Working The Spread

The Weslaco ISD vs Aetna lawsuit and hundreds like it have exposed certain practices that drive up costs which most plan sponsors are not aware of.

The Weslaco ISD vs Aetna lawsuit exposes the pervasive practice of “working the spread.”

The “Spread” is between the red line and the green line. The green line represents the cost of care as reported to CMS and the red line represents charge master rates. The higher the charge master rates the more third party intermediaries earn. There is no incentive to reduce insurance costs although actual cost of services have remained essentially static over the past 15 years.

Why plan sponsors continue to cling to managed care networks is hard to understand unless you consider the fear factor. Fear of employee backlash. Fear of changing 40 years of doing the same thing over and over again. Plan sponsors need to grow some balls. They cannot continue to cling to motherhood forever.

Update: Since filing their lawsuit over a decade ago and learning the truth about health care financing, the Weslaco Independent School District continues to embrace managed care networks.