By: Ron E. Peck, Esq.
Why do employers offer health benefits to employees? Some might point to the Patient Protection and Affordable Care Act (“PPACA” or “ObamaCare”) and say the law forces them to do so. Yet, prior to the law’s passage in 2010, many (if not most) employers voluntarily offered health benefits to their employees. There are a number of reasons for this, but suffice it to say, it was meant to attract and retain the best talent.
Indeed, once upon a time, health benefits were just that – “benefits.” Now, it’s assumed health insurance is included in an employment package, and what was once a benefit is now an entitlement.
Why does this matter? It matters for many reasons, but as it relates to reference-based pricing, or “RBP,” it matters insofar as RBP ultimately – more often than not – puts the patient (“a/k/a” the employee or their family) in the crosshairs when disputes arise between providers of healthcare services, and the benefit plans that utilize an RBP pricing methodology.
Perhaps – long ago – when health benefits were welcomed as “icing on the cake,” the fact that an individual may be limited in who or whom they could utilize for care, or risk being balance billed the difference between what the plan pays and what the provider charges, would not have been so onerous. The employee might have thought, “Heck! It’s better than nothing; and I suppose I could avoid the bill by selecting a provider that works with my plan.”
Today, however, not only do we expect to receive health benefits, but we are outraged when our out of pocket expenses increase. This attitude, on the part of plan participants, is anathema to RBP.
At the same time, recall that RBP is a response to changing opinions as they relate to networks, and PPOs. Looking back in time, one of the values inherent in PPOs was a discount off of provider billed charges. It was assumed – “back in the day” – that the billed charges against which the discount applied were reasonable, and as such, getting discounts on top of reasonable charges had value. The fact that the provider, by agreeing to accept the network rate as payment in full, had the secondary impact of protecting patients from balance billing, was just icing on the cake.
Today, however, we recognize that billed charges are so exorbitant, that network discounts do next to nothing to counter the abuse, and thereby are worthless. As a result, the thing that once was a secondary benefit of network enrollment – balance billing protection for the patient – has become, more or less, the only valuable element of a network. Yes; if asked why they are still using a network, most plans would not state it’s for the discount, but rather, it’s to avoid balance billing and protect patients.
Thus, we must ask ourselves – how much will we pay to avoid balance billing and protect patients? If a provider charges $60,000, there is a discount of 30% ($18,000), $42,000 is thus expected as payment, and the reasonable fee is $5,000, is it worth $37,000 to protect the patient from balance billing? If not, what will you pay – instead – to protect patients, if anything?
This is ultimately the question every plan contemplating RBP must ask itself. How much more, beyond reasonable charges, am I willing to pay to protect my plan participants?
Piling onto this, politicians, lawmakers, regulators and courts seem more than happy to offset the rising cost of healthcare onto the benefit plans as well. From FAQs released by the DOL, indicating that a failure to offer “adequate access” (“a/k/a” a network) will result in balance billed amounts counting against maximum out of pockets – and thus make the remainder of the billed charges owed and payable by the plan, to court decisions overturning previous rulings that determined hospitals can’t force patients to agree to pay whatever the hospital charges and sought to calculate fair prices when no fee was agreed upon, those in power seem dead set on allowing providers to charge whatever they want, and protect patients from any undue out of pocket expenses – by forcing plans to either contract with providers, or pay the cost.
I have personally advocated for working directly with providers, identifying value, and finding ways to create win-win scenarios without increasing how much the plan pays; instead offering providers things of value – other than cash – that incentivizes them to accept plan maximums as payment in full. Yet, this effort is put into serious jeopardy whenever anyone “forces” a plan to enter into contracts or networks with providers. Politicians and providers seem to treat (or want to treat) “networks” like a silver bullet. The issue is, however, that networks are just a nice label for a “contract.” If any rule or law “requires” a payer to enter into a contract with a payee, and failure to do so results in penalties for the payer, it puts an unfair advantage in the hands of the payee. One key to successful negotiation – whether it be a provider network deal, buying real estate, or settling a law suit – if both sides don’t have something to gain, something to lose, and the freedom to leave the table, the “deal” won’t be fair.
As a result, the DOL FAQs, case law, and proposed laws that would “force” a payer (plan, carrier, etc.) to broaden their network, and force them to sign a deal with a provider, will result in one-sided deals, as providers know that the payer cannot “leave the table” without a deal.
These are all things one must consider when asking themselves whether to RBP or not to RBP.