Risk Managers

Jeff Barber- Congressional Testimony

Editor’s Note: Jeff Barber is a forensic auditor in El Paso, Texas. He can be reached at 915-757-7819

Claim administrator ignores hospital’s billed charges – pays cost plus 12%.  Article states that discounts off billed charges have increased over the years, yet costs keep going up. A shell game?

What makes more sense – cost plus 12% or a “discount” off billed charges? 

With hospital’s real costs, insurers, individuals can negotiate prices News for Dallas, Texas Dallas Morning News Jim Landers Business Columnist Dallas Morning News

Editor’s Note: PPO network representatives, carriers, hospital administrators and bloated insurance brokers are seething. Lucrative revenue streams are threatened. If money drives behaviour, how are hospitals going to fight dastardly cost-plus warriors? Will hospitals “play ball”  or gather their marbles and go home?

An excerpt from trial records gives one a clue to hospital Charge Masters – “The total bill for Mrs. Doe’s hospital stay was $6,731.05. This amount was determined according to the hospital’s “Charge Master”, a confidential list of charges made by the hospital for all its goods and services, which is used to compute charges for all private commercial patients who are treated on a fee-for-service basis. The Charge Master is compiled and maintained by the hospital’s chief financial officier on the hospital’s computer system. In 1991, the Charge Master contained approximately 295 pages and listed prices for approximately 7,650 items. The Charge Master is considered confidential proprietary information and is not shown to anyone other than the officers and employees of the hospital and authorized consultants. The Charge Master is adjusted on a weekly basis to reflect current cost data; the hospital’s costs are marked up by a mathematical formula designed to produce a targeted amount of profit for the hospital. When the Charge Master is adjusted on the hospital’s computer, the hospital does not preserve or archive the earlier versions of the Charge Master.”   Hospital Charge Master

Editor’s Note: Seems to us that  hospitals us their Charge Master as the basis a cost-plus pricing methodology. If that is true, then why do hospitals insist on negotiating pricing with payers on the basis of “discounts off billed charges” rather than a more transparent cost-plus model?”

The cost-plus method of paying hospital bills seems to make sense to many employers, with a growing number switching their plans from “secretly” negotiated PPO contracts to a fully transparent model. Cost savings achieved have been documented to be as high as 40% or more.  Bill Miller Forbes

Cost based pricing makes sense for several reasons. First, the method of pricing is relatively simple and straightforward. Second, in the past hospitals were primarily reimbursed based on costs and to go back to that method of reimbursement is not stepping into new territory. Third, when prices are based on costs, they are generally perceived to be equitable and justifiable. This could be particularly important in view of the current national health care debate –  health care has become a social issue rather than a predominately economic one.

Although cost-plus makes sense to many, hospital administrators we have met  are slow to embrace the concept. While they agree that cost plus makes sense, they cite many reasons for their opposition. “We can’t accept a cost-plus method, what would all our other contracted payers think! – we can’t give you a better deal than we gave all the others!”  “That would violate our Favored Nations Clause with ABC Insurance Company.” “We can’t track a cost-plus method internally, our bookkeeping system won’t allow it.”  Or, “our cost, as reported to CMS, is really not completely accurate (wink, wink) and therefore you won’t be able to know what our true costs are – consequently a cost-plus arrangement would be impossible to quantify both internally and externally – therefore we would be happy to talk to you about discounts off our billed charges.”

Hospitals insist that the only fair and equitable way to develop a reimbursement methodology is to embrace their concept; discount off billed charges. Yet, what are the billed charges and how are they developed? Will hospitals provide their Charge Master pricing to the public? Is there a relationship between billed charges and cost?

In reality, discounts are meaningless. One hospital could offer steeper discounts than another, yet still be the higher cost hospital. Cost plus seems a more logical and prudent business practice. It is a concept hard to argue against.

Insurance consultant’s worst fears are vendors who publicly question the validity of their work product. That is especially true if a vendor presents “facts” to support their contention that the consultant’s recommendation/s are based on data that is flawed, fradulent, tainted, incomplete, skewed, misrepresented, or does not generally support the consultant’s recommendation/s in a clear, concise and unquestionably logical way.

Insurance consultants are wise to document all activity as relates to work performed on behalf of his client. All telephone conversations should be memorialized to file, all emails saved, spreadsheets double checked for accuracy, vendor sign off on the consultant’s work product to be presented to his client, careful review of all proposals received and all correspondence between the consultant and his client, as well as all correspondence with vendors, should be kept to file. It is incumbent upon the consultant to document all activities to protect against “vendor backlash”, especially when working with political subdivisions such as the Brownsville Independent School District. E&O Insurance policies may require this as well.

Yesterday at the Brownsville Independent School District, a HealthSmart presentation to the Board of Trustees questioned the work product of the district’s insurance consultant. Contrary to the consultant’s representations to the district (upon which the Board of Trustees awarded a $38 million health insurance contract), the representative from HealthSmart attempted to “set the record straight” by providing “facts.”

If a consultant represents that Company “A” is less expensive than Company “B”, but a vendor goes on public record and states that Company “A” is more expensive that Company “B”, would it not be true that one or the other may be misinformed? If PPO Network “A” has better discounts than PPO Network “B” according to the consultant, then how can PPO Network “B” be better according to the vendor? If premium for stop loss insurance is lower for Stop Loss Company “A” ,according to the consultant, than for Stop Loss Company “B”, then how can a vendor support the statement that Stop Loss Company “B” is less expensive?

If, as the HealthSmart representative stated, that moving the $38 million contract from HealthSmart to the recommended vendor will cost the district (taxpayers) more, then who are we to believe? Do we believe the “expert” consultant, or do we believe HealthSmart who lost the business? The presentation by the HealthSmart representative, in our view, was compelling.

There is one way to ferret out the truth. A careful review of all documents submitted during the request for proposal process should put to rest any alleged descrepancies. We have asked under the Open Records Act for documents relating to the BISD proposal process. Once we receive this public information, our staff will devote the time and resources necessary to evaluate the proposals in question to determine the truth. We will publish the results on this weblog, with detailed documentation.

In light of this apparent controversy, it would not surprise us if all of the other vendors (as many as 21 different companies) who submitted proposals under the BISD health insurance request for proposal process, ask for copies of the consultant’s work product in order to determine if their proposals were accurately and fairly presented to the Board of Trustees.

Editor’s Note: It will be interesting to review the various contracts to be issued with the new health insurance plan. Will the contracts be part of the public record? Or will the contracts be proprietary and unavailable to the public? Will the various contracts be directly with the BISD, or will some or all of the contracts be with third parties? For example, will the Pharmacy Benefit Manager contract be with BISD, or will the contract be with the TPA? Will all the contracts contain a “right to audit” clause that favors BISD, or one that favors the vendor? Will the contracts disclose financial arrangements with parties to the contract?  Will all vendors be required to sign a disclaimer clause stating that they will receive no additional renumeration of any kind other than what is disclosed in the contract?

Email received recently from a consultant friend of ours up North:

“Hey All, this piece really says it all about all these network savings analysis’ by insurance carriers…..well written from a PPO in the Carolinas. I plan on posting it to my website. Even using the best methods of comparison that they recommend, it’s still a crap shoot as to the savings…………….of course this is all the stuff that the “consultants” who place all their business with the carriers are not saying…………..besides, a good majority of them dont know S__T from shine-ola (as my Dad used to say) and wouldn’t understand this if they read it.”

“Some of you who I am sending this to are struggling with these issues right now. Best of Luck!”

medcost-white-paper                                  http://www.medcost.com/

Alan T. Sorensen wrote a treatise on PPO discounts. He is affiliated with the Graduate School of Business, Stanford University. Below are a few excerpts in which he exposes some basic fallacies we all have been educated to believe.

“Payer size appears to affect bargaining power, but the economic significance of the effect is small. Much larger that the effect of payer size is the influence of payer’s abilities to “move market share” by channeling patients to hospitals with which favorable discounts have been negotiated.”

Interpretation: Size matters little, steerage matters greatly. However, when you look at the provider panels of PPO networks, you see almost every hospital on the network – therefore little or no steerage – we dont have PPO’s anymore, we have APO’s (all providers network).

“Pauly (1998) has noted (and the data here confirm) that even very small managed care organizations (MCO’s) often negotiate substantial discounts from hospitals.”

Interpretation: Size matters little

“Results from an econometric model suggest patient channeling is relatively more important than payor size in determining discount magnitudes; in particular, the impact on discounts of a one standard deviation increase in a payer’s ability to channel patients is roughly eight times larger than the impact on an equivalent increase in payer size.”

Interpretation: Size is not as important as steerage

“The second difficulty inherent in this study is that hospital’s listed rates may vary, so that reported discounts may reflect percentages of unequal bases. For instance, if two hospitals charge $200 and $180 (respectively) for the same procedure, and a payer negotiates a 10% discount at the first hospital but no discount at the other, the data will indicate that the payer has a more favorable discount agreement with the first hos;pital even though it pays the same price at either facility.”

Interpretation: Discounts off billed charges mean little when comparing PPO discounts

“The point estimate suggests that increasing a payer’s hospital payments in a county by 10% would enable the payer to extract an additional one tenth of a percentage point in discount negotiations with hospitals. Although this effect is statistically distinguishable from zero, its apparent economic significance is very small.”

Interpretation: Size matters little

Editor’s Note: Bigger is Better, or is it? Not according to this expert. How many times have you heard a group representative for one of the national carriers tout their “superior” discounts due to their large market clout? How then, did a small company out of San Angelo, Texas, for example, assist the Tyler Independent School District in negotiating better provider contracts and save +40%  without reducing benefits? Could the answer be “Steerage?”

For a copy of Mr. Sorensen’s treatise, email RiskManager@sbcglobal.net

Any devoted reader of this weblog will understand how we feel about Preferred Provider Organizations (PPO) and the value they bring to medical plan payers. All PPO’s, both rental networks and proprietary networks, will tell you that their discounts are the best. Yet none will show your their contracts with physicians and hospitals as they are “confidental and proprietary.” So, is there another way to prove that one network has deeper discounts than another?  Yes, say many insurance consultants, “let’s re-price a couple of claims through different PPO networks – we will certainly be able to distinguish the best discounts from the worst discounts.” This makes sense, or does it?

In prior postings we have attempted to show the reader that a claim re-pricing exercise is not an accurate method to determine a correlation between various networks. In fact, the process lends itself to fraud, whether intentional or not.

In the Brownsville Independent School District case, a large 7,500 employee South Texas employer, the PPO network discounts issue has been the driving factor in the district’s recent decision to change from the HealthSmart PPO network back to the Texas True Choice PPO network (effective October 1, 2009).  As a reminder to the reader, Texas True Choice was the district’s PPO provider prior to Healthsmart.

The district’s insurance consultant recently stated at a school board meeting that a change from HealthSmart to Texas True Choice, “assuming the same exact claims occur next year, will save the district anywhere from $4.5 million to $5 million next year.” That is a very bold statement indeed. Can the consultant back this up with solid evidence, or was a sample claim re-pricing method used to come up with this astounding figure.  Why would the local provider community willingly forgo $5 million in lost profits?

In February, 2007, at the time the Brownsville Independent School District was using the Texas True Choice PPO network, the district hired MedReview, LLC, a medical claim audit specialist firm with offices in Denver, Chicago, Philadelphia, Scottsdale, AZ and Thomasville, GA, to audit the district’s group medical claims.  (http://www.medreviewllc.com ) MedReview audited claims paid between October 1, 2004 and September 30, 2006, a period of time during which all claims were subject to the Texas True Choice PPO network discounts.

The objectives of the medical claims audit included, among five catagories, analyze “actual discounts produced by the provider network (Texas True Choice).” – Page 1 of the MedReview Report as submitted to the Board of Trustees.

“The audit covered all claims incurred during the period October 1, 2004 through September 30, 2006. For this period, Mutual of Omaha (acting at third party administrator of the plan – Texas True Choice was the PPO network) provided an electronic claims file which contained a total of 148,323 claims with total paid amounts of $54,579,542.” (page 4). ………….”A number of claims were identified that had been re-priced, or discounted, incorrectly by Mutual of Omaha which resulted in claim overpayments of $561,803.35.”

In addressing provider network discounts, MedReview wrote “During the audit period, the Texas True Choice network delivered an average discount of 34.2% on professional claims, 45.5% on facility claims, and 41.0% on all claims. Please note these calculations are based on all claims and all providers. It is not uncommon for provider networks to inflate their average discounts by excluding some types of providers that historically, give very small discounts, i.e, children’s hospitals.”

So, if MedReview’s analysis is correct, how do these “discounts” compare to HealthSmart’s discounts? Is there a $4.5-$5 million difference between the two?

Do the HealthSmart discounts for the twelve month period ending June 30, 2009 match or exceed the discounts achieved by Texas True Choice as reported by MedReview? Did 7 premature births skew the numbers? Was that taken into account by the consultant? Did the consultant re-price 100% of the claims as recommended by MedReview, or did the consultant re-price only a few selected claims?

In our opinion, after exhaustive analysis of various PPO networks over the past two years, as well as obtaining actual PPO contracts, both physician and hospital from various PPO networks, (we have a Blue Cross Hospital Contract, for example) it is our stand that PPO network discounts do not vary by much. With all hospitals joining almost all networks, there is little incentive to give one network a much better deal than another.  truth-about-ppo-discounts

The MedReview report is eye opening. It has good information which the Brownsville Independent School District would be wise to use in managing their health care costs. For example, the report shows that one physcian had 10,540 claims from BISD employees. The next highest physician regarding number of claims was 2,928. A review of physician #1’s claims as compared to his competitior’s charges would be most interesting to a bonafide risk manager. The most utilized hospital was Columbia Valley RMC. with a total of 2,625 claims as compared to Valley Baptist with 2,405 claims.

The Brownsville Independent School District should eliminate their participation in any PPO network and negotiate contracts direct with interested providers. Tyler Independent School District did just that four years ago and have cut their claim costs by 40-50% while maintaining superior benefits – much better benefits than those in place for employees of the Brownsville Independent School District. (www.gma-usa.com)

Most are not aware that physicians and hospitals will, and do, compete for business. Yet, we all still continue to rely on third parties to negotiate “discounts” on our behalf as third party beneficiaries of PPO contracts. Of course, we really dont know how good a job the PPO’s have done on our behalf in negotiating “good deals” for us. The “Trust Me” factor may be costing us money.  bill-miller-forbes

Editor’s Note: For a copy of the MedReview Audit Report, email RiskManager@sbcglobal.net.

hr-3200-lewin_public_plan_national_all

“………………………..you cancel a healthcare contract with one of the largest health care group insurance providers and award it to an unknown company from Oklahoma, with few staff, only one nurse and no track record.”

A new website, www.carebrownsville.org calls for the ouster of four of the Brownsville Independent School District’s school board members. Concern is expressed on the district’s recent decision to change health insurance providers. How this plays out will be more than interesting.

A $40,000 funded compaign is rumored to be spent towards billboard advertising and television spots to be aired 200 times between today and Monday, just in time for next Tuesday’s scheduled school board meeting. (http://www.bisd.us/PDFs/Board_Agendas/09_10/Agenda%2009_01_09_Agenda.pdf) Who is behind this? Could it be Carlos Quintinilla of Accion America?  (http://www.accionamerica.com/)   

Carlos “The Bull Dog” Quintinilla

Pain management can be costly. Recently we had a client who was charged close to $1 million by a pain management clinic on a single employee who sought treatment at the clinic during a 12 month period. We intervened and questioned the costs of procedures. We received an analysis from another physician who reviewed the medical case notes, and found the treatment plan “irresponsible and unncecessary.”

Today, we were notified that the same pain management clinic is treating another client of ours, with ten office visits thus far costing the employer’s self-funded plan in excess of $13,000.

Of course, the patients have no clue as to the charges submitted by this physician.

http://portland.bizjournals.com/portland/stories/2004/11/22/focus1.html

Medical tourism is catching on fast with over 500,000 Americans seeking medical care abroad last year. Some self-funded employer groups are offering a voluntary medical tourism benefit as a method to achieve plan savings through use of accredited foreign hospitals. However, some are concerned about liability issues involved with foreign medical services. AOS, a Barbados based insurance company, has developed a product to address these concerns – http://www.aosassurance.bb/PublicHtml/malpractice_insurance.htm.

Of course, due dilligence is always paramount before placing cover.

BEIJING – China has launched a national organ donation system to try to reduce its dependence on body parts harvested from executed prisoners, who make up the majority of donors, state media reported Wednesday. http://news.yahoo.com/s/ap/20090826/ap_on_re_as/as_china_organ_transplants

The National Association of Purchasing Management, RGV Chapter, is having their annual conference on South Padre island next month. Purchasing managers from throughout the state attend this annual event. For more information go to www.napmrgv.org.

Here we go………………..Illinois approves insurance contingent commissions. RIMS voices opposition – cites Conflict of Interests.

http://www.property-casualty.com/News/2009/7/Pages/RIMS-Fears-All-Brokers-Will-Get-Contingent-Fee-Okay.aspx

http://www.tpadirectory.com/

http://online.wsj.com/article/SB10001424052970203946904574298661486528186.html

New Plan For Asian-American Market With Asian-Americans being one of the fastest growing segments of the Texas labor force, we have created health plans and services specifically aligned to this emerging demographic. As of Aug. 25, 2009, you can begin offering the new UnitedHealthcare AsianTreasureSM Plan to groups with 2 to 99 eligible employees. Plan Benefits and Services Tailored to Asian Americans’ medical, linguistic and cultural needs, the plan includes: 20 acupuncture visits per member per year with just an office visit copayment for selected plans. Asian language broker service lines. Network-based Asian physician and acupuncturist. Health management and educational programs on Asian medical conditions. Tools and services in Asian languages. Plan Designs Your clients can choose from over 33 different plan designs with competitive prices including: Wide range of flat-dollar copayment choices for many common services Primary physician office visits ($25 to $35) Specialist office visits ($50 to $60) Urgent care visits ($75 to $100) Wide range of coinsurance choices Network (70%-100%) Non-network (60%-70%) Calendar year and policy-year plans available Deductible included in out-of-pocket maximum Broker Toolkit Available The AsianTreasure Broker Toolkit contains everything you need to make a successful presentation including: product grid, presentation deck, health tip sheet, sell sheet, product Q & A and more. For more information about the AsianTreasure plan or to obtain your broker toolkit, please contact your UnitedHealthcare representative.

© 2009 United HealthCare Services, Inc.

Self funded employer groups are seeing savings as much as 75% by sending employees out-of-state for medical treatment – http://www.businessinsurance.com/article/20090823/ISSUE01/308239988. How about a heart bypass surgery for a global pricing of $10,000?

http://hotairpundit.blogspot.com/2009/08/marine-corp-veteran-at-town-hall.html

Need life insurance on an insurable interest (person) but dont want the insured to know the policy exists? A divorce in which the spouse pays alimony? – http://www.globalriskbroker.com/Life%20Insurance/Confidential%20Insurable%20Interest%20Life%20Insurance.htm

 

http://www.insurancejournal.com/news/national/2009/01/06/96760.htm

http://www.riskvue.com/articles/fs/fs0412.htm

This article was written by Joe Paduda (www.joepaduda.com)

PPOs, or Preferred Provider Organizations, have been around for a couple dozen years. They are networks of credentialed (with varying degrees of rigor) doctors, hospitals, and ancillary providers that have agreed to provide lower rates for ‘members’ in return for some measure of exclusivity/promise that patients will be directed to use them. I’d note that this ‘promise’ is often not fulfilled, at least in the eye of the provider. That’s a whole separate issue, one we will likely get to in a future post.

As one good friend puts it, ‘PPOs are a box of contracts’, and not many PPO firms do much more than recruit, credential, negotiate, and contract.

Their popularity waxes and wanes, roughly in line with the underwriting cycle (as cost trends decrease, PPOs tend to grow, as cost trends increase, buyers seek more controlled networks and medical management systems).

Typically PPOs are owned by a large group health plan or specialty company such as a workers comp managed care firm. Many PPOs were built to market/sell to health plans and workers comp payers – Rockport, Coventry, and Interplan are examples of ‘vended PPOs’, as opposed to those built for the exclusive use of a healthplan.

The problem

There can be several issues with PPOs; lack of direction by the payer, inaccurate data, failure to maintain credentialing standards and ‘stacking’ are some of the more prevalent.

But of late another issue has been appearing more and more frequently – providers claiming they are not subject to a PPO contract and therefore should be reimbursed at U&C, or in the case of workers comp in many states, the state fee schedule.

Digging into the disagreements that arise when payers assert the providers are subject to a contracted discount, it looks like there are a few contributing factors.

First, some providers have contracts with many health plans and networks, and it canbe tough to keep them all straight. And, the PPO may have changed its name, merged with another firm, or been acquired since the original PPO contract was signed.

Those are the easy ones.

A knottier issue is caused by the mechanism of ‘provider selection’. When the provider’s bill comes into the healthplan/bill repricer, it is ‘checked’ against a database to determine if it is from a contracted, or participating, provider (known as a ‘par’ provider). This checking could occur either at the health plan/repricer, or the bills could be electronically sent to the PPO for the PPO to check par status and apply the discount.

What determines ‘par’ status is often the source of the problem. For example, PPOs want as many ‘hits’ as possible, so they err on the side of counting a provider as par if at all possible. The more hits, the more money they make (often), and the better they look to the payer. Payers like more hits because then the managed care folks can show the savings they deliver due to the discounts. So the payer side of the equation is motivated to use logic that assigns as many bills as possible to the par bucket.

To do that, payers often use a provider TIN (tax identification number) as the only criterion to determine par status. If a bill is from a provider with a TIN that matches some contract somewhere in the PPO company’s database, than the discount is taken. Payers may also use address, provider first name last name, and/or phone, but most try to use as few criteria as possible.

But large provider groups and hospitals and health systems often use the same TIN for many different service areas – outpatient surgery, inpatient, rehab, pharmacy, hospitalists, occupational medicine. And they rarely offer the same discount deal across all service types and locations. Some service types may not even participate due to the internal structure and demands of the health system.

Here’s real world example, provided by a consulting client. A bill from an occ med clinic hits a payer, who determines it is a par provider due solely to the TIN match. A 30% discount is taken, and the check cut. But the occ med clinic is not part of the original contract, which specifically states that discount is for inpatient medical services only.

The provider complains to the payer, who contacts the PPO, who eventually pulls the contract, says ‘oh, yeah, here’s the problem’, asks the occ med clinic to resubmit the bill, after which the bill may – or may not – be paid correctly.

Now multiply this by the hundreds, and it is easy to understand why some providers, fed up by the paperchase, are getting downright litigious. This leads to providers suing payers over a few dollars on an office visit – not to get those few dollars, but to force the payer to apply the correct repricing methodology.

If the PPO is the one doing the repricing (as is often the case), there is considerably less incentive to fix the problem. The PPO doesn’t have to handle all the calls (although in many cases they are involved at some level), figures many providers will not fight it as it isn’t worth it, and even if they do that’s a small price to pay for all those fees.

And that’s one major reason there’s so much litigation in the PPO world these days.

http://www.youtube.com/watch?v=G44NCvNDLfc&eurl=http%3A%2F%2Fwww%2Emikerogers%2Ehouse%2Egov%2F&feature=player_embedded

“Large, broad-based, national PPOs have been faltering of late, as their ability to extract discounts from providers, especially hospitals, has diminished. Over the last few years we’ve seen the PPO market consolidate, with Beech bought by Concentra, First Health take over CCN, Coventry acquiring Concentra and First Health, and Aetna’s purchase of PPOM. ”

“Expect this to continue, but it’s a losing game. PPOs are a cost containment solution that has fallen out of favor. While there will always be a place for them (think out of area coverage, work comp, companies with widely spread workers) they will continue to lose share to more tightly managed networks, vertically integrated systems, and Blues plans. “

 http://www.joepaduda.com/archives/001600.html

 

Some policitical subdivisions are afflicted with a continuous  and consistant history of political business decisions rather than business, business decisions.  An astute and seasoned insurance broker does his homework first, prior to spending time and money chasing sales through a public bid process.

Some of the questions an insurance vendor would be wise to find answers, to evaluate his/her chances of success include: Does the political subdivision have a history of making political business decisions, or do they have a history of making prudent business decisions? Do they change insurance carriers and agents everytime a new Board of Trustees is elected? Who did they hire to act as their independent fee based insurance consultant? What is the track record of the consultant? Based on historical performance who does he seem to favor most often?  Do the carriers who have historically been awarded the business pay undisclosed fees and commissions? And which carriers do not as a matter of business practice?  Have past bid packages included complete and documented claim data, or has past bid packages provided sketchy and incomplete claim data? And, finally, an understanding of local politics is important in the insurance agent’s evaluation of his chances.

The “Art of War” should be required reading of those in the insurance industry specializing in political subdivisions. A battle to win can be fought within the enemy ranks without bloodshed – spys win wars, not battle ready soldiers.

Molly Mulebriar, a direct descendent of Nostradamus, offered her predictions on the Brownsville Independent School District’s move to change health insurance companies, agents and consultant/s back on April 27, 2009 on this weblog. To view her predictions, go to the April archives and find the posting dated 27 April. The password is “bidrigging”.

This is long, but well worth the read.  It summarizes one of the “root” causes of the health care mess we’re in.  Just follow the $…

the-atlantic-online-_-septe

Editor’s Note: This was sent to me by a medical doctor friend of mine in West Texas. I forwarded this to many of my insurance contacts within the industry – Many have written back stating that this is the best article on our health care system they have ever read. It is a long read, buy extremely interesting and informative.

Harlingen Independent School District last week rejected what was purported to be the best and lowest health insurance proposal from Blue Cross & Blue Shield of Texas. Despite the recommendation of the district’s insurance consultant (as reported by the Valley Morning Star) to award Blue Cross the contract, the district awarded the group health insurance contract instead to Valley Baptist Health Plans. The Board of Trustees voted to retain Valley Baptist on a split vote.

A week earlier, the same insurance consultant recommended the Blue Cross Blue Shield proposal be awarded as the City of Harlingen’s health plan, but that too was rejected by the City Council on a split vote basis.

Rumors abound that the consultant for both entities may be on a suicide watch.

It has been a bad two weeks for eager Blue Cross sales representatives it seems. Touting superior PPO discounts and low rates, Blue Cross sales representatives have become enthusiastic order takes of late.  With strong financial reserves, a systematic draw-down of reserves through below market rates is current strategy it appears. 

The insurance community is small and will take note of these developments. Future RFP’s by either entitiy may be problematic for some potential vendors. Such are the pitfalls of bidding on political subdivisions.

Editor’s Note: See Jan. 4, 2009 post “Political Subdivisions Sometimes (Or All The Time) Make Political Business Decisions”  

 

David (Robert “Take No Prisoners” Rodriguez) Slays Goliath (Jeff “Im Clueless” Jacobi) In Harlingen

 

 Blue Cross agent from Harlingen

The Brownsville Independent School District insurance story will not go away anytime soon it seems. This front page leading story in today’s Brownsville Herald may portend of legal proceedings to come.

One good thing about a lawsuit is that the facts are exposed for what they are and become public record.

.brownsvilleherald.com/news/lost-101281-district-administer.html

Our in-house forensic experts have successfully un-redacted the partially redacted tape (see previous posting; Consultant Touts Credentials). Below is the complete un-redacted transcript:

‘Just as background, just so’s you’ll know, about ah oh early mid 90’s there was a great deal of concern in the insurance industry about whether or not an individual’s licensed as an agent or licensed as a consultant. So working with the State Insurance Board, we came up with license a requirement for health insurance counselor specifically (to health the insurance industry)  I worked with the State Board of Insurance in developing that program and questions and also approached them also with the requirements of that process because we were having a great deal of trouble with consultants that were getting cases at a very low rate and them taking commissions on the back side.  I work very closely with the Department of Insurance with one of their divisions in the fraud area to help resolve those things that occurred throughout the state with other agents involved.  That can be confirmed very easily if you wanna call Mr. Mike Gieslen with the department of insurance.”

Facts:

1. The Texas Department of Insurance issued Life & Health Counselor licenses as far back as the 1980’s.

2. The Brownsville Independent School District fee-based insurance consultant did not obtain his Life & Health Insurance Counselor license until 2002.

3. Mike Geislin, Texas Department of Insurance Commissioner was not employed by the TDI in the early to mid 1990’s and was not appointed as Commissioner until 2005.

We report, you decide.

http://www.taxfoundation.org/publications/show/24997.html

Molly Mulebrier returned today from a secret undercover assignment and is being debriefed by our staff. Contrary to published reports, Ms. Mulbrier was not on assignment to the Congo and was not banished from this blog – that was a brilliant ruse initiated by the editorial staff here to throw off private investigators and insurance brokers seeking the Brownsville Independent School health insurance contract.

Although our debriefing is not complete at this time, we are encouraged at the amount of factual information our investigative reporter has obtained. Actuarial data dating back to 1999 has surfaced, for the first time. This is a significant discovery with tremendous implications to the integrety of the request for proposal process.

As location, location, location applies to real estate, data, data, data applies to underwriting a competitive group health insurance program. He who has data wins, he who has good data wins a lot, and he who has real time data wins all the time.

We expect Mulebrier’s debriefing to continue over the weekend. Our team of private investigators have sworn an oath of secrecy until all information can be confirmed by Don Pedro and his editorial staff.

Recently, at a Special Called School Board Meeting, a member of the school board asked their insurance consultant if he was to receive any fees whatsoever from any source other than the fee paid to him by the district. His response was:

“Just as background, just so’s you’ll know, about ah oh early mid 90’s there was a great deal of concern in the insurance industry about whether or not an individual’s licensed as an agent or licensed as a consultant. So working with the State Insurance Board, we came up with license a requirement for health insurance counselor specifically (to health insurance)   I worked with the State Board of Insurance in developing that program and approached them also with the requirements of that process because we were having a great deal of trouble with consultants that were getting paid *********.   I work very closely with the Department of Insurance ******* fraud to help resolve those things that occurred throughout the state *******   That can be confirmed very easily.   *******”

So, we tried to confirm this.

Here are the Facts:

Texas Department of Insurance has been issuing Life & Health Couselor License since the 1980’s. The consultant stated that he worked with TDI in the 1990’s to develop the license. He was granted a Life & Health Counselor license on 8-21-2002.

We report, you decide.

Editor’s Note: The transcript above was from a tape of the meeting obtained by our staff this morning. The redacted parts of the transcript were parts of the tape that were overridden by exclamations of disbelief of the person taping the meeting. Excerpts of the redacted parts went something like this: Damn, I cant believe he said that!

A careful review of the entire tape reveals disturbing contridictions which we will not get into here. We believe a more formal setting for review and discussion is appropriate.

 

 

Today I witnessed an extraordinary meeting wherein a deep South Texas public school district, employing over 7,000 teachers and support staff, awarded a $38,000,000+ group health insurance contract to a new vendor recommended by a paid insurance consultant.

Being in the insurance industry for almost 40 years, I had a distinct advantage over most of the spectators who attended since I know the business and understand the semantics. What I heard at the meeting concerns me deeply, especially as a taxpayer of the Brownsville Independent School District.

The BISD fired the current claim administrator to “save money.” That is nonsense. A claim administrator does not save money for a client, they simply process claims.

If, as explained, the BISD claims went up last year, was it determined why? Not from what I heard listening to the paid insurance “expert.” All I heard was that a “claim re-pricing” exercise was employed.  A claim re-pricing exercise does not work, and I can prove it.

None of what I heard at this meeting adds up. I have a lot of unaswered questions. There must be more to this mystery.

Arnulfo “Half Pregnant, Half Guilty” Olivarez, whose sentencing was set for this coming Friday, will now have his day in court in time for the Thanksgiving holidays. The sentencing is set for 9:30 am on November 24.

This is at least the fifth time Half Guilty, Half Pregnant Olivarez has had his sentencing delayed. Could it be that the Feds want to keep him “on ice” for possible future indictments of fellow consipirators and then a plea deal in return for cooperation brokered with the Judge?

The Brownsville Independent School District will be meeting tomorrow to award third party administration services for their self-funded health insurance plan. The current TPA is HealthSmart which has everything to lose and nothing to gain from the BISD request for proposal process.

Rising medical costs to the school district is the driving factor to change TPA’s it seems. But that makes no sense at all since a TPA simply administers claims and have nothing at all to do with setting medical provider reimbursements. Could the proposed change have anything to do with a new Board of Trustees elected last fall?

If the BISD is concerned about rising medical cost, they should directly negotiate with area hospitals and doctors as did the Tyler Independent School District four years ago. Their costs dropped over 40% the first year, and Tyler has not had to reduce benefits or increase plan funding since.

http://m.brownsvilleherald.com/brownsville/db_15631/contentdetail.htm?contentguid=cFLcNwSU&src=cat

Ever wonder what motivates your insurance consultant? Is he or she really looking out for your best interests or are there underlying motives at play?  Finally, a new device just released will help you to uncover hidden agendas and ulterior motives that may be affecting your bottom line.

Included with your order will be sample questions that experts say will uncover the darkest and deepest secrets of most fee based insurance consultants. A sample includes “Have you been promised addtional business from a vendor prior to the award of the contract?”, “Have you given our current insurance company the same opportunities that you have given the vendor that you are recommending?”, “Have you blackballed any interested vendor from competing for our business?”  “Who really did this analysis – you or the vendor you are recommending?”

We are excited about this new technology and intend to try it out soon.  If you have a test case for us, we would be happy to lend you our Truth Detector at no charge for the month of August.

You may order your very own truth detector from this website – supplies are limited so order today.

 

Enhanced Truth Detector Available for $99.95

Ever have to change TPA’s but you are not sure if the one that looks the best is really the best?  A name change three times in four years could be a red flag. An array of equity partners coming and going may cause a slight nerve twitch or tingling down your leg – maybe an inner physical warning signal that maybe things are not just quite right. Or, how about a major move from one location to another for no apparent reason? Perhaps TPA’s are nomadic by nature one could surmise. Or, is there a red flag if you find out that scores of key employees with tenure are leaving with many of the remaining sending out resumes…..and going on job interviews while out and about? How about a combination of all of these signals? Would that be a Red Flag to you?

Finally, we are going to put to rest the question that has plagued many political subdivisions in deep South Texas – Who Has the Best PPO Discounts Bar None?  A rare and unique opportunity has surfaced, exploitation of which is paramount to opening Pandora’s Box and finding a bottle with a genie in it. Only, this time the genie has more than just three wishes to grant. Mental giants have been invited to join the fun, with the promise of exposing potential solutions to the Gordian Knot of the merky and mysterious world of PPO discounts. It does not get better than this. Stay tuned Wishbone. 

                                                                                

Meritain may be making a move to acquire blocks of self-funded business in Texas. Rumors are rampant but unproven – http://www.meritain.com/. Cash flow problems may exaserbate the dimensions of terms of purchase to the possible advantage of the buyer. This news, along with the Viant – Multiplan Merger announced today – viant-merger may be just the beginning of some major market shifts in anticipation of Washington’s effort to implement some sort of national health plan for all Americans.

Insurgent Molley Mulebrier posted this without permission of this Blog Master. Some of these independent journalists are ballsy to the point of being annoying. We apologize to our readers. Effective Monday Ms. Mulebrier will be sent on assignment to The Congo for an extended field trip to report on the African Mud Fly and It’s Impact on Global Warming.

First it was Arnulfo “Half Guilty, Half Pregnant” Oliverez indicted for bribery of public officials to gain lucrative insurance contracts. Then it was Edcouch insurance agent Aaron Gonzalez  who plead guilty to a similar offense. Now it is two more insurance agents from Harlingen who are accused of selling non-existent insurance policies to Valley Baptist Medical Center.  We suppose that what makes these individuals different is that they got caught. Of course, one is guiltyonly when a confession is brokered or a jury decides their guilt.  http://www.tdi.state.tx.us/fraud/frpress.html   

                                     

Arnulfo C.  “Half Pregnant” Olivarez, admitted felon, is to be sentenced in Federal Court in McAllen at 9:00 am August 14, 2009 for his crimes. At his August 2008 court appearance before Federal Judge Hinojosa, Oliverez plead guilty of charges against him but stated that he was really only half guilty. (See previous postings on this blog).

Justice, it would seem would require a prison sentence – however with the Texas Department of Insurance renewing his insurance licenses recently, it would appear some sort of deal was made in exchange for leniency.

With the United States moving towards some sort of national health care plan, a careful study of health care economics and opportunities in other countries with socialized medicine in play may provide health insurance agents and third party administrators with clues as to their future role in the health care delivery system.

A Canadian TPA touts their Cost-Plus Tax Free Health Plan for Canadian citizens: www.costplus.ca

 

 

The Grass is Greener on the Other Side of The Fence – The Age of the Golden Goose

In the early 1980’s, group health insurance rates began to skyrocket. Medicare and Medicaid, signed into law by President Johnson in 1964, was beginning to have an unintended financial impact on the health care delivery system. Cost shifting to private pay plans began, health insurance rates began to climb. to new highs.  Insurance companies embraced a new concept called “Managed Care”. PPO’s and HMO’s fought for market share.

As medical insurace premiums rose, insurance companies realized tremendous and lucrative cash flow opportunities. If an insurance company could make 2% on the float, it would mean millions, if not billions of dollars in profits. More insurance companies entered the health insurance market. Prudential and Aetna for example, redirected their profits by entering, for the first time, the health insurance market. And, more insurance agents, especially property & casualty agents, joined in the feeding frenzy seeking 15% commission on health insurance sales.

There was never a better time to become an independent health insurance broker. The sky was the limit, the market wildly free and unfettered, with unbelievable financial rewards for those that worked hard and long hours, day after day. Competition amongst insurance brokers was intense and fratricidal. Greed became a driving factor and honorable business ethics became uncommon.

After nine years working for a health insurance company, I stepped out into the brokerage world seeking my fortune. It would be an interesting learning experience, frought with dangers and rewards. I was entering  unchartered waters, complicated by the good old boy system of alliances and unspoken codes of  questionable ethics of underground operatives on the dole.  I was about to make more money per year than I ever dreamed of making. Although I was “just an insurance agent”, I was to make more money than the owners of the companies I help to insure. 

But, I was about to be hit with a seemingly unsurmountable roadblock.

Editor’s Note: This article was written by Molly Mulebrier of Dime Box, Texas. This is a fictional account of the experience of a health insurance agent.

“Money will buy anything” is the mantra of key political contributers in deep South Texas. And so it seems. “Hussein threw McAllen under the bus” has exaserbated local politics – will the defunct and nearly extinct Republican party of deep South Texas seize the initiative and make new polical allies with rich physicians and their political hacks?  Read all about it here – http://www.nytimes.com/2009/07/30/us/politics/30mcallen.html?_r=1&src=twt&twt=nytimes

http://www.snopes.com/medical/drugs/generic.asp

Office Visit for a total of $35 – heck of a deal when we are seeing office visits costing anywhere from $65-$190 through insurance programs. Dr. Posada publishes his prices and takes cash or credit card only. He does not accept insurance, nor Medicaid or Medicare. Cash only please! affordable-clinics.

If Brownsville Independent School District, Cameron County and the City of Brownsville would bid out for physician services rather than rely on boggus savings touted through PPO networks, the taxpayers would save millions of dollars a year.

In the late 1970’s, the company I worked for experienced an internal political shift in power. Politics are found in all organizations it seems. A new President was selected by the Board, and heads began to roll shortly thereafter. “New Blood” was needed in management, a new direction was charted and the ambitious new President had high expectations of increased market share.

The old and balding Senior Vice President of Sales was sacked. A new, young ex-car salesman from East Texas was selected to lead and command the troops towards a rolling conquest of the state, the goal of which was to increase market share from 23% to 25% within the year.

How to accomplish this? Easy, pay the sales force huge sales bonus based on net-gain in each territory, and “buy business.” That is when I realized I was sitting on a gold mine. I read the new sales incentive bonus program and realized right away that I did not have to even write a new group to get the bonuses; all I had to do was gerrymander my existing book of business. But, what really made my day was the new business rates we were getting from underwriting. We were buying business, no one could compete with our rates. We were giving the insurance away for pennies on the dollar. I became an order taker, a well paid order taker. My income rose to over six figures, and I was “made.” Customers were happy too, at least in the onset.

Eventually this strategy could not sustain itself and all hell broke loose. Member hospitals, all on an annuity contract with my company, began having cash flow problems due to slow (and incorrect) claim payment. Members were having difficulty getting their claims paid. No one was happy, and those of us in the sales division took the brunt of our customers anger every day. Instead of devoting time to selling new business, I was spending all my time as a roving customer service rep. Competition woke up and began making significant in-roads in the market. It was not fun.

Management decided that the sales force was paid too much money and the compensation formula was changed. A quick study showed that my six figure income would now drop down to where I was in the early 70’s. My customers were not happy, I was not happy.  It was time to move on.

Editor’s Note: This is a fictional character and is not intended to represent any one individual.

These websites publish the prices of procedures, which help when negotiating your medical bills:

www.healthbluebook.com, www.changehealthcare.com, www.outofpocket.com, www.myhealthscore.com

These websites offer bill-negotiation services:

www.myinsnet.com, www.medicalcostadvocate.com, www.billadvocates.com

Excellent article in Forbes, August 3, 2009 issue:  cut-your-doctor-bill

There is always a silver lining it seems. Perhaps the illegal drug trade is a good thing? A quick check at the Cameron County, Texas website under prison population, you can view pictures and the status of all 900+ inmates. Over 95% of the inmates are in for drug related offenses. With that many “druggies”, it would seem Cameron County could benefit from drug traffickers Robin Hood approach to neighborhood health care.

drug-gang-clinics

 Bruno, 1924-1938

Pet health insurance, thus far, has escaped the scrutiny of Washington’s Communist Cadres. There is no Pet Health Insurance Czar yet, not even a hint that one will be appointed anytime soon. So, what’s up with that?

Any history buff will tell you that the first pet insurance policy was written for a dog in Sweden in 1924. His name was Bruno. And in 1947 the first pet health policy was written in Britain with sales taking off rapidly. Today the UK has the most mature pet insurance market in the world, with over 18% of pets insured. Yet Jolly Old England has not extended their government safety net to man’s best friend. This is an obamanation indeed. Are not all of England’s four legged creatures entitled to health care?

And what about the USA? The first pet insurance policy sold in this country was to cover TV’s heroic dog Lassie. The underwriter, of course, was Lloyds of London of Great Britain. Today, pet health insurance in the United States is becoming popular with dog and cat lovers of all socio-economic levels.

Pet health insurance is a bargain these days. Premiums as low as $10 per month. And, you can take your animal to any licensed vet – PPO’s have not entered the scene yet. Group policies are available too. But, many Americans simply cannot afford coverage even at these rates. Yet, all American pets are entitled to health care, are they not?  We need and must demand that the federal government at least mandate better benefits, or implement a national pet health insurance plan at best. Animals have rights too!

And what about food insurance? When are we going to get that? We are all entitled to food, aren’t we?

Repealing the laws of supply and demand?

http://www.americanthinker.com/2009/07/welcome_to_mexico_gringos.html – This article is “right on.” We have been predicting this for the past six months and have even started a medical tourism company to assist our clients in seeking affordable and easy access medical care in expectation of when the communists (democrats) expand our national welfare state to include “free” medical care for all.

http://www.ibdeditorials.com/IBDArticles.aspx?id=332548165656854 – What else is in the 1,000+ page bill?

wsj-massachusetts-and-national-health-care

Editor’s Note: This is from Molly Mulebrier, Phd, CPA, CLU, Jd., of Dime Box, Texas, contributing editor for this Weblog. This is based on a fictional character and is the first of a four part series.

As I approach retirement, after being in the insurance industry since 1973, primarily in health insurance for employer groups, I believe it is time to come clean with the employers whom I have scammed all these years.  These confessions will surely pave the way for my safe passage through the pearly gates in lieu of the pergatory existance I truly deserve. Thank The Lord for the Forgiveness Doctrine which the Catholic church perfected many years ago.

It has been a fun ride with tremendous financial rewards. It has made me a millionaire several times over. And, I dont even have a college degree. A remarkable achievement it seems. But, it was only through deception, lying and cheating that I have been able to gain unreported riches at the expense of my clients. Bernie Madoff could have learned a lot from me.  He is in prison, I am not.

THE BEGINNING

My first job in the insurance industry was with a national health insurance company. I was a sales representative for them. I was assigned  a territory that included a substantial book of business which I quickly learned I could prey upon with abandon.  It was like being given a cookie jar with no adults in the room! With management’s active guidance and on-going and knowing approval, I became a sales star.

I quickly learned that when a renewal hit my desk, I could “override” the underwriter to my advantage. For example, if the renewal was for a political subdivision, I knew that any rate increase would trigger a Request for Bids scenario and my renewal would be known to all who attempted to bid and undercut my renewal. So, instead of the underwriter’s 15% renewal increase, I magically changed the renewal to a 32% increase, officially typed on a company letterhead. I was now in a win, win situation. I could not lose. My competition would come in 5% lower than my renewal, thinking they had a great bid. I would come in with a 23% increase and still have 8% in my pocket should negotiations with the employer become necessary. If I sold a higher rate increase than what the underwriter wanted, I became a darling of the underwriting department and future favors would come my way.  And, if I really wanted to make myself look good to management, and put more bonus money in my pocket at the same time, I would advise the group “Look, my renewal came in at 32% but I got it down to 23% . At this point, there is not much more I can do here. But, if you were to buy a $10,000 term life policy on each employee, I can drop the renewal increase down to 19% with the difference going to pay for the group term life plan. So, you are getting a “free” group life plan for all your employees”. And, I would add “we can do this since term life is a very profitable product line and we use those profits to offset health losses within our group health business portfolio.”

I first did this on a very large public school district. Not only did I pocket about $4,000 in bonus money, I won a trip to Las Vegas too! I was living the high life, earning over $50,000 per year on average in the early 1970’s. Better things were yet to come.

This is about a 2 minute interview:

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Money drives behaviour – wall-street-journal-insurance-consultants, wall-street-journal-revenue-streams

This White Paper is an excellent piece that all employers should read. It details the truth behind undisclosed consultant/agent/broker revenue streams.

unbiased-consultants – A MUST READ

This was written by Molly Mulebrier, Jd., Phd., CPA, CLU, of Dime Box, Texas. Her articles have appeared in Forbes, The Wall Street Journal, and the Austin Stateman. She has agreed to be a contributing editor of this weblog.

A 1,000 + page Health Care Bill passed committee this week. Here is a 4 page summary of the bill – http://www.stark.house.gov/images/stories/111/legislation/AAHCA/aahca-billsummary-071409.pdf.

Our office is in the process of reading the entire Bill. So far, it is much worse than what you see in the four page summary above. (The 4 page summary was put out by the government with a positive spin attached).

This Bill represents the biggest government power grab in the history of our country. And, once implemented, no one will like it, including those currently un-insured.

Below is a schematic of the Bill – this is not a joke:

jec20health20chart   

Plan on going to a particular hospital for surgery? Check out the hospital at www.hospitalcompare.hhs.gov.

Wanted: Someone to start my truck every morning and throughout the day as needed. Pay negotiable. Good benefits, attractive hours. Early retirement possible.

“It is no surprise that hospital profit margins are at an all time high since 1997” – ppos-gaming-the-system

Attn. Medical Providers – Maximizing Revenue, a must read – http://www.hcmarketplace.com/prod-2976/Managed-Care-Contracting-and-Reimbursement-Advisor.html

To review the 2009 Medical Fee Schedule, go to www.trailblazerhealth.com

Editor’s Note: Could this be the new fee schedule for our upcoming national health care plan? Since we now have two national health care plans, Medicaid and Medicare, would the new universal health care plan reimbursement rates be 1). Medicaid based, 2). Medicare based or 3). Hussein based? Or would existing PPO’s continue to play a role in our health care system? We suspect the correct answer is #3.

McAllen Independent School District – abbott-open-records-letter-ruling-or2004-10019-mcallen-isd

City of Lubbock – http://www.myfoxlubbock.com/dpp/news/local/061109covenant

“We seek to pay providers at market appropriate levels………….” And just what are market appropriate levels?

bcbs-ancell_responsive

highmark-provider-reimbursement-request

This picture was taken this morning on the way to Starbucks in Brownsville. The location is on the frontage road of Highway 77. According to the sign in the window, total charge for an office visit is $35 – cash or credit card only. No appointment necessary.

So the question is, if I have an insurance policy with a $20 office visit co-pay, do I go to this clinic and pay $35 or go to a PPO doctor down the street and only pay $20?  What is interesting is that the PPO network fee is probably a multiplier of 2008 RBRVS (Medicare), say 100% of Medicare for example. In that case, the PPO doctor down the street gets paid $80-$145 for the office visit, which the employer’s health plan pays for. This makes no economic sense at all – pay $35 cash or as much as $145 or 400% more  with insurance – for an office visit?

This is an excerpt that appeared in today’s issue of the Brownsville Herald:

A lawsuit has been filed against Cardenas Motors Inc., a Rio Grande Valley auto dealer, seeking to collect damages because of “misleading or deceptive acts or practices,” court documents say.

The lawsuit was filed Wednesday by The Zavaletta Law Firm, which is representing eight individuals who bought nine used automobiles from the Cardenas location in Brownsville and claim they where charged an unknown fee for services they didn’t receive.

The case was filed in Brownsville’s Cameron County Court-at-Law No. 3, with Judge Menton Murray Jr. presiding.

The fee in question is listed in the motor vehicles buyer’s order as “VIN REG” and it ranges from $392.18 to $798.18, said attorney Peter Zavaletta.

Editor’s Note: This is exactly what is happening in the group health insurance business, in our opinion. Hidden fees, or fees disclosed that offer nothing in return. Consumers should be incensed.

A Texas based TPA has fine tuned the art of maximizing lucrative revenue streams on unwitting employers. They employ a strategy of disclosing low administrative fees to gain the business, while hidding other fixed costs on the claim side of the ledger. Their contract includes a claim transaction fee on top of a pepm administrative fee, which is highly uncommon in the industry. Claims are unbundled as much as four fold and the claim transaction fee is applied to each. An “aggregate expense factor” is billed by inflating the aggregate factor in their proposal, then upon the sale they lower the agg. factor by as much as $12.50 and call that an “aggregate expense factor.”  When you add up all the fees, this TPA earns as much as $50 pepm and as much as $90 for each family unit per month. This, compared with the usual $15-$25 typical TPA fee, is outrageous.

The PBM contract is between the TPA only, with spread-pricing  which drives the group’s Rx costs up by as much as 62% (we documented this on one case).  Duplicate claim processing is charged at $25 per claim, in addition to the other fixed costs within their contract. And finally, upon renewal, the TPA presents a new administrative contract with a TPA name almost exactly the same but it is actually a different Texas corporation. The new contract states that they are not liable for anything the prior TPA may have done wrong.

This TPA preys on political subdivisions. They have brought the art of politics to a new level within the insurance industry.

A well known PPO network, concerned about their relationship with network hospitals, has decided to boycott any group that implements a cost-plus hospital reimbursement methodology. Notice has been given that any existing group that has implemented the cost-plus scheme must make one of two decisions: 1). drop the cost-plus scheme entirely or 2). PPO network will cancel their contract with the employer.

One wonders who the PPO network really represents? Do they represent the employer, or the hospitals that apparently can “make or break” them?

We think this PPO is short sight at best. Competing PPO networks are joining the fray, agreeing to work side-by-side with employers who use the cost-plus approach.