By Joe Candio
We help employee benefits brokers and consultants achieve better outcomes, save 25-35%, and provide an overall better member experience for their clients and prospects
Paying healthcare claims should be transparent, less costly, and stress free but for many plan sponsors, it is anything but. Insurance company discounts off price-blind billing fuel rising costs, and referenced based pricing (RBP) antagonizes providers and members alike. A better approach is Fair Market Payment™ (FMP).
Insurance Company Reimbursement Schemes Fuel Healthcare Cost Increases
It is common knowledge that hospital and health system pricing is highly inflated and well hidden. Because insurance companies pay these providers using “network discounts” on charges revealed only after services are rendered, every medical claim an employer pays is literally a “surprise bill.”
Why? Because the cost is never known in advance and is rarely fair. Providers are free to charge ever-increasing prices to the insurances companies. The insurance companies, in turn, feign support of employer plan sponsors, yet never seek to alter this arrangement.
These unscrupulous practices are part of a perverse dynamic based on a regulated ratio of administrative to claims charges. As a result, the only way for insurance companies to make more money is to encourage increasing the claims cost side of the equation year after year. Want proof? Just look at the insurance companies’ profits and share prices and you’ll see that this scheme clearly works in their favor.
RBP | A Quarrelsome and Economically Inefficient Way to Contain Costs
Reference-based pricing (RBP) is a reimbursement approach that is intended to specify and severely limit the amount paid for healthcare claims. It has been commercialized by “repricers” who have a small, simplistic function as a bolt-on service to a claims administrator.
RBP uses a single input: the rates set by the government to pay for Medicare services. It then adds a subjective “margin” and applies this “repricing” to an entire basket of medical services and procedures without considering important variables and relevant reimbursement economics. Further, RBP is typically a “pay and fight” mechanism resulting in battles with providers over payments. The claims reimbursement process becomes long and drawn out and can involve lawyers, introducing more friction and expense.
RBP payment schemes are unappealing to providers and fraught with friction for employer plan sponsors and their members. Members are routinely exposed to balance billing from providers who balk at this antagonistic payment approach and try to extract additional money from patients. At times this can even damage the credit scores of employees and their family members.
FMP | An Intelligent, Low-Friction, Cost-Saving Approach to Provider Reimbursement
Fair Market Payment™ (FMP), which is offered exclusively by Vitori Health, eliminates insurance company discounts off price-blind billing and the high-friction, pay-and-fight problems of RBP. In contrast, FMP takes a more sophisticated approach to cost containment using advanced algorithms to establish fair and acceptable claim payments. It is not a dislocated repricer function.
FMP functions as a finely-tuned dimmer switch compared to the “take it or else” on/off switch of Medicare-dependent RBP repricing. Payment is determined using multifold criteria including:
- Claim service category
- Whether the service is a commodity or more complex procedure
- Hospital cash pricing and costs vs. charges inputs
- Facility type
- Historical reimbursement
- Other dynamic data
FMP is applied at a more granular level to further fine tune claim-level payments. This superior approach better manages and controls costs unlike RBP Medicare pricing, which is based on a bundled episode of care.
The FMP algorithm continually optimizes payment to achieve RBP-like savings with less friction than BUCA plans.
FMP is Accepted Where RBP Is Not
Providers appreciate being paid fairly, accurately, and quickly. A dollar paid accurately today with FMP, which introduces pre-payment integrity and eliminates contentious interactions, is worth more to providers than a dollar delayed. RBP and BUCA plans often take 60 days, 90 days and even longer to pay a claim.
FMP Has Less Balance Billing than BUCA Plans
With FMP, member balance billing is significantly less than with BUCA plans. On rare occasions when balance billing occurs, dedicated member advocates resolve the issue quickly. Members are never responsible for balance bills or more than their cost-share under their benefit plan.
Keep in mind that 1-in-20 members in BUCA plans will receive an unexpected bill during a plan year. Up to half of these members will pay these bills without knowing any better, thus increasing their out-of-pocket costs. Under FMP, balance billing occurs with fewer than 0.25% of claims, and there are never any out-of-network claims or penalties.