A Ten Year Look Back On A RBP Group

Tomorrow will mark a new plan year for one of our long time clients, the first political subdivision in Texas to adopt Reference Based Pricing more than ten years ago in lieu of traditional managed care strategies employed by most plan sponsors today.

By Bill Rusteberg

How have they fared since? Was the transition away from status quo antics worth it? What lessons can be learned?

It was a very rough ride when we first jumped off the cliff into unchartered, shark infested waters. “This won’t work, providers will not accept plan members!” shouted the TPA. “They are making a big mistake” said a local hospital administrator. “This is not insurance and we won’t be able to take care of your employees” screamed a room full of local professionals during a public hearing.

The local paper printed the story on the front page. Fortunately the plan trustees had Big Brass Cojones.

The turmoil lasted about six months. Gradually local providers experienced an epiphany – gone were hated third party intermediaries dictating reimbursement terms and conditions, replaced by fair, transparent, quick and easy claim payment memorialized through a simple 190 word Letter of Agreement either party can exit at any time.

Plan members, educated for the first time about how the health care delivery system is financed, began to understand and buy into the concept the plan was theirs, not some out of state insurance company.

A self-funded group of approximately 400 employees, they have essentially maintained static contribution rates for more than ten years. They are currently over reserved by 17 months, a nice problem to have. Beginning tomorrow their contribution rates will decrease 10% across the board, and a portion of the reserves will be set aside as a contingency fund against GASB 45 liabilities.

Benefits have been improved over the past ten years unlike other status quo groups who practice cost shifting as the preferred method of “controlling” costs. There are no deductibles or co-insurance features plan members have to worry about. The plan is a simple co-pay plan allowing members to know exactly what their cost will be for any given medical encounter.

Direct contracting, bundled medical encounter packages with quality metrics in place assure plan members easy access to heath care when they need it. Plan members pay nothing if they choose to use the bundled payment approach.

A non-traditional approach to managing prescription drug costs has kept Rx cost trends below national trends. This approach includes risk transfer and select grouping of retail pharmacies, among other strategies. We are still working on this piece as we think we can do even better.

Stop loss insurance losses over the past ten years have included 13 claims in excess of their specific deductible of which 4 were subject to lasers. Net cost of premiums minus reimbursements was $827,009, or approximately $17.23 PEPM for the period. A typical managed care plan would have had five times or more in specific hits with the leveraging effect upon subsequent renewals bringing stop loss rate trending levels of 10% per year on average. Stop loss premium increases have averaged 1.04% per year.

The transition away from status quo antics has been worth it.

The lessons learned are many. The most important lesson to be learned is one has to be constantly willing to adapt to change as needed and not bask in a corner comfort zone with an umbrella drink. One has to take risks some of which will turn out really well while others may not do as well.

The client must share your philosophy towards managing health care and they must stand resolute in face of tremendous pressure from hospitals who often resort to threats and intimidation. They must also stand firm when dealing with plan members who demand a return to the past which will inevitably happen upon implementation of Reference Based Pricing but will fade away over time.

Employers who truly want to take care of their employees will adopt these strategies.

Another client told me the other day that he was sitting on a board of trustees meeting of another group whose HR director was giving an update on their health insurance renewal. When he asked her if she had explored the possibility of Reference Based Pricing, her response was “That’s for employers who don’t care about their employees!”

Seems to me to be the other way around.

RiskMangers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

The shared vision of RiskManagers.us and clients who retain our services is to establish and maintain a comprehensive employee health and welfare plan, identify cost areas that may be improved without cost shifting to any significant degree, and ensure a superior and sustained partnership with a claim administrator responsive to members needs on a level consistent with prudent business practices.

Plan costs, in all areas including fixed expenses and claims are open for review on a continuing basis. Cost effective plan administration and equitable benefit payment to providers are paramount to fulfilling our mutual fiduciary duties. As we proactively monitor and manage an entire benefit program we are open to any suggestions members may make or the dynamic health benefit market may warrant in order to accomplish these goals.

Duty of loyalty to our clients, transparency and accountability are essential to the foundation of our services. To that end, we expect our clients to realize a substantial savings based upon the services that we will deliver.

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That’s outstanding.  Change is difficult, and those first 6 months or so are rough.  But you have to have buy in from all people involved in making this work.  If not, it’s prudent to find someone who will buy in.  The cost of changing out that HR director in your last paragraph is miniscule compared to the dollar savings a sizable company can realize.

The topic for your next article – “You’re Fired!!!”


Super article……I am sharing this with all our key partners, GAs and agents.  Happy New Year.