City of Lewisville Publishes Health Insurance Analysis – Compares Cost Plus To PPO

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The report is a compelling comparative analysis between a PPO proposal and a Cost Plus Insurance proposal, an evaluation of a non-traditional approach to health care financing and a traditional managed care proposal worth reading.

The City of Lewisville, with the assistance of insurance experts, evaluated group health insurance proposals received during a competitive Request for Proposal process several years ago. The city’s evaluation results have been published and is now in the public domain.

The report is a compelling comparative analysis between a PPO proposal and a Cost Plus Insurance proposal, an evaluation of a non-traditional approach to health care financing and a traditional managed care proposal.

The analysis is an interesting study worth reading and a must read for Cost Plus / Reference Based Pricing proponents in their battle to win customers from managed care competitors.

Conclusions one may draw regarding this study are three fold: (1). Cost plus or Medicare benchmark reimbursement methodologies save claim dollars over traditional managed care contracts – in this case 14%, (2) Cost plus fees to administer, defend, re-price, indemnify can negate, to a large degree, claim dollar savings and (3). Stop loss insurance may not be as competitive as warranted through cost plus/medicare benchmarking reimbursement methods.

In this particular instance, projected fees of over $500,000 for this 676 life case to provide plan audits, claim re-pricing, patient advocacy and legal indemnification wipes out much of claim dollar savings of 14% as indicated in the city’s report. These projected fees do not include the cost of administering claims.

With the projected savings of 14% in claims under the Cost Plus/Medicare platform one would believe that stop loss underwriters would properly credit the reduced risk. But in this case, stop loss included a $350,000 laser  through the Cost Plus proposal while the stop loss proposal for the PPO plan had no laser at all.

The report, one could conclude, illustrates overall plan costs would be less expensive under the PPO proposal.

Fees charged by some  Cost Plus Insurance plan administrators can be significant. Fortunately, increasing competition in the Cost Plus / Medicare Reference Based Pricing market is having a positive impact on fees to be charged. The fee range can make a difference in selection of a plan administrator.

CITY OF LEWISVILLE INSURANCE STUDY ANALYSIS:

https://dl.dropboxusercontent.com/u/107357829/Backup%20-%20August%205%2C%202013.pdf  (scroll down 11 pages to view report).

CITY COUNCIL MINUTES:

Pages 2 – 10 http://www.cityoflewisville.com/modules/showdocument.aspx?documentid=4410

HIGHLIGHTS:

“Mike Williams, Health and Group Benefits Practice Leader, Millman, conducted the attached PowerPoint for City Council consideration. Jeff Peters with GPA stated that after the presentation he was not sure why the City Council would even look at Cost Plus.”

Deputy Mayor Pro Tern Gilmore pointed out that Council had been working on making a decision on allowing chickens within the City for six months and his frustration being asked to make such an important health care decision for employee within a month. (City of Lewisville Considers Cost Plus Insurance – Chickens Remain Anxious)

Editor’s Note: Proponents of Cost Plus, Reference Based Pricing models must be prepared to defend against managed care competitors seeking to maintain the status quo. For example, how would one defend against this? – Insurance Agent Touts Cost Plus Insurance – Is School District Receiving Fair Value? The answer: You apparently can’t. The school district referenced in the article will be moving from Reference Based Pricing / Cost Plus to Aetna (PPO) effective January 1, 2017.

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