Jim Farley, Father of Cost Plus Insurance
“Providers do not balance bill to obtain additional funds. Providers balance bill to disincentivize employer plans from using fixed price, reference based fee schedules.”
Editor’s Note: This article was written by J.P. Farley, the inventor, originator, visionary who championed Reference Based Pricing in the late 1900’s
I read a very interesting article about Reference Based Pricing (Medicare Plus Pricing) in an industry communication written by an attorney at a firm that probably represents more TPAs and others associated with providing service for self-funded plans than anyone in the country. He states: “Providers do not balance bill to obtain additional funds. Providers balance bill to disincentivize employer plans from using fixed price, reference based fee schedules.”
“It has become increasingly clear, therefore, that the only reference based price fee schedule programs left standing are those that belong to plan sponsors that are either willing to have their participants be balance billed or are will to pay fees to organizations that will “deal” with the balance billing,” He further states. “The question is whether the savings are enough to counter the headaches faced along the way”.
There are a few comments that I would add:
There are balance billing issues with current network based plans. Having a network does not remove the issue of balance billing by a number of providers who already choose to be out of network. The number of those providers is growing, not shrinking. These currently represent over 1% of claims in a network based plan. These are also the providers most likely to turn balance bills over to outside collection and report to credit bureaus.
Our experience consistently indicates that dropping a network will cause the number of balance billing issues to go from about 1% of claims to about 2% of claims in the first year. The number falls below 2% after the no network plan has been in effect for a year or longer.
The savings from a no network plan will be about 35% of the cost of a traditional network plan. That savings is more than average current employee contributions to their plan. With an average single premium of over $6,000 per year, the savings available on a single employee is $2,100 per year. For a family the savings (not the premium but the savings on the premium) is over $5,600 per year. Employee contributions can be lower, deductibles and co-insurance can be lower, and employer costs can be lower.
Less that 0.1% of balance bills are serious enough to get turned over to outside collectors and most of that is already occurring with a network. However, once a bill goes to this level it is actually much easier and effective to defend a patient from any ill effects due to a big increase in consumer protections afforded. In the past year of 80 bills that reached this point, only 1 had any follow-up by the collectors. Once collectors realize a patient is being defended, they discontinue collection efforts. The effort is too hard for them to pursue the matter.
We hear a fair number of upper middle and upper management people say that the hassle of the extra balance billing is not worth the savings. That may be true for someone with a family income in excess of $150,000 but it is really hard to believe for most average workers. It has been our experience that as long as the plan will pay a small amount to defend the employees when providers attempt to balance bill, employees are very, very supportive and appreciative the benefit (drastically lower cost) that Medicare Plus pricing will produce. These employees are the people being disproportionately harmed by the results of the current network arrangements. They are glad to have someone trying to help them out of the problem and save them some money.
Remember, “Providers do not balance bill to obtain additional funds. Providers balance bill to disincentive employer plans from using fixed price, reference based fee schedules.
