Day: October 21, 2012

One of our clients recently went out to bid for their fully-insured group medical plan. Most of the BUCA’s bid on this case, clearly indicating there is competition for this account which generates a seven figure revenue stream.

Two of the BUCA’s, independent of each other, disclosed their out-of-network reimbursment strategy:

BUCA #1 pays 110% RBRVS for facility and professional services while BUCA #2 pays 105% RBRVS for professional services and a whopping 140% RBRVS for facility charges.

So the question arises – do these two BUCAS pay providers more  or less out-of-network compared to in-network? If the answer is “more” than in-network providers are really stupid. If the answer is “less” than those “steep” in-network provider discounts are nothing to write home about.

“Cost-Plus is a rating arrangement (not an alternative funding arrangement) that shifts the burden of financial risk (payment obligations) from the carrier to the group itself. The group is responsible for payment of claims plus retention fee. Under a Cost-Plus arrangement, a financial settlement is normally calculated after each contract period, at which time any surplus is returned to the group and any deficit is due and payable to the carrier. The billing under a Cost-Plus arrangement can be based either on a predetermined rate (rate basis) or on the actual claims of the group (claims reimbursement basis). An IBC group under a Cost-Plus arrangement may or may not have state-mandated benefits and/or hold its own claim reserves.”

http://www.savoyassociates.com/docs/IBC%20PA%20Individual%20Underwriting%20Guidlines.pdf (see pg’s 7-8)

Editor’s Note: What is the percentage equivalent of claims that your TPA currently charges you? If the TPA’s annual administration fee is $300,000, and paid claims are $3.5 million, you are paying about 8.5% in addition to cost (actual example). What incentive does the TPA have in reducing your claims under a cost plus arrangement?  Can the TPA be limited to charging their fee based on a claim benchmark basis such as Medicare or Medicaid and not tied to billed charges? (On a side note, we found a Texas municipality paying such a high claim administration fee on a dental plan that it actually cost the city more in claim fees to pay a $74 cleaning – $84 to pay a $74 claims for a total of $158). Seems to us that a TPA claim fee of 5% using a benchmark claim reimbursment method is a fair and reasonable fee basis. No claims, no fees. No work, no charge. So if Sally Jones has no claims during the year, she costs her employer zero (statistics show that 23% will have no claims during the year).

A provision in the health care reform law that should be repealed is one that will sock employers that self-fund their health care plans with billions of dollars in assessments for which they will receive no direct benefit.Starting in 2014, that Patient Protection and Affordable Care Act provision creates what the law calls the Transitional Reinsurance Program. Self-insured employers will be assessed a per-participant fee — likely in the $60 to $90 range — to help fund the $25 billion program. For a big self-funded employer, with say 100,000 people enrolled in its health care plans, its first-year tab for the three-year program could be about $10 million.And where will all that money go? The beneficiaries will be commercial insurers who will receive the money as partial reimbursement for writing coverage for those in the personal lines market with the highest health care costs.It is hard to find the logic or fairness here. These are employers who voluntarily agree to provide coverage for their employees and dependents and they get hit with a whopping fee to offset coverage costs to individuals for whom they have no connection.If lawmakers wanted to give employers a disincentive to offer coverage, they certainly achieved that in authorizing these fees.Equity and fairness aside, there are plenty of practical problems with the program. For example, the fee assessment is based on the number of plan participants. Does that include COBRA beneficiaries or those in retiree health care plans? No one knows because the law just isn’t clear on those points as well as numerous others.A broader question is how this provision got inserted while the legislation was working its way through Congress and why there never was any discussion of it. Our best guess is that this is yet another example of how attention to detail is overlooked by lawmakers and their staffs on both sides of the aisle, with disastrous results.That, unfortunately, is history. So, for now, we strongly believe the best course of action for lawmakers is to repeal of the Transitional Reinsurance Program as soon as the next congressional session begins.

– Business Insurance 10-21-2012