How Not To Compare PPO Discounts

Several years ago we were engaged by a law firm to review and analyze recommendations made by an independent insurance consultant to a South Texas school district.

A losing vendor complained that the consultant’s recommendation was flawed, based on inaccurate representations. Legal assistance was sought to get “their” message to the school district, seeking reconsideration of their bid.

At issue were purported PPO “discounts.” Since claims drive health care costs, the vendor with the best “discounts” would certainly deserve the business.

The consultant, like many in his field, used a “claim re-pricing” exercise to determine which vendor had the lowest health care costs with area medical providers. That certainly makes sense; give a few claims out to all the vendors and ask them to re-price those claims. The vendor with the lowest “cost” would then be the vendor to recommend.

But there are many problems with that methodology as we pointed out in our analysis – Flawed Methodology

School districts, especially those in deep South Texas, should be wary of consultant’s who use  “PPO Re-Pricing” stategies. There is a better and more accurate method to be employed.

The Brownsville Independent School District, for example, is currently seeking competitive proposals for their self-funded health plan. Key to that process will be the consultant’s work product and analysis of PPO discounts for each of the submitting vendors. The method by which PPO networks will be evaluated will be important to the process, and pivotal to the outcome.

Editor’s Note: Our opinion was one of three obtained by the law firm. All three opinions came to essentially the same conclusion. An inexperienced insurance consultant’s worst nightmare is to have another one looking over his work product. Sometimes a second opinion can make a fundamental difference.

 

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