance companies gain investment earnings before they return overage to the consumers. Nothing like working the float – it’s “free” money.

Editor’s Note: There is now no incentive for insurance companies to lower costs. The opposite is true: the higher the costs the more the carrier earns.



Five Emerging Market Trends

Tuesday, June 26th, 2012

MyHealthGuide Source: Richard A. Raup, CEO, BAC, 6/1/2012,

Trend 1.  Insurance companies are now being regulated like utility companies.
Thanks to ObamaCare (AKA The Patient Protection and Affordable Care Act of 2010(PPACA)), Medical Loss Ratio (MLR) rules insurance companies can only keep 15% (20% for small groups) of each fully insured premium dollar for overhead and profit, with the balance to be paid out in claims. If claims are less than 85% a refund is due to the customer and if claims exceed this percentage the insurer must eat the difference. So, for $85 in claims, carriers may keep $15 or 17.65% of each claim dollar. ($15 / $85 = 17.65%) 

Insurance companies used to have an incentive to reduce your claim cost as that would improve their profit, but that is no longer true.

Are insurers more likely to overcharge or undercharge knowing that if they undercharge they’ll take a loss?

How interested are insurers going to be in helping you reduce your claim costs?

Result The only way an insurer can make more money per unit (think covered member or group) is to hope that your claim costs continue to increase year over year.
Trend 2.  Providers are being squeezed to more for less.
We now have a growing physician shortage which is expected to quadruple to 95,000 fewer doctors by 2020 according to an Association of American Medical Colleges report, “Physician Shortage to Quadruple within a Decade” by Karen Cheung, for HealthLeaders Media, 1/4/2011. 

Currently almost half of our country’s medical spend comes from Medicare and Medicaid. These numbers will grow as most of the uninsured to be covered under ObamaCare will be through the Medicaid programs while Medicare will swell thanks to retiring Baby Boomers. Many physicians are reluctant to treat Medicaid patients as reimbursements are less than what it costs them to treat these patients. While Medicare reimbursements are closer to their actual costs, ObamaCare would implement a nearly 30% cut in order to help pay for the new healthcare law. The only way providers can afford to practice medicine is to overcharge the rest of us.

Providers have no choice but to raise revenues from non-government plans by:

  • Negotiating increases in their PPO contracts,
  • Seeing and treating more patients per hour/day,
  • Billing for more services and supplies such as: tests, labs, x-rays, drop in blood pressure checks, and
  • In rare cases becoming very creative in their billing and benefit coding.
Result Patients can expect longer (days not hours) wait times to be seen while the actual time with a physician will be shorter. 

All of this will lead to maladies becoming worse before finally being treated which in turn could affect optimal outcomes, and thus costs.

Trend 3.  Preferred provider organizations are losing their leverage.
Preferred Provider Organizations (PPOs) originally received discounts from network providers for directing patients to them from other non-network providers. 

Now that we have a growing shortage of physicians (supply) and an increase of covered individuals (demand), you would normally expect prices to rise until the supply and demand equate. Unfortunately, because the government controls the pricing in half of the market place (via Medicare and Medicaid), we are left with what economists call an inelastic supply and demand curve.

Therefore, expect provider charges to rise for nongovernment plans, while the growing shortage of doctors means wait times will continue to increase.

Result The value proposition for Providers and Plan to use PPOs will become less advantageous. 

Providers looking to do private only work may reach out to directly contract with plans cutting out the PPO middleman and likewise, plans may set up a fixed fee schedule allowing their members to choose any provider who is willing to accept the plan’s fee as payment in full, similar to the old scheduled fee programs of the 70′s.

Trend 4.  Agents are getting squeezed.
Historically, agents received commissions from insurance companies to sell and renew their products and services; plus significant over-rides and bonuses based upon total sales volume, renewal persistency, and profitable loss ratios. 

ObamaCare’s MLR affects agents as their compensation must come out of the insurer’s 15% and thus the insurers are reducing or eliminating their agent commission amounts.

Result Pay attention to your agent’s insurer relationship, a salesman’s behavior is greatly affected by how he is paid. 

Insist upon complete transparency and disclosure of all compensation they receive relative to your benefit plans. If you have great confidence in your agent, offer him/her a fee to represent you so that there are no conflict of interests between you and the insurers’ multi-level compensation schemes.

Trend 5.  Employers / Plan Sponsors are experiencing out-of-control cost increaes.
Employers currently cover almost 170 million Americans on their health plans. 

In addition to the cost drivers already discussed, ObamaCare has mandated many additional benefits such as: unlimited maximums, children covered to age 26, 100% wellness and preventive care, expensive independent reviews for contested claims, and 100% contraceptive care for all plans, just to name a few.

Some employers are considering dropping their health plans and paying the penalty to the Feds. But when you add the costs of the $2,000 penalty not being tax deductible and the additional matching payroll taxes on the wage increases the employees would need in order to afford coverage through the new State exchanges, it may not be cheaper to drop coverage. With the average annual cost of health care per employee at more than five times the penalty and the Federal Government running huge deficits; how long before the penalty is raised?

In a recent survey of employers by the Midwest Business Group on Health; 71% said they were not very likely or unlikely to drop coverage while only 6% responded that they were likely or very likely to drop coverage according the article, “Employers Split on Health Care Reform” by Jerry Geisel, Business Insurance, March 26, 2012.

Even if PPACA is repealed by the Supreme Court or by the new Congress next year, these major trends will continue. Will the Public demand that some of these new mandates or the elimination of pre-existing condition exclusions be continued?

Result Change your health benefits strategy and the vendors you’ve been relying upon. 

Otherwise, your health care costs will continue going up at an increasing rate and your employees will miss more and more work as they wait longer to be seen and treated by a healthcare professional.

How to Change the Trends

Ask (insist, demand) that your employees and their adult dependents quit having so many claims, especially the really big ones. This means:

  • Changing how health care is delivered and received by your employees by emphasizing earlier intervention and prevention instead of waiting until someone crashes and burns ending up in the ER.
  • Adjusting your corporate culture to encourage wellness and early intervention.
  • Updating your health plan to support and reward these initiatives.

About the Author

Richard A. (Rick) Raup founded Business Administrators & Consultants, Inc. (BAC) in 1980 and has led its growth as a full service national third party administrator with offices in Ohio, Indiana and Texas. He is active in the Society of Professional Benefit Administrators and Past Board Chairman and the Self Insurance Institute of America. Rick is a frequent speaker and author on the issues affecting health care and employee benefits.  Contact Rick at and visit

If ObamaCare Survives, Employers To Be Punished

Monday, June 25th, 2012

Best Kept Secret of Managed Care

Friday, June 22nd, 2012

“The best kept secret about managed care was that the so-called health care costs “saved” by the self-styled care managers ended up being shared with insurance administrators and their self-insured employer/clients – the sponsors and fiduciaries of their own employee’s benefit plans.”

“As we noted earlier, Preferred Healthcare’s president, Robert K Lifton, was quoted in Barrons: “the company actually has been able to save customers at least 30% of their health care costs and it splits those savings with the employers.”

“To this day, despite toady assurances to the contrary, the managed-care process has done nothing to lessen medical costs for the patient or improve the quality of healthcare delivery for the country.”

-The Managed Healthcare Industry – A Market Failure by Jack Charles Schoenholtz, MD- , page 409

TRANSLATION: Managed Care, i.e, PPO networks, do not save money. It is a complicated scheme designed to enrich third party intermediaries, funded by ignorant consumers who have no idea of the fraud brought upon them.

Editor’s Note:

We should all thank our medical providers for sharing part of our “savings” with third party intermediaries – nothing like spreading the wealth – “Hey doc, thanks for seeing me! My insurance will be crediting your account $400 for that service you charge $1,000 for. Part of the $600 savings, of course, will be coming out of your $400 to pay various parties to the scheme to defraud me and you. So your net payment, on your normal $1,000 charge will be around $200.”

Traditional Bidding of Group Health Insurance Does Not Save Money

Thursday, June 21st, 2012

Many of us bid out our group medical insurance hoping that we will save money. We bid out claim administration, stop loss cover, large case management, etc. We even bid out PPO network access.

But we have all found that this does not really save us money. We may shave a few points off our current costs temporarily, but inevitably we face cost increases month after month, year after year without ending.

Maybe we should consider a different approach to bidding competitive cover. If claims account for 80% or more of our costs, then should we not focus on claims versus insurance cover, administration fees and other incidental plan expenses?

“Well”, you may say, “We bid out PPO networks and get the best deal we can on contracted rates with medical providers. We even ask vendors to re-price claims to see which vendor has the best and steepest discounts!”

Molly Mulebriar, investigative reporterette and health care bulldog points out the problems with comparing PPO pricing:

“First, you cant see or even review a PPO contract. Next, not all providers within a network have the same contract. Plus, there are side agreements to many of these contracts that stipulate kickbacks. And, PPO contracts generally have an Evergreen Clause that give providers an automatic renewal as well as an automatic pay raise each year. So, with a PPO re-pricing exercise, 1/12th of all claims to be repriced are subject to increased costs as per the various PPO contracts in place.  Negotiated reimbursement rates are in a continuous flux. Awarding a PPO contract that you cannot adequately evaluate is tantamount to gifting a company’s treasury without accountability and violates a Plan Sponsor’s fiduciary duties.”

Plan Sponsors need to bid out provider fees directly with the provider community. Or unilaterally pay providers a fair and reasonable fee using a universal benchmark such as Medicare rates, or published Charge-to-Cost ratios. Only then will a Plan Sponsor regain control of runaway health care costs.

Editor’s Note: In essense, we have all been guilty of chasing nickle and dimes and not aiddressing the core issue of health care costs – providers continue to charge too much and we let them do it behind the protection of secretive and elusive PPO contracts arranged by biased third party intermediaries who are not our friends. Managed Care Under Siege


Assignment of Benefits Is A Double Edged Sword

Wednesday, June 20th, 2012

This is interesting. The Phia Group is a law firm that works with Plan Sponsors in a number of ways. You may be a client of theirs but dont know it. The following deals with balance billing issues and how Phia defends the Plan Sponsor and how providers and their attorneys are using the Assignment of Benefits to their advantage (or at least they think they are).


Patients Livid At Hospitals For Rewarding Cash Paying Patients With Steep Discounts

Wednesday, June 20th, 2012

Everyone knows that cash makes a huge difference in health care costs. Without blinking an eye, one can get a medical provider salivating at the thought of cash – it’s worth at least a 50% “discount” off inflated health care pricing. Members of the 50% Club can attest to that –

Employers who sponsor group health plans should consider sponsoring a Cash Health Plan instead. Not only will they save on PPO access fees and other fees such as large case management, medical review, disease management, etc, they will pay much less in actual claim costs. We suspect such a scheme would reduce a group’s health plan costs by 60% or more, without reducing benefits.


Blue Cross Tackles Expensive Hospital Bills – Leads Charge Against High Cost Hospitals

Monday, June 18th, 2012

In an attempt to reduce healthcare costs, Blue Cross Blue Shield of  Massachusetts introduced a new plan last month that chargesmembers hefty fees for seeking care at more expensive hospitals–and it has become the insurer’s fastest new  product launch ever.

The Blue Cross Hospital Choice plan  charges members, for example, an extra $1,000 for an inpatient stay or  outpatient surgery, and $450 more for an MRI at 15 higher-cost hospitals,  including Massachusetts General and Brigham and Women’s hospitals. Companies and  workers that sign up get a significant break on their health insurance premiums,  increasing by 4.5 percent for the first quarter of the yearinstead of 10 percent, the Boston Globe reports.

Other Massachusetts insurers also report brisk business  in plans that offer lower premiums in exchange for limits on use of high-cost  care. These plans either charge consumers extra for receiving  care from popular but expensive hospitals or doctors, or bar them  altogether from seeking treatment at those institutions and  practices.

Editor’s Note: We applaud Blue Cross for this “take charge” approach to health care costs. The ultimate step is to cut out the more expensive hospitals completely from their network of providers – we wonder why they dont do that. In fact, why have a network at all?  BCBS representative: “Here is our list of participating hospitals. Make sure, though, you dont go to the ones marked in red because their costs are really high.”

Blue Shield Sued For “Death Spiral’ Tactics

Monday, June 18th, 2012

Blue Shield of California has been engaging in “death spiral” tactics by pushing older and sicker members into low-benefit, high-deductible plans, according to a lawsuit filed Wednesday against the company.

Consumer Watchdog sued Blue Shield, claiming the insurer closes certain health plans to new members and then sharply increasing rates for the plans’ remaining members until they no longer can afford the prices. This practice effectively forces those members to either to pay the higher rates or switch into policies with less coverage, reported the San Jose Mercury News.

These so-called “death spiral” policies violate a 1993 California law requiring insurers that are closing a health plan to pool the members’ health histories with other members to minimize rates increases for those left in the closed plan. That law also requires that insurers offer members the option to switch to a comparable plan, according to the San Francisco Chronicle.

“Death spirals are the result of insurers behaving at their worst,” Jerry Flanagan, staff attorney for Consumer Watchdog, said at a press conference announcing the lawsuit. “Instead of providing coverage to loyal customers who have paid their premiums, Blue Shield pushes consumers into skimpier coverage or prices them out of care altogether when they are sick and need insurance the most.”

The lawsuit specifically accuses Blue Shield of closing eight policies in 2010 that placed more than 60,000 members in a “death spiral” and of planning to close an additional 23 policies on July 2, affecting more than 250,000 members, the Santa Monica Mirror reported.


Healthcare Data Is A Plan Asset Not A TPA/Carrier Asset

Saturday, June 16th, 2012

Have you ever been refused data from your own benefit program? Does this sound familiar? “Im so sorry but I can’t provide you with that data due to HIPPA, as well as our secretive agreements with managed care organizations precludes us from releasing the information you have requested. I know that it is your data, but we just cant give it to you.”

The plan’s ownership of, and entitlement to, its own data is supported and underscored by the fact that service providers specifically state in their agreements that they are not plan fiduciaries, but rather provide services that are generally considered a “ministerial” and not a “fiduciary” activity.


Christus Spohn Pays $5 Million To Settle Lawsuit Over False Claims

Friday, June 15th, 2012

CORPUS CHRISTI – Christus Spohn Health Systems Corporation has shelled out more than five million dollars to the federal government to settle a lawsuit over false claims made to Medicare.

Back in 2008, Spohn Shoreline’s case management director Cecilia Guardiola filed a lawsuit under the False Claims Act, alleging that the six Christus Spohn hospitals in the Coastal Bend were routinely billing Medicare for inpatient procedures, but only performing less serious outpatient procedures.

Medicare pays more for inpatient care when compared to outpatient. Prosecutors say many of the patients billed were out of the hospital within 24 hours.

According to the federal lawsuit filed in 2008 against Christus Spohn, Guardiola complained about the practice to hospital administrators, but was ignored.

The lawsuit reads, “Mrs. Guardiola resigned her position at Christus Shoreline in April 2007 after hospital officials and physicians repeatedly refused to follow her advice, preferring to continue defrauding government-funded health insurance programs.”

Under federal law, Guardiola is eligible to receive 20 percent of the settlement, or in this case, about a million dollars.

She now lives out of state.

Her attorney in Houston could not be reached to confirm the payment.

Christus Spohn responded to questions about the lawsuit and settlement with the following written statement:

“Christus Spohn Health System cooperated fully with the U.S. Department of Justice regarding allegations of admitting patients to inpatient status for outpatient procedures. Christus Spohn disagrees with the government’s overall characterization of this issue. We remain committed to our core value of Integrity.”

Spohn also claimed that it was responsible for catching the error through an audit, not Guardiola.

“The issue of whether patient care is inpatient or outpatient is incredibly complex. As a result we conduct regular internal audits; it is through this review process, that we uncovered the issue and began corrective action well before learning of the government’s investigation.”

“We are glad to put this issue behind us and move forward with our continued focus on providing the highest quality of care to all those we are privileged to serve.”

Click the following link to view the federal lawsuit against Christus Spohn filed in February of 2008.


Click the following link to view the terms of the settlement reached in April.


Greek Health Care System Crumbles

Friday, June 15th, 2012

ATHENS (Reuters) – Greece’s rundown state hospitals are cutting off vital drugs, limiting non-urgent operations and rationing even basic medical materials for exhausted doctors as a combination of economic crisis and political stalemate strangle health funding.


Aetna To Sell Health Insurance In Singapore

Friday, June 15th, 2012

SINGAPORE—Aetna Inc. has received a license to begin selling health insurance in Singapore, the Hartford, Conn.-based health insurer announced Wednesday.”We’re very pleased to offer our insurance products in Singapore,” said Derek Goldberg, Aetna International’s Singapore-based managing director for Southeast Asia, in a statement. “Singapore is a very attractive market for Aetna. It has a vibrant, growing economy and a large number of expatriates and local residents who may need global or regional health care coverage.” In the statement, Michael Elliott, Hong Kong-based general manager for Aetna’s Asia-Pacific region, said Aetna’s entry into Singapore demonstrates the company’s commitment to growing its business in the region. He added that Aetna also will offer technology-enabled health management services in Singapore and regionally.

An Electrical Physical? How Much Is That?

Thursday, June 14th, 2012
I have a cold. Sore throat, dry cough. Have had it for about three days now. Ive had colds before, they are not deadly and go away with time. But, having a cold is miserable and misery in and of itself is contagious to those who have to put up with your whinning. So, with the advice of my wife, I went down to the clinic this afternoon to have it treated.
Ok, what the heck is this visit going to cost? I thought. I have a high deductible health insurance plan and of course I am sensitive to costs since this visit, I knew, would be all on me, and not on the insurance company.
After checking in, sitting in the waiting room, and then led to an examining room, the cash register began to work overtime. I had asked the girl at the front desk to check to see what BCBS would allow for the office visit alone, and was told $62. Not a bad deal, below Medicare and above Medicaid, not too bad. “But sir, we may need to run some tests and those are extra”, said the nice admissions girl.
So Im sitting in this isolated room, door closed, wondering what was going to come next. In comes a nurse asking a whole lot of questions about my general health. Ok, that is fine. Then another nurse comes in later to swab my mouth and nose for testing – makes sense I thought because, after all, I was in for a cold. Then another nurse comes in and says “Sir, we need to take an xray of your sinus’s please come with me!”. Ok, that makes sense I guessed since sinus may have something to do with my throbbing head and general congestion. But as I walked down the hall to the xray room, I starting to add up the costs, or at least wondering what they were escalating to.
Back to the isolation room, in comes another nurse, clip board in hand, and she says “Sir, Im here to take you for an electical physical, please come with me!”  “Wait, what is an electrical physical!” I asked.  “It’s a physicial of your entire body, and only takes about ten minutes.”
“No, I am not doing an electrical physical, Im here for a cold and I dont need that test!”
“But sir, your Blue Cross will cover it” came her soothing reply.
“No, you dont understand, I have a $10,000 deductible and this test is going to cost ME money. I dont want to walk out of here owing you $1000 today when all I have is a damn cold!”
“Sir, I do understand. This test costs about $300. So we wont do it”.
I left the clinic paying $128.43. This included the office visit charge, xray and sinus and mouth swab test. So these procedures doubled the cost of the visit from about $62 to $128. With the electrical physical my bill would have been almost $500 for my visit to treat a common cold. I have not been to the pharmacy to pick up my antibiotic and cough syrup, so I am not too sure what my total expense will be for the day.
The point of this long winded email is to illustrate consumer behaviour when one has skin in the game. The other point is, and which I am not certain of, is at what point does the consumer know when to say “No” to additional testing.
Next time I get a cold, Im going to Matamoros, have a shot of tequila while waiting for the pharmacist to fill my $3 bottle of antibiotic or a $9 Z-Pak.

Damn, I wish you had the electrical physical so you could tell me what the hell it is and what they can tell from it. I personally prefer the two hat method to cure the common cold. Put a hat on your bedpost. Drink tequila and orange juice until you can see two hats. Go to sleep. If it still is there when you wake up, do it again

Prostate Ruling Prompts Backlash – Lucrative Market Threatened

Monday, June 11th, 2012

“I don’t know if prostate screening saves lives,” he said. “But it sure sells diapers.”


Will California TPA’s Survive? Are Self-Funded Plans Threatened Nationally?

Friday, June 8th, 2012

If California passes a new proposed stop loss insurance mandate, and it appears it will, some TPA’s within the sate will be hard pressed to survive. Their small group accounts will flee to the fully-insured market, or drop their health plans completely. Will other states follow California’s example?




23.5 Hours: What Is The Single Thing We Can Do For Our Health?

Friday, June 8th, 2012

Health Care Is A No-man’s-land – Take Advantage Of The Chaos

Friday, June 8th, 2012

Health care costs are an anomaly. Costs vary significantly from one provider to the next. PPO’s contract varying reimbursement levels with willing providers – one MRI center may contract at $300 while another five minutes away will contract with the same PPO network, for the same procedure, for $1,800 (we personally experience this wild pricing difference).

PPO’s are pressured by consumers to include everyone they can in their networks, to hell with the costs. PPO’s have become agents for hospitals and many receive financial rewards through lucrative side agreements. PPO’s are not your friends and are not looking after your financial interests.

Although many find health care pricing opaque, hard to quantify or even identify in advance of service to be rendered, it is possible to do so with hard work and persistance. Data is readily available for those with the patience to look for it.

Taking advantage of the Chaos in Health Care will save a self-funded health plan a minimum of 40%, with some cases achieving savings of 60% in real claim dollars.

Editor’s Note: “The Company That Solved Health Care” is a must read.

H.R. 676 – Medicare For All Americans

Thursday, June 7th, 2012

HR 676 – If ObamaCare is ruled unconstitutional this month will 676 gain new traction in Congress?

Obama To Veto FSA, HSA Legislation

Thursday, June 7th, 2012

WASHINGTON—President Barack Obama will veto legislation that would ease a 28-year-old Internal Revenue Service rule that requires forfeiture of unused flexible spending account balances and eliminates restrictions on using FSAs and health savings accounts to pay for over-the-counter medications, the administration said Wednesday.Under the measure headed for a vote this week on the House floor, employers could amend their FSAs to allow employees to withdraw as taxable cash up to $500 in unused balances remaining at the end of the plan year or at the end of an FSA grace period, if an employer has that feature. If passed, the measure would be considered by the Senate.OTC medicationsIn addition, H.R. 436 would overturn a health care reform law provision that allows FSA reimbursement of OTC medications without a prescription and imposes a 20% federal tax on HSA distributions for OTC medications obtained without a prescription. Those provisions are part of a broader bill, H.R 436, that would repeal a provision from the Patient Protection and Affordable Care Act that imposes new federal excise taxes on medical devices and boosts repayments of federal premium subsidies provided to low-income and middle-class uninsured individuals in situations in which the subsidies turn out to be higher than the individuals were entitled.It is those provisions that the administration opposes.“This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion,” the Office of Management and Budget said in a statement.“In sum, H.R. 436 would fund tax breaks for industry by raising taxes on middle-class and low-income families. Instead of working together to reduce health care costs, H.R. 436 chooses to refight old political battles over health care. If the president were presented with H.R. 436, his senior advisers would recommend that he veto the bill,” OBM said.

Do Hospitals Kick Back Undisclosed Fees to PPO Partners?

Wednesday, June 6th, 2012

Recently a Texas based TPA negotiated a direct contract with a hospital, on behalf of one of their clients. Upon final review of the terms of the contract, the negotiator for the hospital said to the TPA representative,  “We pay PPO’s, so what do we need to build in for you in this contract?”

We have heard this before. But we have never been able to get our hands these hospital/PPO “side agreements.” These add-on  agreements are not part of the hospital/PPO contracts per se, but a separate side agreement no one would suspect even exists. At least that is our guess as we don’t know for sure what the truth is without documentation.

So, if I were a PPO network, I could probably say to the hospital negotiator, “Load in 5% of gross billed charges for me and adjust your Charge Master to make you whole. Our mutual clients will never know and will remain clueless.”

If I were to earn 5% of gross billed charges, it would not take too long before I could buy that island down in Belize with some quick cash.

Those PEPM PPO access fees of around $3.50 are just window dressing. The real money is never seen or accounted for. Or so it seems.

Editor’s Note: If any of our readers can verify hospital/PPO kickback schemes, and have copies of these agreements, we will become your new best friend.

From An Ohio TPA:

I don’t have copies but I know this was very common in Ohio, all the major ppo’s kept a % of charges. XXXXXX XXXXX still does, they disclose it though. The TPA actually does the withhold. XXX XXXX lets it known that if you rent their network you do not get full discounts, they retain a portion. If you purchase from them direct they pass on all the discounts…..supposedly

From A Plan Sponsor:

I had always understood that the way PPO’s made money was by extracting a discount off BC’s from providers, and then passing some, but not all of the difference to the payor.  The rest (maybe 50:50?) was retained by the PPO network as their fee.  Other arrangements, instead of splitting the discount, could be based on a PEPM rental basis.  That’s the way I had always understood the financial arrangements for independent networks.  But for wholly owned networks – like Humana, UHC, etc., that have built their own in-house NW’s, I’m thinking that works based on the initial discount that the MCC ‘guarantees’.  In other words, Humana, as an example, may ‘sell’ their services (either fully insured or just as a TPA) to an employer by guaranteeing a certain discount off BC’s, say 45%.  Then, if they’re able to extract a bigger discount from a provider, they’d keep 100% of the difference.

The fallacy, of course, in either of these models, is that they’re based on BC’s, which, as we know, can be anything the provider wants it to be.   But the further problem with the wholly owned NW’s is that the payor (employer in a self funded plan) isn’t getting the benefit of the real negotiated discount.

This whole system is about as transparent as mud at the bottom of a river – and that river is full of alligators (the NW’s)!!

From A Texas TPA:

Bill, this is from a BCBS contract:

In addition, Client hereby acknowledges that, as a part of PPOs contractual arrangement with

certain participating network providers, PPO and its Affiliates may receive compensation for

administrative services performed for the benefit of Participating Providers during the term of this

Agreement. Such fees may be in the form of direct payment by the Participating Provider to the PPO or in

the form of a differential in reimbursement amounts (the “Differential Model”). In a Differential Model

scenario, the reimbursement amount paid for a claim under this Agreement may not be identical to the

amount of compensation a Participating Provider receives or retains in connection with providing health

care services. Client acknowledges, subject to the requirements of applicable law, that reimbursement

amounts paid to Participating Providers under this Agreement may not be identical to the amount of compensation a Participating Provider receives or retains. Solely PPO and Participating Provider establish the applicable reimbursement amount in the Differential Model, and the compensation which PPO and Affiliates shall be paid, which shall be fair market value for services rendered. Neither Client nor any Customer of Client shall be entitled to any portion of such administrative fees paid by a Participating Provider.

From A Medical Provider:

MF’s.  They’re screwing the provider and the employer.

From A San Antonio Employer:

What is not transparent is alway’s easily corrupted.

Prime HealthCare Moving Into Texas – Acquires Harlingen Medical Center

Wednesday, June 6th, 2012

“They look for opportunities where they can catch people in the emergency room and focus on obtaining as much reimbursement as possible from Medicare and from private payers,” Adam Weisberg, a research coordinator with the Service Employees International Union, told the Tribune.


How Is A 25% Increase In Stop Loss Premium Really Only A 3.6% Bump?

Tuesday, June 5th, 2012

             Numbers are interesting, and deceptive at times.

A 25% increase in stop loss insurance premium is essentially a 3.6% increase in overall costs if all other cost components remain unchanged, assuming that the 25% increase on one component representing 15% of the overall cost, with the remaining cost components representing 85% of the total that remains static.

Which is easier to sell – a 25% increase in stop loss premium or a 3.6% increase in Plan spending? It is certainly easier to sell on a fully insured basis –  various components that make up the rates remain hidden.

Aetna & Karl Marx – A Partnership Made In Washington

Tuesday, June 5th, 2012
   In a press release issued today, Aetna announced  the results of their  Medical Loss Ratio calculation.  The Medical Loss Ratio Provision, alternately called the Karl Marx Dictate,  is imbedded in a  federal law  (PPACA)  requiring health insurance companies to kick back “excessive” profits to the masses.

House Set To Vote On FSA’s

Monday, June 4th, 2012

WASHINGTON—The House of Representatives is scheduled to take up legislation this week that would ease a decades-old Internal Revenue Service rule that requires forfeiture of unused flexible spending account balances and eliminates restrictions on the use of FSAs and health savings accounts to pay for over-the-counter medication.


Do Insurers Set Health Care Pricing, or Do Providers? Are Poor Hapless Consumers Pawns?

Monday, June 4th, 2012

An article in the most recent issue of Consumer Reports verifies what America’s Health Insurance Plans (AHIP) has been saying for years now–providers are at the root of the healthcare cost problem.