Comparing Discounts in a Self-Insured Arrangement

In a self-insured plan, where 85% or more of cost is the actual payments made for medical claims, one of the most important factors to consider is the network; which one will provide the best access and which will yield the best provider discounts.

Let’s start with access: which network most closely aligns with the providers your employees and their families actually see? This is an easy one – with the exception of steerage driven by strong in-network bias, if a network is within 10 percentage points of the incumbent, that should be a close enough match and will not result in significant disruption. It’s more critical to look closely at the in-network statistics for noise such as inclusion of repricing networks or the exclusion of certain ancillary providers.

Moving on to claims: we feel that repricing exercises are also of limited value. While routine charges are relatively easy to assess, the big variables are in large claims adjudication – here are a few important things to consider:

  1. Some carriers have bundled payment arrangements and others straight discount deals – this is akin to comparing apples and oranges.
  2. Risk-based contracting throws the entire analysis off since the deals are not comparable.
  3. Medical management effectiveness is another variable which is tough to control for. Take setting of care steerage for specialty medications, for example.
  4. Shared savings and network access fees are another variable that is hard to control. Usually these fees are not included in the disclosed discount percentage, but they are an additional cost to the plan.
  5. Reimbursement agreements also contain stop-loss provisions where the payment arrangements may change after a person is inpatient for a certain number of days; for instance, a shift from a per diem arrangement to a discount off of billed charges.
  6. Pharmacy pricing is one of the most opaque components of costs and a lot of study is required to compare those variables.

There is a great deal of analysis that goes into matching a client to a network and a lot more transparency is needed to ensure that your coverage is in the right place. A great broker/consultant can guide you through this process from beginning to end.

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