"The Rates are the Rates"

Part 1 of 3

The phrase “The Rates are the Rates” implies helplessness, and is usually accompanied by defensive hands being thrown in the air. It implies that employers have seen everything there is to see, and this defeated spot is where they are destined to remain if they would like to offer health insurance at all. 

I don’t have patience to be expensively polite anymore - any benefits professional can read a carrier rate grid - table stakes. We can all can toggle with ease deductibles/copays/co-insurance/network access/Out of Pocket Max – factors offered by carriers that contribute to an insurance rate or premium. It doesn’t help. It’s also boring. Pick a survey. SHRM. WACABA. PwC. Millimen. I’ll save you the cost of the survey and let readers know that they all say the same thing – rates are going up. For years we’ve been reporting this simple fact with expansive charts, and impressively beautiful tables. What no one running around town with these absurd surveys touting BUCA 'same ol, same ol' stories has done is use the data sets to impact change. I'm concerned about the results to come if we keep having this same annual conversation...

Turning towards constructive and more polite discourse, let’s discuss ‘the miss’. Said differently, let’s discuss what is in a rate and consider how the cost of insurance rates, are impacted by what we don't discuss often enough or at all - the cost of healthcare as determined by a PPO Discount.

The two are things are different, but related like symptoms (insurance cost increases) and disease (healthcare). 

As a starting point, admin fees are typically 20-25% of an insurance rate. Claims are 75-80%. Let’s agree that the larger opportunity to do meaningful needle moving is on the claims and healthcare side.

Fiction #1: “Phew. Thank God for that PPO Discount”

“I’ll give you a 99% discount on anything you’d like if I get to pick the starting price.” Dave Chase

This is what is happening with PPO Network ‘discount’ charades. Consider the below common event sequence:

1.      Medical arrives in mail.

2.      Small heart attack looking at potential bankruptcy from Out of Network listed costs.

3.      Elation once we see the bottom reduced cost having been saved by PPO ‘discounts’.

Secret: The PPO discounted fee is a terrible deal. Take a look at your own area hospital charges as a bloated % of Medicare, even after those ‘discounts’. Hospitals accept Medicare as an acceptable reimbursement rate. Your plan payments, negotiated often by the #6 company on the Fortune 500 list, are typically several 100% higher, again even after carrier negotiated network ‘discounts’.

The carriers are either complicit or incompetent to allow member plans to be charged these rates. By the way, fun fact, network access fees are about $10 PEPM of a plan premium. To call these sorts of reimbursement rates any sort of 'discount' is a misnomer. Those utilizing carrier designed healthcare plans are paying too much for healthcare, which makes rates very high. This, however, isn't what we discuss in our planning meetings. Why is that?

To substantiate the bad deal that PPO 'Discounts' are, take a look below at an actual hospital charge master for a CT Scan of an Ab/Pelvis, code 74175:

• Out of Network (OON) or Pre-Discounted Cost: $13,145
• Cash Pay: $1,813
• Usual, Customary, & Reasonable (UCR): $706.81
• Medicare: $184
• State Average: $478

The challenge is not many of us have visibility to the variable costs that providers charge across payment methods for the same service. When sunshine disinfectant is applied, we can begin to understand why the first question asked on arrival at a place of care is “what insurance do you have?” The provider wants to determine how much can be charged. Carrier insurance is always best (for them).

PPO Discounts are a bad healthcare deal for employers. It's THE fundamental reason employers simply pay too much money for insurance - because insurance plans and network discounts allow members and plans to billed too much. Until this is solved for, rates will continue to be expensive, and increase.

I understand that employee perceptions - right or wrong - are meaningful benchmarks of a plan's performance. There are ways to address the above healthcare cost challenge so that employers save money, and employees share in those savings while leaving comfy status quo's in place. Solving for the above problem doesn't need to be a Fred Flinstone to George Jetson overnight transformation. As a starting place, having a discussion this year about the cost of healthcare is a great place to begin making a difference.

This is part 1 of a 3 part series.

Matthew White

[email protected]

Schedule a time: calendly.com/mattwhiteaht