By Christine Cooper, CEO, aequum LLC
The lack of price transparency throughout the healthcare industry has subjected increasing numbers of patients to the unwanted surprise of unplanned medical bills. These unexpected and often high-dollar costs occur when people are surprised by a bill for the difference between what their provider charges and the covered amount. It is a surprise when the balance exceeds the participant’s expectations regarding out-of-pocket costs in addition to paying a deductible, copayment or coinsurance. Although federal and some states are attempting to curtail this practice in certain circumstances, the complexity of compliance may increase costs for those most vulnerable to surprise and balance bills.
Enter big data. Sophisticated information technology coupled with deep knowledge of medical billing created a new generation of services that deliver competitive advantages by protecting employers and their employees against unreasonable and balance-billing charges. One such solution adopted by 325 self-funded health plans successfully resolved thousands of claims. In one recent period, this solution generated savings of 97.2% off disputed charges for 6,800+ claims.
Many plan sponsors seek a partner to provide technology solutions that protect participants and increase employee satisfaction with their health coverage, while also generating savings to both the employer and plan participants. Partnering with a self-insured plan’s claims administrator ensures coordination of administration, advocacy services and legal representation.
Coordination ensures payers can successfully navigate complex federal and state healthcare regulations and effectively negotiate and/or litigate complex medical billing issues.
Understanding the Issue
Typically, surprise out-of-network bills occur when patients receive care from a non-network provider, such as when they access treatment out-of-network. Studies suggest that about 20% of emergency department visits and 10% of elective inpatient care stays involve at least one out-of-network provider.
To date, federal and state legislative actions haven’t addressed all such situations. For this reason, several employers have moved away from offering traditional coverage with a provider network and instead are using reference-based pricing for some or all of the services covered by their health plan.
What is Reference-based Pricing?
With reference-based pricing, the employer pays a set price for each health care service instead of negotiating prices with providers. The reference price results from collecting data on prevailing costs for medical services from the Center for Medicare and Medicaid Services Healthcare Provider Cost Reporting Information System, benchmarking them against relevant types of hospitals and other provider settings, then calibrating the prices by severity level and applying a margin factor.
For plans using reference-based pricing, when a provider bills for the service, the claims administrator remits the set amount. If the provider is satisfied with the payment, then the processing is complete. However, if the provider is dissatisfied with the payment, then they can bill the patient for the unpaid portion of the claim. In those balance-billing situations, almost all participants can reduce their costs/liability through advocacy, legal representation and other assistance.
Self-Insured Plans Subject to ERISA
Federal and state law permit most payers to use reference-based pricing for out-of-network claims. But any plan subject to network adequacy rules may not use this as a comprehensive payment strategy. Only employer-based, self-insured plans regulated under the Employee
Retirement Income Security Act of 1974 (ERISA) may use reference-based pricing as a comprehensive payment strategy.
A growing number of payers want to replace the traditional provider network model with reference-based pricing for some, or all, of their medical spending. This is significant, given that the number of employers offering self-insured plans, subject to ERISA, is growing – as there is a significant cost advantage for plan sponsors who self-insure, avoiding various charges and taxes.
Percentage of U.S. workers covered by self-funded health insurance plans from 1999 to 2020*
This graph shows an increase in participants in self-insured plans from 72MM in 1999, to 86MM at the time Health Reform passed in the Senate, then to 105MM in 2020 – a significant trend resulting in a nearly 50% increase since the turn of the century.
With the growth in self-insurance, there has been a steady increase in the number of individuals covered under plans which have implemented reference-based pricing. This is where the right partner can make a big difference.
Finding the Right Partner
It’s important to look for a tech-driven medical billing partner that utilizes a proprietary database that can proactively protect plan members against aggressive out-of-network charges, recover excessive provider payments and shield them from unfair debt collection practices. The partner should function as an agent of change, employing information technology and data-driven solutions to bring savings to employer-sponsored health plans while improving employee satisfaction through defense of medical balance billing and the recovery of overpayments.
Look for a partner that offers services designed to create a competitive advantage by protecting clients and members/dependents against unfair medical billing charges. aequum’s ability to limit charges to “what is fair and just” reduces participant out-of-pocket cost sharing. What’s more, these services help plan sponsors manage the cost of coverage, often reducing both employer and participant contributions.
Christine M. Cooper isthe CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Founded in 2020, aequum serves third-party administrators, medical cost management companies, stop-loss carriers, employer-sponsored health plans and brokers nationwide, defending medical balance bills and delivering savings to employer-sponsored health plans. Find aequum at aequumhealth.com.