Edgewood ISD To Drop Reference Based Pricing Plan

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The Edgewood Independent School District in San Antonio, Texas, has decided Cost Plus / Reference Based Pricing is not for them.

The district has elected to terminate their current program with Group & Pension Administrators (GPA) in favor of a PPO plan administered by Aetna. The new plan will be effective January 1, 2017.

It is unusual for plan sponsors to revert back to managed care plans. The flexibility and savings inherent in reference based pricing strategies, with lower costs and improved benefits, usually provides enough incentive to continue.

GPA has administered Edgewood’s self-funded health & welfare plan since January 1, 2014. Eschewing managed care contracts, the district instead pays qualified claims using certain claim bench marking, such as and including Medicare allowable charges and cost-to-charge ratios. A 2015 presentation to the Edgewood ISD Board of Trustees by the district’s Agent of Record showed “significant” savings to the district utilizing the reference based pricing model known by some in the industry as Cost Plus Insurance. (Insurance Agent Touts Cost Plus Insurance – Is School District Receiving Fair Value? )

Edgewood relied on an independent insurance consultant in the district’s review of insurance alternative for 2017. The district’s Goals and Objectives were memorialized in a formal Request for Proposal process:

  1. Review the aspects of Edgewood ISD’s benefit programs to ensure price competitiveness, service and benefit access at optimum levels.
  2. Maintain or improve the benefit levels in force, if economically feasible.
  3. Improve cost minimization by investigating alternatives.
  4. Assess long term alternatives for managing the employee benefits programs.

Edgewood ISD’s consultant appointed to managed the RFP process was HUB International Insurance Services, El Paso. HUB assisted in preparing the RFP document, as well as the analysis of responses and selection process.

It was wise of the district to employ an expert consultant to navigate the sometimes choppy waters of Reference Based Pricing / Cost Plus Insurance plan termination provisions.

Contested claims under the current program may pose certain liability issues with plan members after the plan’s termination date. Unresolved balance billing liabilities for claims incurred prior to plan termination can continue for years, affecting credit ratings of plan members. Does legal defense of all contested claims continue after plan termination, or only specified claims?

We suspect Edgewood’s claim costs will increase under a PPO program due to escalator clauses found in managed care contracts, as well as other contract provisions standard in these provider agreements. These agreements typically, effectively, give rise to Contracts of Adhesion.

Will the cycle of inevitable medical trend increases begin once again for the Edgewood Independent School District?

Meanwhile, back at the Reservation – Tribal Health Plans Utilize Medicare Rates For Savings

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