There is no doubt that our healthcare system is currently structured in such a way as to be confusing, expensive, and extremely complex, but why should the average person or employer care? Because we are the ones that pay for the broken system! One of the reasons why we don't pay attention to provider and facility charging practices is because we have been conditioned to think it is complicated, which it is, but let's put this same methodology into another field to see if it makes sense:

You walk into a car dealership and ask the price of a car that has no sticker on it. The dealer then asks you for your W-2 to see your ability to pay and then works backwards to come up with the price. This isn't fair, right? Agreed, but this is exactly what healthcare facilities do; ask about your insurance carrier first and then see how much more they can charge over the medicare reimbursement rate as a result. This is how our system has evolved since PPO's entered the market decades ago.

The facilities can't really be blamed for this either though because, in general, they don't compete on price. This is understandable because healthcare is a very personal service and because the member is usually only exposed to their deductible and coinsurance amount, they don't have a reason to think critically about where to receive care. We want to know that those that care for us are fairly compensated for their expertise as well. The concept of Accountable Care is another topic that can be expanded into a novel, but let's stay on point for now. The problem is that employers, by far the largest medium through which Americans receive health coverage, are forced to pay the ever-higher trending costs of care, which then trickles down to the employees by way of increased cost-sharing and decreased benefits. There is not a simple solution, but there are creative ways to mitigate these costs for employers.

A novel trend in group benefits is the practice of reference-based pricing. Payments made to facilities and providers are based on a percentage of what Medicare reimburses them, which may be enough to cover costs, and a PPO network is circumvented. Because PPO networks average nationally around 260% of what the Medicare reimbursement rate is, there is ample room for savings. Given a reimbursement rate of even 130% of Medicare cuts claims costs by 50% for an employer that is directly responsible for the cost burden of their staff (directly if self-funded and indirectly if fully-insured). What's more, PPO networks have fees associated with them that can be $12 to $20 per employee, per month, making the proposition of using a PPO network more costly still, through administrative fees that is.

Many health plans have adopted reference-based pricing for groups as small as 10 employees that choose to self-fund their benefits plans. What this means is a direct savings to the employer when it comes to claims and administrative network fees, which may come as a relief to small groups that are used to seeing 10 to 20% increases or more without a remedy to lower costs.

In sum, reference-pricing may be an attractive strategy for many employers and employees. Though each case is unique, we can all agree that more transparency and lower costs for healthcare is a step in the right direction. Prosperity Benefits delivers a data-based health and welfare evaluation to ascertain if a referenced-based pricing benefits plan is an appropriate fit.

This idea and others are examples of how Health and Welfare Consultants can differ dramatically in the value that they provide. Intellectual capital is how brokers differ from each other. Have you been presented any great solutions lately?