Last week I went over some of the factors driving the rise of healthcare costs that are not in our control. This week I will focus on solutions. Before I jump right in, I’d like to start by posing a question: who are the doctors and hospitals working for; who are their customers? Think about it. We’ll come back to it in a bit.
As we’ve discussed, there isn’t a whole lot we as individuals can do to drive down healthcare costs other than diet and exercise. We can certainly take some control of our personal costs by being smart buyers but we can’t take the reins and control costs as a whole.
As a benefit plan administrator I think you have more power of the overall picture. If you can start to change the costs for some of your employees then you could change the costs for the group. Insurance is a pooling of risk. What if we could design a plan that pooled only your group? Don’t you love that statement “What if…” it makes it feel that whatever you are thinking is already a reality. (Guess what, this one is….)
Back to our earlier question, who are the doctors and hospitals working for?
Did you say patients? I am betting most of you did.
I would argue that the providers are actually working for the insurance companies. The insurance companies are their true customers. I don’t mean to say they aren’t working for the patient’s best interest, but their chief customer is the party who pays the bills and in our current system the carriers pay the lion’s share of claims costs, not employers or individuals.
Let me give you a simplified example: someone covered by their employer’s plan has a broken arm and the total allowed hospital claims cost $15,000. The individual has a $1,000 deductible with no coinsurance. Their insurance carrier pays the other $14,000. The hospital is still getting their full $15,000.
By contrast if a Medicare covered patient has the same broken arm at the same hospital then the hospital is likely getting much less, probably in the neighborhood of $8,000-$10,000, because Medicare has coverage limits. Insurance negotiated rates are usually a percentage over Medicare.
This example shows that hospitals NEED the insurance carriers who pay higher than Medicare does. They and the insurance carriers NEED us – subscribers. So how is it that we do not have more control over healthcare costs? How have the carriers convinced us to pay those high premiums every month?
I think it results from the veil over healthcare; without price transparency, we are not able to act as good consumers. The carriers have hammered home the need for their network and discounts. We are all convinced that we cannot get adequate healthcare or decent pricing without a traditional plan.
Clearly none of us want to pay that $15,000 and at a glance that even seems like a good deal. However, is that really the cost of care? We never know beforehand how much a given procedure will cost. It is nearly impossible to get a clear idea of the costs going into a procedure. The providers will tell you it depends on your carrier’s negotiated rates and policies. The carrier will tell you that it depends on the specifics of each procedure. It keeps us in the dark and somewhat fearful of what the cost would be if we didn’t have a group insurance discount.
The traditional model works for some people. In fact 71% of employees report being happy with their insurance coverage. I suspect that is because they know no better.
Since the same survey shows 56% of US adults are more likely to stay with their current job if they are satisfied with their health coverage and the highest cause of dissatisfaction is cost we can't afford to let them remain in the dark.
Let’s talk about moving beyond what we know and changing how we consume healthcare.
What if we decided to toss away networks, tell our employees go see their preferred provider, remove some of the limiting loop holes we have known to date?
What if we could pay close to Medicare based pricing rather than the higher insurance carrier reimbursements? If we pay more to the hospital we have higher claims, but if we’re able to pay less for each claim our total claims costs come down. This type of insurance exists and WDA has the contracts to show how this can work.
How it works
Through our contracted third party administrator’s (TPA’s) we remove the networks and enable the employee to go where they choose. When the claim comes in, the TPA will look up what Medicare pays for the same claim and then offer the hospital slightly more than Medicare but less than a traditional insurance carrier. Experience to date shows that most providers are happy to work with this arrangement.
When we do this, networks are obsolete, only a marketing gimmick that you don’t need. Instead take control of your claims costs and offer your employees and their families personalized high touch care with options to make educated choices.
You can build in incentives for your employees not only to go where they choose but to go where makes the most sense. Since Medicare reimbursements are public information, they can compare facilities costs and success rates on several publicly available websites or they can use the built-in comparison service that researches the procedure in their geography and suggests several best in class options for the employee to choose from.
It’s called Reference Based Pricing and it’s an exciting new model that is taking the country by storm. It’s great for the mid and large market on a self-funding platform. WDA has the partners to offer these innovative solutions. If you want to learn more about it and how it could work for you please contact us.
You can expect our team to be talking a lot about this and other changes to the market place. Let’s take back healthcare and find the right fit for your business.
Find out more about the high costs of care in our region.
This is why we need to spread the word about alternative options.