Paying health insurance claims is more than just paying providers. You’ve got to pay a whole lot of other people first and it’s adding up fast.
The majority of health plans are self-funded. According to KFF, an independent source for health policy research- 67% percent of American workers, including 23% of covered workers in small firms and 84% in large firms, are enrolled in plans that are self-funded.
Most self-funded plans see all the costs associated with their health plan while fully-insured plan sponsors have no clue. That’s too bad because if they knew were all their money was going before claims are paid they may be surprised.
Self-funded health plans administered by independent third party administrators have expenses that often add up to well over $100 pepm not including stop loss insurance. PPO network access fees, large case management fees, disease management fees, audit fees, legal fees, repricing fees, wellness fees, compliance fees, risk placement fees (commissions), concierge fees, capitated fees, claim administration fees, record keeping fees and more.
But don’t fool yourself. Self-funded plans administered by a BUCA have many of the same cost components although you would never know it. Hiding fees on the fixed cost side of the ledger is a time honor tradition.
In either case not a claim is paid before all these fees are paid.
Years ago I shocked a city council when I presented my findings on their self-funded health and dental plan. Little did they know they were paying $127 for a dental cleaning when local dentists were charging less than half of that. The difference was cost of administration based on their historical claim data.
Keeping third party fees as low as possible is worth the effort and entirely possible. More importantly, keeping claim costs low can be just as easy if you know how.
On average, a well managed comprehensive health plan should cost no more than $400 per month for single coverage and no more than $12,000 for family coverage. The key is keeping fixed costs as low as possible and careful common sense management of claims.
