As a Third Party Administrator, employers and plan members count on us to make their health benefits work. While that sounds easy enough, it can be anything but easy when ordinary working families are forced to face exorbitant hospital bills.
One couple recently found themselves confronted with a very difficult situation when their son needed a medical procedure that would be considered routine in ordinary circumstances. However, what happened was anything but ordinary. The hospital rejected the couple’s insurance, saying that because they had gone out of network, they would be required to pay $9,000 up front for their child’s tonsillectomy and another $10,000 or more immediately following the procedure.
Their health plan, which we manage for their employer, has been partially self-funded for several years. In addition, the employer recently replaced their PPO network with reference based (or cost plus) pricing, a strategy that enables the plan to define pricing limits and ensure a much more transparent view of healthcare expenses.
In this particular case, we worked with the parents, their regular pediatrician and ELAP Services to arrange for the procedure to be performed at a local, affiliated surgical center – at a fraction of the price quoted by the original hospital. Their total cost was less than $2,000, approximately one tenth of the cost the original provider intended to charge. It took a great deal of work and cooperation to achieve this outcome, but the case serves as an excellent example of what can be done when a health plan has been designed to encourage open dialogue between patients, trusted advisors and providers.
More and more, hardworking Americans are facing extraordinary healthcare costs and struggling to pay their bills. NerdWallet Health conducted a study and found that a debt collection agency will contact 1 in 5 American adults regarding medical debt. This means there are approximately 51 million people who are unprepared and unable to deal with the rising cost of healthcare.
Another aspect of healthcare that is seldom discussed is the challenge facing small and mid-sized employers struggling to provide adequate healthcare to their workers. Rising costs have made it nearly impossible for many companies to hire new employees or invest in their businesses in other ways. Sadly, millions of Americans have seen their standard of living eroded by the cost shifting that has occurred.
As these parents and their employer have discovered, alternatives like reference based pricing are helping to build bridges between employers and hospitals. “While a good deal of experience is required to design these plans and manage them over time, the opportunity for cost savings is so significant that more and more employers are moving in this direction,” said Brooks Goodison, President of Diversified Group. One of New England’s most experienced Third Party Administrators, Diversified Group has responded to the growing demand. “With or without reference based pricing, Diversified has long been committed to pursuing mutually rewarding partnerships between employers and community-based health care facilities,” added Goodison. “Open communication, cooperation and innovation by businesses and healthcare providers are musts if the issue of runaway healthcare costs is ever going to be resolved.”
As cases like this have long shown, the price for a given healthcare procedure in the same locale can vary greatly, often with little difference in quality. When employers use reference based or cost plus pricing, the plan and area hospitals typically agree on a pricing schedule for covered benefits by using Medicare plus a predetermined margin. Visit Diversified Group online to learn more about reference based pricing and view a brief educational video by ELAP Services, Inc.