By Molly Mulebriar
What should plan sponsors, who take their fiduciary duties seriously, pay for managing Cost Plus / Reference Based Pricing plans? What is fair market value to provide claim re-pricing, patient advocacy, medical review, defense and indemnification? We can look for clues in the market today to determine “average market price.”
For example, one provider is charging 12% of billed charges. However, there is a 25% commissions and overrides payable to TPA’s, consultants and brokers. The net is 9% of billed. This same provider charges an additional 20% as a premium for their captive (retirement plan?) which provides minimal coverage up to $75,000 only. Taking away the premium load leaves a net cost to be charged to a plan sponsor of 6.6% of billed.
Another provider charges 15% of allowed for the same services. However, after taking out commissions, overrides and premium loads, the net is 8.25% of allowed.
We have kept on top of the market and know what most providers charge and the level of service they provide. Whereas several years ago there were few providers in the Cost Plus / Reference Based Pricing arena, there are now many. Competition benefits plan sponsors – Xerox, Eastman Kodak And Cost Plus Insurance
Our best estimation of true market value in today’s market is 6% of billed or 8% of allowed. On a PEPM basis we see a range of $8 to $12.
What are you paying these days?
Editor’s Note: It is unfortunate that plan sponsors pay fees to third party intermediaries that could otherwise go to health care givers – Cost Plus Insurance To Make Offer To Hospitals?
