Blue Cross Offers Cost Plus Health Care Financing

“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).

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