There is no doubt that Cost Plus Provider Reimbursement saves on health care costs when compared to traditional PPO negotiated pricing. Empirical data shows that Cost Plus 12% margin saves on average 43% or more, above and beyond traditional PPO discounts.
Whereas a billed charge of $100,000 to a PPO network reduces to $50,000, Cost Plus 12% equates to $20,000 or so as a matter of routine.
Over 80 Texas employers, to date, have adopted the Cost Plus concept, with significant results to their bottom line.
The Cost Plus methodology is composed of two distinct components; (1). Claim process and (2). Liability exposure.
The claim process includes claim audits, claim re-pricing and provider appeals. Claim audits and re-pricing occur 100% of the time and there is a cost associated with each function. Provider appeals, on average, occur only 7% of the time and is performed by outside independent claim professionals at a cost.
The second component of a cost plus program deals with liabilty exposure, i.e, provider balance billing activities and provider generated lawsuits. Balance billing occurs 100% of the time, while lawsuits almost never happen, i.e, 0% of the time. There is a cost associated with liability exposures.
So, what are the costs associated with the management and liability cover of a self-funded Cost Plus employee welfare plan?
There is the expense of an audit firm. There is the expense of an independent bill review firm. Liabilility issues must involve a law firm. Routine and expected expenses can be budgeted for in fees to be charged, while more expensive and actual lawsuits can be indemnified through a carefully designed insurance policy. Additional revenue demands by various components of a self-funded health plan, to include the third party administrator, require that all must be fairly compensated for work performed.
Is the cost of administering and indemnifying a Cost Plus employer sponsored plan based on competitive market pressures? The answer, as of this writing, is probably no. However, that is soon to change. More players are paying attention. With competition, costs will go down. It is an American tradition.
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