MedCost Rated Highest in Mecklenburg Medical Society Survey

The Mecklenburg County Medical Society’s Managers Managed Care Sub-Committee conducted its second annual survey of physician members and managers of medical practices in Mecklenburg County. The purpose of the survey was to identify how area managed care plans differ from each other on issues of primary importance to medical practices. The survey asked respondents to rate eight managed care plans—Aetna, Blue Cross, Cigna, Health Care Savings, Mamsi, MedCost, United, and WellPath--on nine criteria.
MedCost received the highest, most favorable scores in these categories:

• Timely credentialing of physicians
• Contract negotiation process
• Complete fee schedule provided
• Payments are correct
• Overall impression of the network/payer

Posted 11/09/04

Putting the pieces together to provide health care benefits

Every employer in the country frets over the every-rising costs of providing health care benefits to their employees.  With health care costs, in most cases, coming in second only to payroll as the biggest monthly expense to a company, employers are constantly looking for solutions in order to minimize this liability.

With fewer and fewer insurance carriers in the health insurance marketplace, where can you go for relief?  The answer for many companies can be the "partially self-funded" method of providing health care benefits.

When small to mid-size companies (50 to 250 employees and higher) first hear "partially self-funded," they might think more liability for my company or added administrative duties for the employer.  In fact, the "partially self-funded" method of providing health care benefits should present no more liability or administrative obligations than any other method of offering health insurance benefits.

The "partially self-funded" method of providing health care benefits is relatively simple.  An employer takes the initial claims deductible for each plan participant, which starts at $15,000 and rises, according to the size of the company.  Once an employer determines the deductible amount that they are willing to absorb, they purchase what is referred to as "specific stop loss" reinsurance coverage from an insurance carrier.  What this means is the company's liability ends once a participant reaches the assigned risk.

The second piece of the puzzle is total liability for a company.  You might have asked yourself, if the company takes on a $15,000 deductible per participant and I have 50 employees and 35 dependents that is a $1,275,000 liability.

The solution to this exposure is the purchase of a second policy, which is referred to as "aggregate stop loss" reinsurance coverage.  Effectively, all of your company's claims responsibility up to, in this case the $15,000 risk, accumulates to a predetermined aggregate cap.  This cap is based on the employee demographics and past claims experience.

The last piece of this puzzle is hiring an independent Third Party Administrator (TPA).  A TPA is an organization that is contracted by your company to administer all aspects of the health care benefits administration.  Their services would encompass all of the services traditionally provided by an insurance carrier.

A good TPA will not only administer the day-to-day operations (i.e. adjudicate claims, issue I.D. cards, answer employee inquiries, COBRA administration), but they also perform the task of negotiating reinsurance for the coverages previously described.

The total sum of what has been described is that a company takes on a certain risk, in exchange for insurance premiums that can be 75 to 80 percent lower than the premiums paid to an insurance carrier.  The company hires a TPA to provide all of the administrative services for the plan for a fee which would equate to 4 to 6 percent of the premium paid to an insurance carrier.

Effectively what transpires is that you pay a monthly "fixed cost" of approximately 30 percent of your current premium through an insurance company, which obviously frees up 70 percent of the dollars that would have previously been allocated for this coverage.  The company uses the savings to fund the claims as they are incurred.

Typically, the bottom line is that the maximum liability under a "partially self-funded" health care model (specific stop loss and aggregate stop loss reinsurance and administrative expense) would equate to approximately what your existing premium exposure would be through an insurance carrier.

In a worst case scenario, the company would not spend any more money during the plan year under the "partially self funded" model, then it would have spent with an insurance carrier.  The up side is that in a year when a company has better than expected claims experience, the company would retain the savings, instead of the insurance carrier keeping the money as profit.

There are several other positive aspects to "partially self-funded" health care plans, as well.  An employer has total autonomy in plan design (within a broad framework), where the employer can tailor a benefits program to suit the needs of their employees.  It is not uncommon for employers with 50 to 100 employees to have two or three plan options from which the employee can choose.  Included in possible plan designs are Health Savings Accounts (HSA's), as well as Health Reimbursement Accounts (HRA's) options.

Perhaps the most significant aspect of "partial self-funding" is that an employer has total accountability with regard to plan costs.  In any given month or year, an employer can see what has been spent for reinsurance coverage, administration and on claims.  An employer can see what percentage of his cost are associated with the prescription card plan, or see how much savings the company has realized through the Preferred Provider Organization (PPO) they have elected to contract with.  Chances are, under a traditional health care plan, an employer can not even get a "loss ratio" for their plan.  Under the "Partially self-funded" method of providing health care, an employer has as much access to data as is allowed under law.

When a company's second largest monthly liability is health insurance premiums, it only makes since to manage this expense like any other aspect of your business.  "Partial self-funding" allows a company flexibility in designing and maintaining its health care plan, and most importantly, the opportunity to save money, while providing for the health and well being of the company's most important asset, its employees.

Business East, December 2004
by Kenneth (Kenny) E. Morris III, president of First Choice Benefits, Inc.