How many people do you know that can keep a secret?
A BUCA renewal for a midsize, fully-insured case warned that the information contained in the re-rate calculation was CONFIDENTIAL and proprietary in nature.
Here’s some of their Secret Sauce:
1. Out-of-network reimbursement is based on 105% Medicare for professional care, and 140% Medicare for facility care. This is a change over the prior year – “This change helps in controlling rising health care costs. Our Medicare based coverage generally is leaner than our previous coverage for out-of-network services.” Translation: We focus on controlling costs on providers not willing to join our network by paying them less than those that play ball with us. Since out-of-network claims average 5% or less of a group’s medical spend, this cost containment strategy drives costs up rather than down because plan members are effectively steered to providers who are paid more and to whom plan members pay less.
2. “Your claim experience and rates are lower due to negotiated savings. The claim experience shown also includes access fees which are a percentage of savings achieved.” Translation: Claim data includes fixed costs. Carrier negotiates discounts off inflated billed charges that no one ever pays and then charges a percentage of the “savings” as a fee that never shows up as a line-item expense but rather are hidden on the claim side of the ledger.
3. State taxes, assessments and/or other charges, reinsurance contribution, health insurance providers fee, and “other adjustment” = 7.5% of premium. Translation: This is another hidden fee on the claim side of the ledger.
4. Target loss ratio of 80% is divided into expected claims. Translation: Any number divided by 80% produces a number 25% higher. This has two effects (1). Premiums are based on the higher number and (2) The higher provider reimbursement rates the greater the carrier’s profits.
5. Trend is 9,85% health, 10.50 Rx. Translation: PPO contracts drive inflation primarily due to automatic annual escalator clauses averaging 4-12%, gifting providers a pay increase whether they deserve it or not. Reference Based Pricing plan effectively eliminate medical trend.
This case is getting a +20% renewal increase. 7.5% of the increase is politically driven through mandates and taxes. The rest of the increase is partially due to the MLR mandate, also a politically driven cost factor. This renewal should be a pass.
