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Usually and Customarily Denied

On October 4, 2017
By: Jon Jablon, Esq.

An increasingly common problem that self-funded plans face is that plans subject to network agreements pay claims correctly and timely and at the negotiated rate, but when the claim is submitted to stop-loss, stop-loss denies a portion of the paid claim as excessive compared to the carrier’s U&C provision.

The first question a plan should ask is whether the carrier was correct in denying the claim. For instance, if the stop-loss policy defines U&C as the prevailing charge in the area, the carrier has limited its ability to reduce the claim except based on the prevailing charge in the area, so the basis for reducing the claim is severely limited.

To contrast, if the stop-loss policy defines U&C as the lesser of the prevailing charge in the area or, say, 150% of Medicare – then the carrier has the right to perhaps reach a lower determination of payability.

This might seem like a question that shouldn’t need to be asked – and we agree! – but there are so many moving parts in the self-funded industry and so many differing interpretations of contracts that it makes sense to cover all possible bases.

No matter who the carrier is, we urge health plans to not make any assumptions about what will or will not be covered. Since many stop-loss policies contain their own definitions of U&C, a health plan should coordinate with its stop-loss carrier as early in the policy year as possible (or even, ideally, prior to signing) to determine how the carrier will treat network payments in terms of U&C.

We urge health plans to learn from others’ mistakes, and make sure all the relevant contracts align before signing them. The questions of how a stop-loss policy defines U&C and how the carrier will treat network rates are important parts of the shopping-around process!

Another One Bites the Dust

On October 2, 2017
By: Brady Bizarro, Esq.
    
It turns out that the reports of Obamacare’s death were greatly exaggerated, at least for the 2017 calendar year. Earlier this week, Senate Republicans scrapped their last-ditch effort to repeal and replace the Affordable Care Act (“ACA”). This time around, the repeal bill, named after its sponsors, Senator Lindsey Graham (R-SC) and Senator Bill Cassidy (R-LA), received a sudden burst of momentum in the past few weeks, mostly due to the September 30th deadline, after which procedural protections expire and Republicans will need sixty (60) votes to pass a healthcare bill.

Like the earlier repeal bills, Graham-Cassidy would not have truly repealed the ACA, but it would have made fundamental changes to it. The centerpiece of this bill was the proposed repurposing of nearly all federal money currently allocated to states for premium tax credits, cost-sharing reductions, and the Medicaid expansion, into a giant block grant distributed to the states. Along with this pinch of federalism, the bill’s sponsors proposed repealing the individual and employer mandates and providing some flexibility to insurers with regard to ACA coverage mandates (provided those insurers offered “adequate” alternative coverage options). In the end, however, this bill ran into the same hurdles that plagued the other repeal bills; moderate Republicans were unwilling to make deep cuts to Medicaid and roll back protections for people with pre-existing conditions, at least not without hearings and regular order.

Now, many political supporters of the President are urging him to turn the page to tax reform, a policy area where Republicans are more unified and perhaps the last opportunity for the Trump Administration to secure a major legislative victory before the end of the year. That does not mean that the GOP is about to abandon the top campaign promise of most Republicans in Congress. We fully expect Republican leaders and the Trump Administration to revisit this issue after they deal with tax reform (possibly after Thanksgiving). Just this week, Senator Graham told reporters that he was optimistic and that it is merely a question of “when,” not “if” repeal was going to happen.

So where does this all leave us? What does this mean for the self-funded industry? It means that for the rest of 2017, Obamacare is staying put. Whether or how strictly the Trump Administration will enforce the ACA remains to be seen. The President has already indicated his intention to sign as many executive orders as he can to ease the regulatory burden of the ACA (his first proposal, to permit states to sell policies across state lines, really only affects the fully-insured market). Meanwhile, HHS, the IRS, and other federal agencies will have to prepare for open enrollment on the exchanges and a new coverage year.

In God We Trust; All Others Pay CASH…I wish…

On September 25, 2017
I love calling a provider before medical services are rendered to settle on financial terms, and I love it when they have a reasonable cash price ready for me – but it’s all too rare to get a reasonable price easily.  Usually, I need to wade through concepts and terminology like “regular rates,” “commercial contracts,” and “networks,” and excuses like “I’ll see what I can do,” “our clients don’t process claims that way,” and plenty more. It never ends.

I want to pay a cash lump-sum for a service you’ve provided hundreds (or thousands) of times, and you really can’t tell me the price?

However, with the steady emergence of more consumers being responsible for paying for their medical care (in the form of higher OOP) and perhaps continued provider frustration, more providers are now offering cash discounts (thanks to transparency pioneers like Surgery Center of Oklahoma). Consider these other examples:

[This clinic] does not accept any third-party payment and makes no apologies for this. In order to keep costs down for the uninsured and the increasing number of patients who have high copays and deductibles, we choose to not assume the massive overhead involved in billing third-party payers. This has the added benefit of eliminating bureaucratic hassles and intrusions into the doctor-patient relationship, ensuring confidentiality of patient information and keeping our typical charges usually between the costs of an oil change and a brake job.1

* * *    

[This health system] offers cash pricing for selected services. Cash-pricing packages must be paid in advance of receiving services. Insurance will not be billed and claim forms will not be provided. If you would like information on cash packages, please call …2  

* * *

Does [this hospital] offer a discount if I self-pay for services? [This hospital] offers a 75 percent discount on eligible services to patients who pay out of pocket for medical services — whether it’s because you don’t have insurance, your insurance doesn’t cover the services, or you’d prefer not to bill through your insurance provider.3

Swedish Health Services may have seen the writing on the wall when they decided to lower their charges for certain outpatient services (bear in mind these are ordinary charges, not cash rates). On their old billing platform, an MRI of the brain was billed at $6,143; the new billing is $1,810 (70% less).

In many ways, cash rates are a type of network unto themselves. Providers are basically saying, “If you can pay cash at the time of service, these are the rates, and they are good. If you want us to bill an insurer, have the claim repriced, pended, denied, re-coded, covered, denied, covered, we will bill you our much maligned chargemaster rates, and the claim will be paid with our equally maligned network rates.”   

We are truly only at the beginning of this trend, and it is difficult to assess how many providers are now offering cash rates and how many are publicizing that fact; offering cash rates can be viewed as a form of direct-to-consumer contracting.

The American Academy of Private Physicians estimates there are about 6,000 physicians in the US who contract directly with their patients without an intermediary. That is roughly 1% of physicians, but this number has reportedly been growing at a rate of 25% per year for the last four years 4, and despite the fact that this is decimal dust compared to the market at large, the trend is likely to continue.

All things considered, we need more providers to step up and post their cash prices for consumers to consider.  The providers who pioneer in this area will be rewarded with business from a large market that is getting increasingly desperate for honesty and transparency.

1 Sean Parnell, “The Self-Pay Patient”, January 2014, pg. 28
2 https://www.uclahealth.org/pages/patients/patient-services/cash-pricing.aspx
3 https://www.elcaminohospital.org/patients-visitors-guide/billing/faq
4 Sara Rosenbaum, “Additional Requirement for Charitable Hospitals: Final Rules on Community Health Needs Assessments and Financial Assistance”, http://healthaffairs.org/blog/2015/01/23/additional-requirements-for-charitable-hospitals-final-rules-on-community-health-needs-assessments-and-financial-assistance/ (January 23, 2015)

Natural Disasters (Hurricanes Harvey and Irma) - Don’t Let Them Wreak Havoc on Your Health Plan

On September 13, 2017

By: Kelly Dempsey, Esq.

The last few weeks have been difficult for several states and U.S. territories.  Hurricanes Harvey and Irma have caused significant flooding and damage.  In addition to the loss of power, many people are homeless and corporations/employers are without a place to conduct business.  Depending on the level of damage, it may take a long time for different areas of the country to rebound and rebuild.  Chances are that employee benefits, specifically the health plan, are the last thing on employers’ and employees’ minds, but there are some very important considerations.  So what do Hurricanes Harvey and Irma mean for employers, employer sponsored health plans, TPAs, and employees?  

Self-funded health plans are required to comply with various federal laws that carry different responsibilities including, but not limited to, ERISA, COBRA, FMLA, HIPAA, and the ACA.  These federal laws come with a wide array of notice requirements and time frames for processing claims and appeals and other requests for documents or information.  As such, the Department of Labor and the Department of Health and Human Services (collectively referred to as “the Departments”) have issued press releases and bulletins that provide general guidance and limit exposure to penalties.  These press releases were specifically issued after Hurricane Harvey; however, it’s likely that additional releases will be issued to address Hurricane Irma.  Below are links to important press releases; however, the following is one of the key summary statements:

The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time-frames.

Health plans and their supporting vendors will likely need to review situations on a case by case basis to determine what is reasonable for each plan and employer.

If you’ve listened to any recent Phia Group webinars, presentations or podcasts, or read our blog or published articles, you already know we’ve been focusing on leaves of absence and gaps between handbooks and plan documents.  You’re probably thinking, “Yes, I know, so what’s your point?”  With all the damage to homes and job sites, it is possible employees may seek leaves of absence and/or employees will ask questions about existing leaves of absence and how the leave is impacted if an employer ceases operations.  While FMLA is generally not available for employees to use as time off to attend to personal matters such as cleaning up debris, flood damage, home repair, etc., FMLA may come into play if an employee or their family member suffers a serious health condition as a result of the hurricane.  For those employees that were already out on FMLA, if an employer ceases operations, the time operations are stopped would not count towards FMLA leave.  As always, FMLA and other leave situations should also be reviewed on a case by case basis.   

In summary, the Departments have issued guidance specifically related to Hurricane Harvey; however, we anticipate additional guidance associated with Irma as well.  The bottom line is that employers, health plans, and applicable vendors will need to act reasonably when administering the health plans (i.e., processing claims and appeals, issuing notices such as COBRA notices, etc.) and take into consideration the locations and entities that were impacted and allow grace periods or other relief as applicable.

Important Press Releases and Relevant Guidance:
- U.S. Department of Labor Issues Compliance Guidance For Employee Benefit Plans Impacted by Hurricane Harvey
- Secretary Acosta Joins Vice President Pence in Texas
- FAQs for Participants and Beneficiaries Following Hurricane Harvey
- Hurricane Harvey & HIPAA Bulletin: Limited Waiver of HIPAA Sanctions and Penalties During a Declared Emergency

Hope for Self-funded Plans in Connecticut..

On August 16, 2017
By: Chris Aguiar, Esq.

Subrogation is tough.  Even the best language possible is susceptible to issues like limited funds, or worse, a Plaintiff’s attorney who refuses to acknowledge the realities of the law.  Of course, self-funded benefit plans who find themselves subject to state law, such as government entities, can find themselves in even worse positions when located in certain areas of the Country.  New York, New Jersey, and Pennsylvania, to name a few, are notoriously averse to the rights of benefits plans.  Connecticut was among the worst on that list …until now.  As of October of 2017, the State of Connecticut has enacted an exception to its anti-subrogation law which will give self-funded benefit plans some reprieve.  

Connecticut HB 6221 takes its cue from some of the other anti-subrogation states who have provided an exception to their law for cities, towns, and municipalities; allowing them to take advantage of some more of the cost saving benefits of self-funded plans.  Specifically, it allows self-funded local government entities with a third party interest to seek recovery from judgments or settlements obtained by plan participants.  While this is great news, this change doesn’t come without limitations.  The bill appears to only allow recovery from the part of the judgment or settlement that represents payments for medical, hospital, or prescription expense damages.  This will no doubt entice plan participants and their lawyers to structure settlements in such a way as not to include those damages.  Either way, it gives plans, administrators, and their recovery partners another tool to utilize.

A House Divided

On August 7, 2017
By: Ron E. Peck, Esq.

In the world of self-funding, everyone plays a role.  The broker advises, the employer customizes their plan and funds it, the claims administrator (TPA, ASO, etc.) processes claims, and stop-loss provides financial insurance.  When the lines get blurred or we start asking people to do the jobs of others, we either create new opportunities or destroy the foundation.  It all depends upon whom we’re asking, what we’re asking them to do, and whether they are stepping on any other toes when so doing it.

Consider, for instance, when a benefit plan asks its stop-loss carrier whether they should or shouldn’t pay a claim.  Stop-loss is not health insurance.  It is a form of financial reinsurance.  Health insurance receives medical bills, processes the claims, and pays medical service providers for care rendered to insured individual patients.  Stop-loss allows others to handle the “health insuring,” and instead provides protection to such health benefit plans against debts – incurred by those benefit plans – when payable claims exceed a deductible.  They despise it when a plan asks them whether the plan should pay or deny a claim.  They don’t want to be the fiduciary, or deemed responsible for wrong payment decisions.  They aren’t paid to make such decisions, or incur such exposure.  As such, most stop-loss carriers have traditionally told the plan that they (the carrier) cannot make the call, and that the plan will have to comply to the best of their ability with the plan document.  That, when the claim is submitted for reimbursement to the carrier, only then will they judge the payability.

The problem?  Some carriers want to have their cake and eat it too.  They won’t tell the plan what to pay and what to deny, but they will happily criticize the plan’s decisions after the fact.  Again – let me stress that I’m talking about a minority of carriers.  These very few can ruin the reputation of an entire industry, however, and that is why it is so important to address this growing problem.

With increasing frequency – a lack of communication or presence of conflicting interpretation is resulting in stop-loss and benefit plans disagreeing regarding what is payable, how much is payable, and thus – what is covered by stop-loss.  Even more tragically, the growing number of disputes between plans and stop-loss carriers is leading to an increased number of claims paid by benefit plan sponsors that are not reimbursed by stop-loss, resulting in employers enduring negative experiences with self-funding, financial ruin, and legislative scrutiny.

For instance, a plan document may define the maximum payable rate as “usual and customary,” and define that as being a number calculated by reviewing what most payers pay.  The plan takes that to mean “private payers,” while stop-loss includes Medicare as a “payer” when calculating the payable rate.  Or, perhaps the plan applies usual and customary only to out of network claims – choosing to pay per a PPO network contract whenever possible, but stop-loss interprets the term “maximum payable” to apply to all claims – in and out of network; arguing further that the plan document controls the plan, and stop-loss only insures the plan.

The number of claims I’ve seen independently audited by the carrier, resulting in the carrier chopping away at the amount paid by the plan – in an effort to define what they feel is the “payable” amount – and the resultant conflicts will not benefit the industry.  When a self-funded employer who sponsors a self-funded plan, also uses a PPO (to avoid balance billing of their members), and that plan pays $100,000 in “discounted claims” … they expect stop-loss to pay everything paid beyond the $60,000 deductible; a refund of $40,000.  It is, after all, why they pay for stop-loss, and is something they depend upon to self-fund.  Imagine, then, when the carrier “reprices” the $100,000 using Medicare,  and decides no more than $10,000 should have been paid… well short of the $60,000 deductible.  They may even go so far as to “advise” the plan to ask the provider to refund $90,000 to the plan.

This employer will point a finger at their broker, their TPA, and stop-loss.  Taking the carrier’s advice to heart, and challenging the outrageous provider bills and/or PPO terms is the last thing they are going to do.  The sooner we realize this form of “tough love” doesn’t work, and ultimately only provides fuel for politician’s anti-self-funding rhetoric, the better.

To address this issue, it behooves both the plan (and its TPA) and stop-loss to examine the plan in its entirety during the underwriting process.  What do I mean by “entirety?”  The plan document is not enough.  A plan is more than an “SPD.”  It is also the network contracts, employee handbooks, and any other document or obligation that dictates how the plan will actually be administered.  Only by laying all of those cards on the table ahead of time and agreeing collectively how the plan will be administered in all such circumstances can disputes like the ones I described be addressed before real money is at stake.

Reverse Medical Tourism

On July 31, 2017
By: Jen McCormick, Esq.

On the way home to Boston from a recent international family vacation, I had the pleasure of sitting next to a young gentleman.  He was very friendly and didn’t seem to mind a wiggly toddler so we started to chat.   He told me that he would be in Boston for a month with his father (who was also on the flight), because his father needed medical treatment.  He explained that the services his father needed were not available on the island, and his father’s health insurance would cover a small part of these services via ‘reverse medical tourism.’  The gentleman implied that the family would be covering the balance.  It shouldn’t have come as a surprise that US hospitals are likely enthusiastic to offer services to affluent international patients (maybe because they might pay the hospital at a higher rate than an insurance company).  

During the flight, the gentleman also wanted to know if he could ask me a few questions about where to go in Boston.  Of course I was ready and excited to tell him all the places to visit and see in Boston, but he instead pulled out a list of medical supplies that needed to be purchased (some for the trip and some to bring home).  The gentleman explained that he had been instructed to purchase these basic supplies to avoid having insurance pay for them and/or due to some of these items being difficult to locate (or too expensive) on the island.  

On a daily basis we work to ensure employers are aware of how they can stretch their budgets while still providing comprehensive benefits to their loyal employees.  One popular way is via international medical tourism.  My chat with this gentleman on my short flight home was a reminder that medical tourism works in a variety of ways - US patients are seeking services abroad to obtain services and care at more affordable rates, while at the same time the international patients are seeking services in the US because they can afford to self pay.

Can’t We All Just Get Along?

On July 12, 2017
By: Chris Aguiar, Esq.

It always baffles me when sides whose interests should be very well aligned can’t seem to get on the same page.  The Right and the Left blame each other for the problems in America.  Payers chastise providers for charging too much while providers point the finger back at payers for paying too little. The reality is, if we all took a seat at the table together in the spirit cooperation and compromise, we could probably figure out something that worked for everyone.

In today’s blog installment, I’m looking at the relationship between stop loss carriers and benefit plans.  Now, talk to any of us lawyers at The Phia Group, and we could talk all day about horror stories, as far as subrogation is concerned, its comes up in the same way almost every time.  Now, it doesn’t happen often – but every once in a while I’ll  come across a plan that doesn’t want to comply with its stop loss contracts and/or obligations.  It’s important that everyone realizes that we need each other to survive.  Those plans who perhaps don’t have the cash flow or population to sustain large losses especially must consider the importance of stop loss to the health of their self-funded plan.  And let’s face it, if companies didn’t make money offering a stop loss product, it wouldn’t be available in the marketplace.

The truth is, we’re on the same team.  If we can’t get on the same page, how can we expect state regulators to see the value in what self-funding brings to the benefit plan table?

Spinning the Web of the Plan Document

On July 7, 2017
By: Kelly Dempsey, Esq.

(No, this isn’t about spiders.)

The date was somewhere around August 25, 1999. The location was my 10th grade biology class. I remember taking in the scenery of a new classroom and looking at all the pictures and quotes my teacher had up on the walls. One in particular caught my eye:

“I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.”

Once your head stops spinning, we can continue…

I’ve since learned this quote is attributed to the former head of the Federal Reserve Board, Alan Greenspan.  The context of this quote is still foreign to me, but I believe it can be applied to just about anything – so let’s apply it to plan documents.  

In general there are several entities involved in the process of administering an ERISA self-funded medical plan document, but ultimately the plan sponsor is responsible for ensuring the terms of the plan document meet the needs of the plan and its members. The plan administrator then has the fiduciary duty to administer the plan in accordance with the terms of the plan document. So when is the last time that you, the plan sponsor, have read the plan document cover to cover?  

Plan documents have to be reviewed and revised for any number of reasons, including regulatory changes – but sometimes plan documents are changed when the plan moves to a different claims administrator (i.e., hires a new TPA to administer claims, or moves from an ASO to a TPA or vice versa). The “rules” each claims administrator sets related to the plan document’s format may vary. Some TPAs will administer the document as-is. Some TPAs prefer to use their own plan document template, which the plan sponsor can either adopt from scratch or conform its existing benefits to.

I’ve written about “gap traps” before, and while this isn’t a really one of those as we typically use the term (which is most often relevant to gaps between a plan document and a stop loss policy), a type of gap arises if a restated document doesn’t mirror the prior plan document. For example, the prior plan document had an illegal acts exclusion that applies for any act that carries with it a potential prison sentence of one year. The restated plan document, however, doesn’t include this specific prison sentence limitation, which means the plan essentially will have to exclude more claims in order to comply with the terms of the plan document (such as, for instance, a DWI, which does not carry with it a sentence of up to one year, but is an illegal act!). While this would comport with the terms of the plan document, it is something for which plan members – and even the plan administrator – may not be prepared.

Another example is a situation where the prior plan contained a medical tourism program that includes many non-U.S. locations, so the plan did not include a foreign travel exclusion. When the two plan documents were “merged” such that the existing document and new format are combined, the new plan document accidentally contained both an international medical tourism program as well as a new exclusion for non-U.S. claims (because foreign travel exclusions are still fairly common). Needless to say, that type of contradiction can cause a slew of problems (including a potential gap with the stop loss policy).

The addition of a new exclusion, or even apparently minor verbiage changes within an existing exclusion (or definition, or benefit, or just about anything else, for that matter), can seem very insignificant, but has the potential for dire consequences if the intent of the plan is not reflected as clearly as possible.   

So, a few questions for employers, TPAs, consultants, brokers, and anyone else involved in plan document drafting:

•    Does the plan document actually say what the plan sponsor wants it to say?
•    Does it clearly outline what is covered?
•    Do the exclusions align with what the plan wants to be excluded?
•    If a plan document has been recently restated, have you confirmed that the terms of the new plan document are the same as the prior plan document?

It’s always best to triple-check these types of things.  Happy reading!

Altogether Now… But Not a Single Payer

On July 5, 2017
By: Ron Peck, Esq.

I have in the past remarked both that a single payer system would be harmful to patients and providers, and that it therefore behooves providers and benefit plan administrators to collaborate on an approach that ensures long term sustainability and viability of private benefit plans.

In response, I have been asked why a single payer system is bad for providers and patients, as well as why the current benefit model is not sustainable or viable long term.  While fully responding to both of these inquiries requires way more real estate than I have here, I hope in this blog entry to briefly explain.

WHY THE STATUS QUO CANNOT CONTINUE

I was recently asked to speak about our healthcare system.  I’d planned to talk about how PPACA (aka the ACA or Obamacare) only targets one-third of the healthcare system – that being payers (insurance), while mostly ignoring the other two-thirds: payees (providers) and patients.  

When I performed a web search to find pictures of the three for my slide deck, (insurance, providers, and patients), almost all of the available stock photo images associated with each were as follows: Provider; a wise, grey haired, caring doctor gently comforting a sick child – someone we could trust.  Patient; a desperate looking otherwise average person, clearly in pain and needing help – someone we could relate to.  Insurance; a sleazy looking businessman in a fancy suit, with a slick grin and pockets full of cash – someone we could hate.

Call it a scapegoat, or something else, but of the three players in healthcare, insurance is the villain.  Small wonder, when you consider that they are the ones that employers blame when rates go up; they are the ones siphoning salary from your paycheck; and they don’t provide anything useful.  I mean – providers save lives.  Insurance ruins them, right?  Insurance profits off of others’ suffering, right?  Insurance can charge whatever they want because the alternative is death, right?  Wrong.

Health insurance is routinely ranked beneath the pharmaceutical industry, medical products and equipment, and even some hospital systems, when it comes to profitability; (https://www.forbes.com/sites/liyanchen/2015/12/21/the-most-profitable-industries-in-2016/#12b660035716).  Now – I understand that “profit” means your revenue to cost ratio is great… and that it’s absolutely possible that insurers are taking in way too much revenue, and simply fail to address costs (resulting in poorer profits), but regardless of the reason – the national belief that insurance is printing money, is misplaced.

As I’ve said many times before, insurance isn’t healthcare – it’s a means to pay for healthcare.  This idea that insurance can strong-arm people into paying whatever they want, because people can’t say no – because not having insurance means certain death – assumes that without insurance there is no healthcare.  Yet, the truth is that healthcare would exist with or without insurance; we’d just need to find a different way to pay for it.  People “need” insurance – not for its own sake – but to pay for healthcare, because healthcare itself is too expensive.  

Imagine the following scenario:  Oil changes for your car jump to $1,000 per oil change.  Rather than be outraged with the price, we turn around and demand that auto insurance start paying for it.  We then get outraged when auto insurance rates increase.

Insurance isn’t without blame.  Indeed, I believe strongly that some forms of benefit plan are the only types that should be allowed to exist; that others are too profit driven, and/or force insureds to pay the cost when they make mistakes or act inefficiently.  Yet, with that said, blaming those actors (even the bad ones) for all the problems facing healthcare is a huge mistake.

Health insurance is not a behemoth, stomping around, forcing its will on insureds and providers.  In fact, the opposite is true.  Problems with the status quo arise not from the strength of the insurance market, but rather, their weakness.  This weakness, which we’ll next dissect, would be abolished by a single payer system – at the expense of medical service providers.

Presently, insurers (try to) negotiate with hospitals and drug companies on their own.  To do this, many rely upon preferred provider organization (PPO) networks or other such programs, whereby someone (the insurer itself or a network acting on a plan’s behalf) negotiate deals with providers, which then allows the provider to be deemed “in network.”  

In exchange for agreeing to the network terms, providers are promised prompt payment, and reductions in (or elimination of) audits and other activities payers otherwise engage in when dealing with medical bills submitted by out of network providers.  Indeed, benefit plans unilaterally calculate what the covered amount is when paying an out of network provider (usually resulting in the “balance” being “billed” to the patient).  When paying an in-network provider, however, benefit plans are required to pay the network rate (the billed charge minus an agreed upon discount), regardless of what pricing parameters they’d usually apply to out of network bills.  This is agreeable to the payer, meanwhile, because it means they get a discount (albeit off of inflated rates), and – more importantly – the payment is payment in full… meaning patients aren’t balance billed.

Due to the payer’s size (or lack of size) and number of payers present, competition between payers and networks, and other elements present in our market, payers cannot “strong arm” providers.   Compare this to markets where there is a single payer; when providers must agree to terms controlled by the payer, since it’s their way or no way.  

In other words, in a pure single-payer system, there is only one payer available – and you play by their rules, or you don’t play at all. Currently, in the United States, Medicare and Medicaid are the two “biggest” payers, and thus, it should come as no surprise that they routinely secure the best rates.

So – when you ask why the current system can’t survive, look at the prices.  Yes – instead of focusing on getting everyone enrolled in an insurance plan, and hoping that will somehow make things less expensive, instead look at what we’re actually paying.  As with the $1,000 oil change, sometimes the simplest answer is the right answer.  Healthcare is too expensive because healthcare is too expensive.

A 2011 study (http://content.healthaffairs.org/content/30/9/1647) found that reimbursements to some US providers from public payers, such as Medicare and Medicaid, were 27% higher than in countries with universal coverage, and their reimbursements from private payers were 70% higher.  This tells you two things – private plans pay way more than Medicare, and Medicare pays way more than “single payer systems.”

What does this mean?  If providers fail to offer private payers better rates soon, they will bankrupt the system.  If that happens, Medicare will go from being the “biggest” payer to the “only” payer… and the rates they pay will drop accordingly.  This then, brings us to the next chapter…

THE ISSUES WITH A SINGLE PAYER

Businesses need to stay profitable to stay afloat, and medical providers are no different.  In a single payer system, usage increases (because – from the “consumer” perspective [aka patients] it’s free), and reimbursement to providers decreases (for reasons discussed above).  That means providers are expected to do more with less.  Naturally, this results in decreases in quality, and longer waiting times (assuming access is available at all).  

To counter this natural shift, many nations with single payer systems also implement strict central planning.  This moves many healthcare choices from individual patients and providers, and instead allows the government to set the rules.

Months to have a lump examined?  Hours upon hours sitting in a waiting room?  Death panels?  The “horror” stories we hear from other nations with single payer systems are not shocking – they are expected.  Yet, those who support a single payer system do so because the current system is too expensive.  Thus, to avoid a single payer system, we need to make healthcare less expensive.  How do we do that?  Reduce the cost of healthcare, and reduce the cost of health insurance accordingly.

IDEAS FOR THE FUTURE

First, many have argued (and I tend to agree) that health insurance pays for too many medical services.  Routine, foreseeable services should not be “insured” events.  Insurance is meant to shift risk, associated with unforeseen catastrophic events.  A flu shot doesn’t fall into that category.  If people paid for such costs out of their own pocket, hopefully the cost of insurance would decrease (adding cash to the individual’s assets with which they can pay for said expenses).  Likewise, hopefully providers would recognize that people are paying for these services out of their own pockets, and reduce their fees accordingly.  If an insurance carrier wanted to reimburse insureds for these expenses (promoting a healthy lifestyle and avoiding some catastrophic costs insurance would otherwise pay) or employers want to cover these costs as a separate and independent benefit of employment (distinct from health insurance) so be it; (cough*self-funding*cough).

Next, we need to refocus on primary care as the gatekeeper.  I’ve seen a movement towards “physician only” networks, direct primary care, and other innovative methods by which benefit plans and employers promote the use of primary care physicians, and I applaud the effort.  They provide low cost services, identify potential high cost issues before they multiply, and steer patients to the highest quality yet lowest cost facilities and specialists when needed.

Lastly, I’ve seen benefit plans attempt to remove themselves from traditional “binding” network arrangements and instead contract directly with one or two facilities in a given geographic area.  By engaging with the facility directly, they can find common ground, and identify valuable consideration not previously considered.  Between increased steerage, true exclusivity, electronic payment, prompt payment, dedicated concierge, and other services payers can offer hospitals – above and beyond dollars and cents – some facilities are able to reduce their asking price to a rate that will allow the plan to survive… and thrive.

From ACOs to value based pricing… from direct primary care to carving out the highest cost (yet rarest) types of care – to be negotiated case by case – many innovative payers are trying to cut costs and ensure their survival.  The next step is getting providers to agree that such survival is good for the provider as well.  Compared to the alternative, I hope they will not cut off their noses to spite their faces.