By Bill Rusteberg
Reference Based Pricing plans have been around for many years now. Fear of lawsuits by medical caregivers is a concern for middle and late adapters of the model, causing many to pay a premium for protection against them. And, the cost to do so can be significant.
A leading national purveyor of Reference Based Pricing plans recently gave a presentation outlining their performance in this growing health care delivery phenomenon.
Referencing the fear of lawsuits, and potential crippling, credit ruining judgments against plan participants, the marketer announced on power point slide #33 “Between 2008 and 2016 We Have Had 171 Lawsuits filed against our clients, and we have won every one of them!”
A quick calculation from empirical data within our data base, we estimate this represents less than one half of one percent of all claims audited by this firm. That is a very low number.
If the risk is low then shouldn’t that be a factor in rate (fee) making? Unfortunately we find that is not always the case, with costs to the Plan Sponsor running into the hundreds of thousands per year for a group as small as 500 employee lives. It’s all about selling fear (Selling Fear & Cost Plus Insurance).
“Insurance premiums are set through disciplined actuarial science, but fees set by marketers have no bounds”……………...Molly Mulebriar
The answer may be that there is no insurance in place at all to protect against lawsuits, just a promise to defend and maybe a promise to make good any judgments against the plan participant. Added protection against loss to the marketer may also be carefully crafted into the language of the Plan Document.
For example, language may include a provision that only Referred Appeals are covered. This happens less than 7% of all claims. The reason the percentage is so low is because smart medical care givers know that to accept the offer of a claim appeal creates a contract to which they must adhere, which of course will almost always include a provision that the provider agrees to no balance billing once the claim runs though the appeal process.
It is our opinion legal protection for plan participants is important and necessary. But at what cost?
Write RiskManager@RiskManagers.us
From Insurance Broker:
Bill – can you share with me the firm you were referencing on the RBP presentation? If you could please share with me, it would be greatly appreciated. Thanks!
From RBR Vendor:
I saw your blog post today and thought it was great. I don’t normally read about people criticizing the expense of companies like mine, and it’s desperately needed.
From TPA (Active in RBR):
Great post. I believe the cost factor load for RBR is not about the cost of actually insuring against the potential pushback as much as it is about assuring the appropriate and needed level of plan and member support required to allow the plan to run as effectively as possible. Too many payers with little or no experience in RBR discount the importance of this component of the plan, charge a minimal amount to gain the business and can not effectively serve the member or plan as consequence. In doing so those payers have done a disservice to all by underperforming and thereby giving RBR a bad name / bad taste for the broker or employer effected. Thank you for continuing to lead the TBR “charge forward”!
From Insurance Consultant
Bill, I can pretty much guess who the vendor is. What your readers may not know, and what you failed to mention, is that out of all these lawsuits, only a mere handful went to trial. The rest were non suited early on during the discovery process. (Dollar amounts involved have been surprisingly low. One lawsuit that made it to trial was over a hospital bill of less than $5000). This vendor has bragged in the past that they have a 66 page discovery demand letter that effectively telegraphs to the plaintiff that details of hospital billing will be exposed to the public. This has the intended effect of a quick resolution of the problem. The THR lawsuit is a perfect example.
