For decades, employers have been constantly wrestling with the cost of health insurance. Paying more and getting less seems to be a reoccurring theme each year. We’ve all been told how complex healthcare is by health insurance companies, hospital systems, big Pharma, and brokers and consultants, AND it’s so complex that it can’t be fixed, thus leaving us all with the “Healthcare Paradox” that IT IS WHAT IT IS. It might’ve been difficult decades ago, but with technology and innovation healthcare costs are no longer complex and are easily fixed.
As everyone knows, increased healthcare costs translate to increased health insurance costs, so if an employer wants to reduce their health insurance costs they have to have a method to reduce healthcare costs. The same four institutions mentioned above could easily change the healthcare and health insurance landscape for all of us, but they won’t. There’s too much money in it for all of them – misaligned incentives. In fact, did you know that BUCA (Blue Cross, United, Cigna, Aetna) had $11B in profits in Q3 of 2022?
Hospital costs and prescription drug costs are the two largest categorical expenses incurred by employees. Increased hospital and prescription drug costs are going to continue into the foreseeable future, so no one should expect health insurance costs to go down in the present system.
But health insurance costs can be reduced now in the future. Among other things, here’s how:
- Eliminate insurance company PPO contracts and their discounts. If you’ve read some of my prior articles you know that the purported “large” PPO discounts that insurance companies have negotiated get diluted by increasing hospital charges. For decades we’ve all been ‘programmed’ to believe that PPO discounts are the only way to keep costs down. Nothing could be farther from the truth.
Instead, implement a plan that reimburses medical providers based upon a “Cost Plus” and/or “Medicare Plus” basis. This eliminates the proverbial “PPO discount off of what” and replaces it with a fixed reimbursement tied to their costs and/or Medicare. This is a simple solution that can reduce healthcare costs by as much as 30% or more.
- Change your Pharmacy Benefit Manager (PBM) from one of the “Big Four” with the BUCAs, to an independent transparent PBM that has more competitive terms and pricing. BUCA PBM’s make a great deal of money from spread pricing and collecting rebates.
Independent PBM’s make their money on administrative fees and not at the expense of their clients increased prescription costs. Zero spread pricing and 100% of the rebates going to employers are two of their cornerstones. Members can go to the same pharmacies with the same or lower co-pays. In addition, create a relationship with a Specialty Drug vendor who can significantly reduce or eliminate those costs as well.
Fixing healthcare and related health insurance cost is easy, and doesn’t take much time. Once you understand the “WHY,” you can then do something about the “HOW.” If you’d like to know more about how you can fix it, you can email me at [email protected] or call me at 970 – 349 – 7707. I hope to hear from you.
