Free Market Myth v. Fact

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MYTH: I must use a carrier as my Third-Party Administrator.
FACT: You do not need a carrier/ASO to be your TPA.

It is common for carriers to convince employer and brokers, that having a carrier (ASO) is  almost a prerequisite to having a self-funded plan. However, these carriers are often not working in the best interest of the employer.

Since ASOs often require the use of their networks, PBMs, stop loss coverage, out-of-network negotiations, and other services, an employer is often kept in the dark about the funneling or usage of their claims funds. When using an ASO for all the various services they offer, the employer is also unaware of the ASO’s true total compensation.

When you are self-funded, you want an administrator that works in the best interest of you and your plan. In fact, it is your duty under ERISA to be able to prove that plan assets have only been used in a reasonable way. Your TPA is valuable only when they work for the exclusive benefit of the self-funded Plan.

MYTH: I have to have a comprehensive PPO network with good discounts.
FACT: Discounts are an illusion.

PPO discounts are an illusory shell game.  A discount off what?  The answer is that it is a discount off an unknown starting point.  The final amount after the discount is not based upon a fair market value price, a reasonable price, or any knowable number.  No one would willingly buy a vehicle with a price that is 60% discounted unless they knew the final amount that would be charged. The same should apply with non-emergency healthcare services.

Additionally, PPO networks not only charge an access fee to the employer, but they also skim off the discount itself.  For example, the facility or physician will agree to a 60% discount, BUT the network shows the employer a 50% discount, keeping 10% for themselves.

To add insult to injury, the contracts negotiated with providers are proprietary and confidential, leaving the employer in the dark about what their plan has agreed to pay, how to pay it, or any of the other terms.

Many providers charge a lower total charge if they believe the patient does not have coverage. When they are informed of existing coverage, their bill is modified to show a much higher billed charge, the agreed upon discount, and then the final amount owed. (See illustration, previous page).  The patient is then responsible for a higher cost than if they had just paid cash!

The pressure to keep a specific provider “in-network” so that the patient does not have to discuss cost is powerful. But discounts rarely do the patient any more favors than they do your plan.  There are thousands of Sellers not participating in a network who willingly accept a reasonable reimbursement. It is more efficient to not deal with claims filing requirements, incorrect payment issues, and multiple agreements.


MYTH: My overhead is high, so you must pay more. My reimbursement from a carrier or Medicare is too low, so you will have to pay more. The “free market” has siphoned patients out of my managed care contract, so you will have to pay more.
FACT: These issues are NEVER the Buyer’s problem.

The inability to compete for customers should never be used as a justification for overcharging your benefit plan.  If their overhead is too high, it is their responsibility to bring their costs under control. The Buyer is under no obligation to pay higher charges to bring a Seller into the black when they have willingly signed adverse contracts with other plans or programs. If a free market program is causing patients to seek out an alternative provider, it is up to the seller to offer services and/or pricing to retain these patients.