Suggested Self-Funded Health Plan Changes

Background

We have established in other sub-sites that unfair trade practices may appear as either (a) discriminatory hospital billing practices or (b) vendor bundling, each of which will introduce the possibility of conflicted interests. Also, that such unfair acts or practices will likely only be found (and proven) by means of a special-purpose audit with new professional skills added to the audit team.

The self-funded plan sponsor may wish to know what can be done to ameliorate the harm which may be inflicted by such potential unfair trade practices. This sub site offers a few suggestions which may (or should) be considered by such plan sponsor at once. The range of actions are these:

1. Amend such plan to disclose certain vendor bundling.

2. Encourage the regulation of hospital billing practices by the state.

3. Amend the plan sponsor’s plan to define the hospital basis of charges.

4. Encourage the use of the special-purpose audits.

5. Promote Consumer-Driven Health Plans.

6. Amend the Administrative Agreement to show the relationship between the producer and TPA with regards to stop-loss.

7. Rely on competition.

Amend Plan to Disclose Certain Vendor Bundling

While vendor bundling may or may not affect the assets or benefits of the plan, either directly or indirectly, the existence of such bundling carries the possibility of conflicted interest which opens the opportunity to unfair trade acts or deceptive practices. There are four vendor services to be considered:

• Utilization Review Firm (UR)
• Managed Care Organization (Network Management) (MCO)
• Plan Supervisor (Claims Administration) (TPA)
• Stop-loss Carrier (SL).

While the SL agreement has the plan sponsor as applicant-owner-payer-beneficiary and is therefore not a plan asset, its relationship by bundling with other vendor services may indirectly affect plan assets or benefits. For two reasons, it is grouped with the other vendor services.

The bundling of vendor services maybe as follows:

_______ Two services

__________ and __________.

_______ Three services

__________, __________ and __________.

______ Four services

__________, __________, __________ and __________.

Encourage the Regulation Hospital Billing Practices by the State

All of the parties connected directly or indirectly with self-funded health plans (providers, producers, plan sponsors and vendors) should consent to what is obvious: i.e., because of the oligolopolistic nature of the hospital industry, regulation of billing practices by the state is necessary.

Amend Plan to Redefine Hospital Basic of Charges

For every inpatient stay by any covered person, this plan requires that the hospital’s basis of charges be disclosed to such Covered Person by means of a Plan-Provided Hospital Disclosure of Charges Statement as near to the admission date as possible. Such Disclosure Statement shall show this information.

Basis of Hospital Charges

This health care plan will not reimburse for hospital charges which exceed the following:

In-Network Care

Those hospital charges established by the Network

Non-Network Care

Those hospital charges which exceed the particular selected basis below shown:

___ (105) % of Hospital’s Chargemaster

___ (115) % of Hospital’s Medicare Reimbursement including any outlier payment

___ 100% of state-provided basis of charges

___ (110) % of Hospital’s publicly-disclosed charges

___ Other, as may be agreed up by the Plan and the Hospital.

Hospital charges mean the unit (sticker) price of the service and has no relationship to either the quantity or quality of such service.

Encourage the use of the Special-Purpose Audit

Every reasonable effort should be made by all parties connected with a self-funded health plan to assure the ready availability of special-purpose audit teams that can bring the needed and added dimensions to the audit assignment such as legal, economic and actuarial.

Promote Consumer-Driven Health Plans

While most students of health plans agree that the virtues of the CDHP paradigm are significant, the difficulty is that without price transparency, the success of such plans will be limited. As a tax-deferred retirement plan, such arrangement as the HSA is fine but as a cost containment tool it has limited effectiveness.

What is needed is a nationally-based software program which will make available such data as the following:

• Representative costs, by procedure, showing both (a) hospital and (b) physician costs.
• Representative costs, by procedure, showing on a national cost basis, the costs of the principal treatment options separate by type of provider.

Amend Administration Agreement to Show Relationship Between the Producer and the TPA with Regards to Stop-Loss

Notwithstanding the fact that (a) the stop-loss contract is not directly connected with the plan in that the plan sponsor is the owner-applicant-payer-beneficiary and (b) the only parties directly connected to the stop-loss are the carrier and the plan sponsor, there should be a liaison between the plan sponsor and the stop-loss carrier (i.e., either the producer or the TPA).

The Administrative Agreement should make clear that the vendor responsible to the plan sponsor for stop-loss related administration is indicated as follows:

___ TPA

___ Producer (agent, broker, consultant, etc.)

___ Other _________________________.

Rely on Competition

Each of the four major funding methods (fully insured, prepaid, HMO and self-funding) has its own set of skills and advantages. Each of the four should see the challenges set forth is this Web Site and accordingly seek and provide solutions. The market-share dominance of each of the four methods is, and should be, the goal. The writer might add “good luck to the winner”.