As the costs of health care continue to increase, employers are turning to innovations in health care payment, benefit design, and network design to manage their costs. One reform that has gotten recent attention is reference pricing.
Archive for October, 2013
By Molly Mulebriar
The World’s Biggest Liar contest is to be held next month at the Bridge Inn, Stanton Bridge, England. The contest is held every year in November. Politicians and lawyers are not allowed to enter the competition because “they are judged to be too skilled of telling porkies.”
However, insurance agents, brokers, consultants, TPA’s and carrier representatives qualify, although some thought was given to excluding them too.
The Board of Directors, in a narrow one vote margin, agreed to allow Texas insurance insiders to participate this year after hearing the exploits of one “seasoned” insurance worker from the Lone Star state. Skilled at lying to attract and retain business, playing on the ignorance of unsuspecting prey, this ingenious fabricator of fiction is considered a perfect candidate for the Bridge Inn contest. Smart money has 5 to 1 odds on a Texas win this year.
We have no idea who this Texas Wonder is. Could it be someone from the Dennis Clan? – http://blog.riskmanagers.us/?p=12682
Suggested topics can include (1). How I get clients to pay more for less, and get them to give me referrals and recommendations at the same time, (2). How to earn twice as much as is fully disclosed while making clients believe I earn a competitive fee , (3). How I am totally independent through financial alliances with undisclosed partners, (4). How I only work through independent brokers who I pick for my clients, (5). How I never go around brokers or deal direct by going around brokers and dealing direct ,without client knowledge, (6). How to fabricate market intelligence to gain the advantage, and finally (7). How to lie your way to success in sales in an honest and open way.
Continuous lying somehow ends up becoming the truth in the eyes of the purveyor and ultimately in the eyes of the unsuspecting prey. Tell a story enough times and it becomes gospel. A good example is the Johnson vs Stevenson, 1948 Texas senate primary : http://www.nytimes.com/1990/02/11/us/how-johnson-won-election-he-d-lost.html. Johnson purchased radio and paper advertisements linking his opponent to union alliances which was totally untrue. Stevenson, being the gentleman he was, refused to answer those charges as he felt it would give credence to the lies. After months of hearing the lies, with no rebuttle offered by Stevenson, many voters turned to believe that “Mr. Texas” was a union man.
For more information on the World’s Biggest Liar Contest go here: http://en.wikipedia.org/wiki/World’s_Biggest_Liar
By William Rusteberg
Business is akin to war. There are winners and losers. War is supposedly governed by the Geneva Convention, business by ethics. Unfortunately combatants overlook the “rules” sometimes.
In the insurance business, particularly the group health insurance market, competition can be brutal. The spoils to be gained or maintained are significant. For example, a 300 life group medical plan, on a self-funded platform, can generate fees that would make Bernie Madoff blush.
Market intelligence is paramount to success. Sun Tzu wrote, “hence the wise general who will use the highest intelligence of the army for purposes of spying, and thereby they achieve great results. Spies are a most important element in war, because upon them depends an army’s ability to move.”
Market intelligence must be accurate. When one employs spies, care must be given to the process. Misinterpretation, or worse yet, interception of message, can lead to disaster and ruin. Thus spies who are employed are at risk of exposure and doomed, as well as the general who employed him.
Faulty analysis of information gained through spies can mean the difference between victory or defeat. Foreknowledge of deceit (lying) always brings eventual defeat.
In the insurance business, many have found that fee-based insurance consultants have extensive market intelligence, superior to moles one may encounter during a weak moment at Happy Hour.
Spies and consultants are paid for the same reasons. Is there an ethical difference?
Transparency or secrecy………..?
“What You Don’t Know Can Hurt You! – A Detailed Review of Provisions contained within Provider Network Agreements…”
By William Rusteberg
The Affordable Care Act (ACA) is damn complicated. No one I know seems to have all the answers. Anyone who says they understand ACA is probably delusional or related to Dennis (http://blog.riskmanagers.us/?p=12682). At least that is my perspective after talking to many of my peers in the insurance industry during the SIIA annual convention in Chicago the past several days.
I did meet one person though, with a deep southern accent (probably from Mississippi) who kindly spelled out the essence of ACA in a way that most would understand:
“Bill, look at it this way…………..Under ACA all health plans must have no more than a $6,350 maximum out-of-pocket for each insured, or double that for a family. So just think about that for a moment…………once an individual reaches that limit, easily done with the high costs brokered by managed care companies, there is absolutely no incentive to limit costs by either the patient or the provider…………in fact just the opposite is true……………….the quicker medical expenses add up the quicker “insurance” starts paying 100% of all expenses with no maximum limitations.”
My new best friend continued “So, how are insurance companies going to compete?…………All are mandated to limit out-of-pocket expenses to $6,350, so the competition will be formed around how to get there. Which proposal takes the longest to reach the maximum out-of-pocket, or the shortest, to reach the magic number? And, what about the cost of the insurance? Who will have the cheapest costs? Or, which proposal has the lowest out-of-pocket exposure!
Consumers will key in on out-of-pocket exposure and price, that is all.
Since all health plans will essentially be the same (insurance kicks in 100% after $6,350), upon what basis can carriers compete? The answer is pretty simple – lower reimbursements to a limited number of providers willing to work for less or unilateral forced strategies employed utilizing Cost Plus / Reference Based Pricing methodologies. The key to competition has now pivoted to relationships with willing providers or forced relationships with unwilling ones.
The market for self-funding opportunities has never been better. Employers, unlike clueless plan participants, look beyond the participant’s maximum out-of-pocket exposure. The plan sponsor’s out-of-pocket exposure is unlimited. Who do you think has the most incentive to control costs?
Smart providers will seize opportunities to selectively pick their customers. In return for quick and easy access, they will charge a premium. Do you mind paying more at Circle K for a gallon of milk, or do you park at HEB, walk 500 yards to get the same gallon of milk at a cheaper price?
We are entering some interesting times.
Now that the open enrollment season is underway for many clients, it’s a great time to examine their options for recruiting and retaining hourly employees. However, if your clients had an expense-based limited-benefit plan in place this year, it is likely expiring on or before January 1. Fortunately, there is an alternative and you still have time to implement this innovative solution.
FARGO – The Obama administration asked North Dakota’s largest health insurer not to publicize how many people have signed up for health insurance through a new online exchange, a company official says.
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Anne Wheeler, C.P.M., CPPB, CTPM, Services Purchasing Section, Purchaser IV – Central, Procurement Division
By Becca Aaronson, The Texas Tribune
Oct 21, 2013
As consumers weigh coverage options available in the newly launched federal health insurance marketplace, three of the largest medical associations in Texas have raised concerns about the uncertainty of provider networks offered by health plans in the marketplace.
“If you’re dealing with no deductible or a $20 co-pay for a visit or something, it’s not really insurance because then it’s like going to eat at the Golden Corral. Once you’re in you get to eat all you want.”
By William Rusteberg
Self-funded medical plans should rejoice. There is good news on the horizon. No need to purchase stop loss insurance protection anymore. ObamaRe will assume the risk anytime you need it. Beginning in 2014 ObamaRe will become the ultimate insurer of last resort for struggling self-funded plan sponsors. Placing cover for burning buildings has never been easier.
Employers who set up a trust through which defined health benefits are funded are under no obligation to continually fund the trust through unlimited contributions. After all, no employer can commit to unlimited funding for future health care costs – corporate dollars can only stretch so far.
A plan sponsor may elect to fund the trust to a certain, pre-determined annual limit with stipulation in the Plan Document that, if in the event plan assets are depleted during the plan year ,the plan terminates. At that point ObamaRe steps in to assume the risk. Plan participants are guaranteed continued coverage through ObamaRe, an exchange plan with pre-existing conditions covered immediately. No lasers, no declines, no kidding.
Employers who drop conventional stop loss cover in lieu of ObamaRe can mitigate their exposure. Health benefit dollars can be leveraged through cost plus or reference based pricing models. In our experience we have found that paid claims in excess of $100,000 are infrequent while paid claims in excess of $250,000 are virtually non-existent. Plus, $1,000,000 claims simply don’t exist. For example, the TRS ActiveCare plan for Texas school employees with over 280,000 plan participants, had only three (3) claims surpassing the $1 million mark last time we looked at their financials. And the TRS plan does not employ cost effective reimbursement methodologies as is found under cost plus or reference based pricing.
Self funding makes economic sense, especially when you can rely on ObamaRe to step in when you need it the most. And it’s free.
Getting Control Of Healthcare Expenditures – The Reduction Of Healthcare’s Moral Imperative On EmployersThursday, October 17th, 2013
By: Mike Dendy, MHA/MBA – CEO/President Advanced Medical Pricing Solutions, Inc (AMPS)
Our current system of corporate healthcare financing is nothing short of absurd. Health plan members seek care without regard for or knowledge of costs and administrative fiduciaries pay those bills without even the slightest bit of diligence to confirm validity of charges or services rendered. We buy medical services through expensive purchasing cooperatives (PPOs) that increase rather than decrease costs. And, we levy the same participation fees on members who work diligently to care for themselves properly as those who manage themselves in near suicidal fashion.
By Molly Mulebriar
Why pay intermediary fees when both providers of medical care and consumers would be better off dealing direct? Cost Plus Insurance and/or Reference Based Health Plans pay 120% of Medicare to hospitals in most cases. By the time intermediary fees are added, plan sponsors end up paying 135-150% of Medicare equivalent rates. Why not pay these intermediary fees to the provider of medical care instead?
We have seen fees as high as $650,000 (group of 750 employees) and $900,000 (group of 435 employees) – would this money have been better spent paying health care providers instead of auditors, TPA’s and law firms?
Plan sponsors have been willing to expend these enormous fees to protect their employees against balance billing and lawsuits although they do not have any liability themselves (the plan pays what it pays, nothing more, nothing less). However, more plan sponsors are reconsidering this expense and are turning to a reference based pricing model instead. Onerous fees go away, patients are now, for the first time, participating in a direct dialog with their providers – it’s called “skin-in-the-game.”
At what level of reimbursement are hospitals willing to accept? We see some taking less than Medicare on an exclusive basis in certain areas. In other areas we see 120-150% as the magic number. The vast majority however, want more. After all, they are getting as much as 250-400% of Medicare through managed care contracts leaving little incentive to settle for less.
Editor’s Note: Molly Mulebriar is a free-lance reporter from Waring, Texas and a frequent contributor to this blog. She can be reached at www.mollymulebriar.org
This article destroys wells program
By Al Lewis & Vik Khannahe series of unflattering articles published in Health Affairs early this year – the first unfavorable press wellness had ever received in a top tier policy journal — turned out to be a harbinger of what became the wellness industry’s summer of discontent. Perhaps in error, the Journal of Occupational and Environmental Medicine (JOEM) also drifted into the sea of credibility on wellness early in 2013 by publishing a meta-analysis of the industry’s claims of economic success.
The analysis, by researchers at Tufts, destroys the industry mythology of respectability by noting that out of over 2,000 papers published in the world’s medical literature, only 10 (0.5%) are worth discussing and that discussion leads essentially nowhere. Not surprisingly, like our essays here and in Health Affairs, the Tufts work has been universally ignored by the wellness true believers.
Market Intelligence – Cost Plus Insurance/Reference Based Pricing Fees In Today’s Market
By William Rusteberg
“This is a competitive market. The difference in fees can be substantial. For example, a fee based on a percentage of billed charges can be significantly higher than a percentage applied to an allowed amount. The allowed amount equals what the Plan Document stipulates upon which a claim is paid…….Plans paying 12% of billed charges could save 50% or more utilizing a fee structure based on allowed amounts instead.” (http://blog.riskmanagers.us/?p=11250)
Editor’s Note: Why doesn’t someone simply publish exchange prices along with a table to calculate subsidies? Maybe that is just too simple.
Taxpayer-funded commercials paint a rosy picture of the Affordable Care Act. But let’s face it, Obamacare is unworkable. Enjoy our parody – Heritage.org
Ernst Consulting Group – “70% of Companies overpay. We can typically generate a refund of 10%-15% of your annual premiums. There is no cost for our services unless we recover expenses.”
Why pay for Sally’s $85,000 operation when she can get it for $20,000? Seems unfair to pay Johnny $85,000 for his operation and only pay Sally $20,000 for the same procedure. Under a reference based pricing model, the plan sponsor would allow $20,000 leaving it up to the patient to decide where to seek treatment.
Political pundit Dick Morris believes that a suit brought by Oklahoma against Obamacare could be what ultimately knocks down the president’s healthcare law.
“Why didn’t anyone else think of it?”Morris wrote in The Hill. “Unlike the suit brought by 26 state attorney generals, this suit does not make a constitutional objection to the Affordable Care Act. Instead, it uses the language of the law to challenge the elaborate system of subsidies, tax credits, and individual or employer mandates and fines the act has spawned.”
The suit, filed by Oklahoma’s Republican Attorney General Scott Pruitt, was published in the Case Western Reserve School of Law Journal. The article contends that the wording of the Affordable Care Act only allows a subsidy for health insurance for those who got their coverage through state exchanges rather than the federal exchange.
“The IRS has ruled that the language of the statute should be ‘interpreted’ to extend the subsidies to those enrolled in state or federal exchanges, but that’s not what the law says,” Morris explained, adding, “Section 1041 of the act, according to their article, ‘authorizes premium-assistance tax credits and makes them available only through state-run exchanges.'”
It also says tax credits can only be given if the taxpayer has a plan that was enrolled in through an exchange established by the state under section 1311 of the Affordable Care Act.
“Adler and Cannon argue that ‘by its express terms, this provision only applies to exchanges ‘established by a state’ and ‘established…under Section 1311,'” Morris pointed out.
Morris argued that the IRS and supporters of Obamacare try to “stretch the language to imply a mandate to cover those in federal exchanges.”
He quoted IRS director Douglas Shulmann’s reply to a letter from GOP Congressmen about the issue, in which Shulmann said, “The statute includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state-based exchange or a federally-facilitated exchange.”
“Unfortunately for President Obama, the statue implies no such thing,” said Morris. “It is not only silent on any subsidies for federal exchange, it is clear that the subsidies were intended to encourage states to set up exchanges.”
A federal judge seemed to agree when he allowed Pruitt’s lawsuit to proceed in August, http://freebeacon.com/lawsuit-challenging-obamacare-subsidies-moves-forward/?print=1ruling against the Obama administration.
“The Oklahoma suit has survived a motion to dismiss and its standing to bring the suit has been affirmed by the District Court,” Morris stated. “Attorney General Pruitt hopes for a judgment later this year and feels the case might reach the Supreme Court by late next year.
By William Rusteberg
Have you ever tried to negotiate pricing with a hospital? Fun wasn’t it! Our most memorable encounter with a hospital official was several years ago in East Texas. The meeting went something like this:
“Nice to meet you. I represent XYZ Company and we are here today, as I mentioned over the phone last week, to negotiate a direct contract with you.” Hospital official, not smiling at all, responded “Ok, our offer is a 3% discount off billed charges with a quick pay provision of 30 days from the date of a clean bill. If you violate the quick pay provision you will be responsible for full billed charges!”
“Thanks for your very generous offer, but I think we will pass” and out we went. The time we entered the board room and the time we left totaled 9 minutes.
Hospitals are not hungry. The status quo is just fine and it really doesn’t matter that other hospitals in town are on the same networks. The key is network membership and alliances with local physicians who are, in reality, the true customers, not patients. Patients don’t care about costs, after all they’ have insurance that takes care of the bills. Inflating charges has never been easier in the history of the free market.
Health care costs are now so high that more plan sponsors are calling it quits. No longer accepting time tested explanations of why costs are going up every year, employers are taking a stand, asking questions and learning secrets that the health care delivery system have held close for years.
Times are changing, and changing fast. Narrow networks of providers who charge less are gaining acceptance in the market. More plan sponsors are asking questions about costs and are doing something about it…………Medicare benchmarking of claims, reference based pricing is gaining ground with dramatic effects.
Smart hospital administrators who understand the changing food chain economics of health care are, for the first time, sensing opportunities to compete with the other hospitals in town. Understanding that plan sponsors are no longer lemmings, health care providers are seeking partnerships based on fair and equitable and transparent basis. No one wants to be hungry.
ObamaCare does have it’s good sides that some believe is directly responsible for these substantive market changes. That is a good thing.
Editor’s Note: Brownsville Independent School District hires HealthSmart, then fires HealthSmart, then hires MAA, then fires MAA, then sues HealthSmart, then HealthSmart buys MAA. http://blog.riskmanagers.us/?p=12531
San Benito Independent School District is embarking on a new health plan that centers around their in-house primary care clinic. Controlled referrals add to plan savings, or at least that is the theory.
Primary care physician Dr. John Rodriguez examines new patient Natalie Grubb, a hairstylist with no insurance who “jumped at the chance” to sign up for care when she heard how the new plan works. Rodriguez is trying to build a new business model where patients pay $25 per month plus a $10 co-pay per visit, which includes an annual physical exam.
Fed up with increased paperwork, red tape and delays in getting paid by health insurance companies, San Antonio primary-care physicians Simone Norris and John Rodriguez have come up with an offbeat solution: Don’t accept insurance.
“…..unlike any other business in America, almost all of the financial transactions in healthcare are hidden from the providers as well as the patients…………..any cost that is hidden or confusing is easy to inflate……………..”
By Barbara Soderlin
The health care system alleges in a civil case that Douglas M. Pick of Omaha and his company, Pharmaceutical Technologies Inc., overcharged the health care system’s clients and agreed to pay bribes to a Texas hospital official in exchange for the official’s continued business. The hospital system alleges that from 2004 to 2011, Pick and the official conspired to add a $2.90 fee to the price of each prescription filled, with PTI redirecting at least $1.6 million of the money, 75 cents per prescription, to the official through a company incorporated for that purpose.
Legislation designed to make it more difficult for smaller employers to self-insure by restricting their ability to obtain stop-loss insurance with very low attachment points was signed into law on Oct. 1 by California Gov. Jerry Brown.
By William Rusteberg
Selection of a third party administrator (TPA) is crucial to the success of a self-funded plan. Criteria usually revolve around several factors including compatibility. Corporate philosophies of the employer and TPA should harmonize.