Health care costs keep rising and consumers aren’t the only ones feeling the financial pain.
Employers also are seeing their expenses rise, and are beginning to question those expenses.
A recent NPR report stated that a hospital in North Carolina was reimbursed nearly 250% more for an appendectomy than what Medicare would have paid – and yet the hospital was still billing the patient for nearly $20,000 more, which would equate to seven times what Medicare would pay.
Overpricing is not uncommon, and it seems to hit self-insured employers particularly hard, said Larry Thompson, chief strategy officer at Advanced Medical Pricing Solutions. Thompson said it is typical for a provider to charge up to 300% more to a self-insured plan than to a government payer. But, he added, self-insured employers have more power to reverse this trend than they may realize.
Thompson talked with InsuranceNewsNet about some tactics employers can use to contain their health care costs and protect their workers from over paying for health care services. He also gave some advice for health brokers who want to help their employer clients get a handle on health care costs.
About 95 million American workers are insured through self-funded employer plans, Thompson said, adding that self-funded plans make up the fasted-growing segment of the group health market. Eighty percent of self-funded clients work with a broker, he said.
High Error Rate
Eighty-five percent of every premium dollar goes toward claims, Thompson said, which includes medical claims and prescription drug claims. “So if we're going to try and impact the cost of health insurance, we have to attack that 85%,” he said.
He said his company looks for billing errors in claims and works to get them corrected. “We're showing 93% of claims have errors. So the first thing we look at is, can we get rid of the errors? Often they are simple things such as there was a billing for a surgical kit for a person who never had any surgery in the hospital, and then $5,000 can come off the bill.”
The next step is to perform a clinical review of the claims. Thompson said his company works with practicing physicians to review claims based on the physicians’ areas of specialty.
Reference based pricing is the final piece, Thompson said. His company has access to Medicare pricing and hospital charge masters. “We looked at every single procedure. We look at that line items, and we know exactly what the pricing should be,” he said.
“Our philosophy is very simple. We're not here to try and beat up on the providers to make them suffer and lose money as they treat the patient because we want the highest quality as the brokers do for their members. But we want fair pricing. So our motto is ‘Fair Pricing For All.’”
'A Bigger Share'
Using the tactics Thompson described helps the employer and the broker to keep the overall health insurance plan costs down, he said. But the worker benefits as well.
“Most plans now force consumers to have a bigger share in the cost associated with that health insurance plans," Thompson said. "And brokers have to sell those plans to keep costs down. So if you have an employee or their dependents and they have a $10,000 out-of-pocket cost, we can negotiate significant savings on a hospital stay.”
The result, he said, is that the employer saves because they are paying less in claims, and the worker saves because their out-of-pocket responsibility is much less.
The future of health care “is definitely going to be much more direct,” Thompson said.
“We have a tremendous number of health systems that want to offer direct contracts to employers,” he said. Direct primary care – which replaces copays and deductibles with flat, affordable monthly fees – will continue to grow.
“We're also seeing more and more entrepreneurial companies developing very high performance, very limited and narrow networks. And then they're going out and directly contracting with employers.”
What can a health insurance broker learn from all this?
The most important thing, Thompson said, is make sure that your client takes a close look at the potential of self-funding their employee health care. “Because it will give them the flexibility to manage their health program much more efficiently.”
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.
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