The Rise of EPO’s

“I never had a call that an employee had been billed for the difference for an out-of-network provider or got stuck with a big surprise bill. And that is so important because that is a fear” – EPO Plan Sponsor

By Bill Rusteberg

The new health plan regulations kicking in for 2022 produces major disruptions in how health care plans are managed and adds punishing government sanctions on self-funded plan sponsors who fail to comply. Among other things, the No Surprises Act (NSA) addresses (but doesn’t solve) the age old problem of balance billing by pitting providers against payers, while holding patients harmless.

It all revolves around traditional managed care plans that have been the status quo method of financing health care for over 40 years. Out-of-network providers often charge more than what managed care plans allow, leaving the balance the financial responsibility of the patient. Out-of-network claims average <5% of total claims in any given population because almost every provider on the planet belongs to PPO networks (whether they like it or not).

Reference Based Pricing plans having direct provider contracts in place are considered “Network” plans and subject to the same requirements as a traditional PPO plan under the NSA.

Anesthesiologists for example are famous for surprise, balance billing. Most have found it lucrative to eschew managed care contracts and bill patients with abandon. According to a 2016 Sagebrush audit of the Edinburg Independent School District’s self-funded health & welfare plan, “emergency room physicians billed charges were in excess of ten times Medicare fees.”

The new health care regulations include an Independent Dispute Resolution requirement to resolve balance billing in a baseball style arbitration process. This process will always cause a plan to pay more and never will allow a plan to pay less. The ability of the plan sponsor to walk away from the negotiating table is gone forever. Providers will increase their billed charges to establish a new billing amount norm.

Government interference in health care financing in this country almost always brings unintended consequences. The Minimum Loss Ratio requirement is one example. Rather than reducing health care costs, it has turbocharged higher costs faster than a speeding bullet.

The new 2022 health care regulations have unintended consequences too.

In this instance, plan sponsors seeking to make their lives less complicated (and less costly) are moving from the PPO model to the EPO model (Exclusive Provider Organization).

Moving to an EPO model solves a lot of headaches and eliminates balance billing issues for the most part. In the case of emergency room physicians who are not part of the EPO network, the Blue Cross Blue Shield of Texas solution could be applied. We call it the BOP solution (Bend Over And Pay).

A 2016 Sagebrush audit report of the Edinburg ISD self-funded health & welfare plan noted “per BCBSTX policy, BCBSTX paid the emergency room physicians 100% of their billed charges for claims where BCBSTX considered the diagnosis to be emergent. The paid amounts for “emergent” services were in excess of ten times Medicare fees.” (Claim Audit Exposes Managed Care Reimbursement Levels).

Which is better under the new health care regulations – PPO plans vs EPO plans? Reference Based Pricing plans with direct contracts vs Reference Based Pricing Plans without direct contracts? Its up to the reader to decide.

Many will conclude in-network/out-of-network plans are not the way to go anymore. The solution is either no network at all (pure Reference Based Pricing) or a network plan with zero out-of-network benefits.

Reference Based Pricing plans with direct agreements in place may consider methods to avoid some of the new health care regulations and associated sanctions. One method involves restructuring reimbursement delivery while eliminating all direct agreements at the same time, and maintain the same outcomes with the same previously contracted providers.

The following article by Franklin Baumann, M.D. talks about eliminating out-of-network benefits and all the reasons why a self-funded plan will benefit.


Eliminating Out-of-Network Benefits Saves Employers Money and Discourages Fraudulent Claims – SmartLight Analytics

Eliminating out-of-network (OON) benefits in self-funded employee healthcare plans tackles several  problems for employers and benefits administrators: healthcare plan costs, dealing with laborious ERISA out-of-network appeals and the potential for fraud.

Employers and their insurance companies negotiate contracts with in-network healthcare providers and facilities such as hospitals and rehabilitation centers. For out-of-network providers and facilities, however, the employer and insurance payer have little control over billing because there is no such agreement. There are no agreed upon costs for procedures. In such cases, OON providers can essentially bill what they want for services. And because OON providers are not pre-vetted through contract negotiations, it opens the door for fraud, waste, and abuse for those looking for an opportunity.

Employers often provide OON benefits for members such as a 60-40 plan. In such cases, employees using an out-of-network provider will likely have a deductible that is twice the normal amount in an 80-20 plan, their co-insurance could be half and out-of-pocket cost is as much as doubled. Mike Adams, the former head of Dean Foods Benefits & HR  Systems, is a benefits innovator. He advocates for employers eliminating OON benefits. The move to do just that saved the Dean Foods plan spend significantly – an estimated $900,000*. It also closed the door on predatory providers, primarily mental health and substance abuse/alcohol abuse inpatient facilities who were taking advantage of out-of-network benefits and recruiting employees knowing they would be able to manipulate insurance billings while not being a contracted in-network provider.

Employers are often reluctant to look at limiting any OON benefits, however. Adams said employers would be surprised at how easy it is to do and how undisruptive it is for members and employers. With 18,000 employees at Dean Foods, there were possibly five or six cases of employees being impacted that didn’t involve the predatory mental health & substance abuse/alcohol abuse inpatient facilities.  That very low volume was easy to deal with and create workable solutions that the employee and provider were happy with.

“There is the perceived impact and then there is the actual impact. The perception is more onerous than the reality of it. This situation of removing out-of-network benefits initially seems like it is limiting employee choice and freedom but it’s not because 98.5% of claims are in-network anyway.”*

A January 2020 Business Group on Health report said, “eliminating out-of-network (OON) coverage may sound like a disruptive move, but several employers have been successful in steering employees toward higher-quality in-network providers and reducing costs by removing coverage for OON providers.” The report when on to say that employers who had eliminated OON benefits found “the change generated significant savings, contributing to a negative cost trend for the year. Employee noise and disruption were minimal due to an effective communication and transition strategy. In key OON use areas, including physical therapy and substance use disorder treatment, overall patient visits remained steady, but costs decreased, and appropriate care was covered at in-network rates.”1

The problem Adams saw in OON claims was the fraud that existed within those claims: “Predatory facilities are good at saying, ‘We’ll work with your insurance carrier, you don’t worry about being out of network.’ But behind the scenes they are recruiting patients, illegally providing incentives for admissions and creating egregious inpatient bills for extremely low quality and inefficient care. On the employee side, it is an emotional decision for the member. They want to believe the OON provider will work with them on costs.” But these are the situations that end up costing the employer and the employee. By eliminating OON benefits, those who are trying to dupe the system will shy away from those members.

Many doctors and healthcare facilities do not take OON patients or encourage them to go to an in-network provider instead.

“Doctors’ office insurance coordinators are going to do a lot of the work for you; the inherent nature of the process lends itself to fixing itself up front and it not being an issue,” Adams explained. “An unscrupulous provider who knows there is going to be an artificially inflated charge and knows you don’t have a OON benefit is going to be concerned that he or she won’t get paid. The process gets shut down early on and the provider won’t take that member as a patient.”

Plan administrators and insurance companies are armed with exceptions and single-case agreements for situations where an employee may require care out-of-network for a rare or serious illness or in an emergency. In other words, to stop out-of-network benefits in self-funded plans does not mean there are no options for individual situations. But it does mean that employers can reap the benefits of cost savings by eliminating inappropriate out-of-network spending and fraud, waste, and abuse.

“The whole thing … was a huge savings for us,” Adams said of eliminating out-of-network benefits. “I never had a call that an employee had been billed for the difference for an out-of-network provider or got stuck with a big surprise bill. And that is so important because that is a fear.”

The ideal time to make a move to eliminate OON benefits is at the beginning of a new plan year so employees can plan for it during  annual enrollment. Planning and employee awareness as well as extra advocacy/concierge services can help ease an employee population into such a change. As for insurance providers, the change is likely neutral and can be a cleaner process for paying claims. It also gives rise to insurance providers classify as secondary that can reduce the cost of OON claims. In the end, it is the employer’s money on the line. is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

The shared vision of and clients who retain our services is to establish and maintain a comprehensive employee health and welfare plan, identify cost areas that may be improved without cost shifting to any significant degree, and ensure a superior and sustained partnership with a claim administrator responsive to members needs on a level consistent with prudent business practices.

Plan costs, in all areas including fixed expenses and claims are open for review on a continuing basis. Cost effective plan administration and equitable benefit payment to providers are paramount to fulfilling our mutual fiduciary duties. As we proactively monitor and manage an entire benefit program we are open to any suggestions members may make or the dynamic health benefit market may warrant in order to accomplish these goals.

Duty of loyalty to our clients, transparency and accountability are essential to the foundation of our services. To that end, we expect our clients to realize a substantial savings based upon the services that we will deliver.

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