Traditional Bidding of Group Health Insurance Does Not Save Money

Many of us bid out our group medical insurance hoping that we will save money. We bid out claim administration, stop loss cover, large case management, etc. We even bid out PPO network access.

But we have all found that this does not really save us money. We may shave a few points off our current costs temporarily, but inevitably we face cost increases month after month, year after year without ending.

Maybe we should consider a different approach to bidding competitive cover. If claims account for 80% or more of our costs, then should we not focus on claims versus insurance cover, administration fees and other incidental plan expenses?

“Well”, you may say, “We bid out PPO networks and get the best deal we can on contracted rates with medical providers. We even ask vendors to re-price claims to see which vendor has the best and steepest discounts!”

Molly Mulebriar, investigative reporterette and health care bulldog points out the problems with comparing PPO pricing:

“First, you cant see or even review a PPO contract. Next, not all providers within a network have the same contract. Plus, there are side agreements to many of these contracts that stipulate kickbacks. And, PPO contracts generally have an Evergreen Clause that give providers an automatic renewal as well as an automatic pay raise each year. So, with a PPO re-pricing exercise, 1/12th of all claims to be repriced are subject to increased costs as per the various PPO contracts in place.  Negotiated reimbursement rates are in a continuous flux. Awarding a PPO contract that you cannot adequately evaluate is tantamount to gifting a company’s treasury without accountability and violates a Plan Sponsor’s fiduciary duties.”

Plan Sponsors need to bid out provider fees directly with the provider community. Or unilaterally pay providers a fair and reasonable fee using a universal benchmark such as Medicare rates, or published Charge-to-Cost ratios. Only then will a Plan Sponsor regain control of runaway health care costs.

Editor’s Note: In essense, we have all been guilty of chasing nickle and dimes and not aiddressing the core issue of health care costs – providers continue to charge too much and we let them do it behind the protection of secretive and elusive PPO contracts arranged by biased third party intermediaries who are not our friends. Managed Care Under Siege