May 23, 2016
How Medicare-Plus Plans Can Work For You And Your Clients
By: Bruce Roffé, President and CEO of HHC Group
Featured on insurancenewsnet.com
Commissions, as a percentage of your clients' premiums, likely comprise the lion's share of your income. So it's only logical that when your clients' renewals roll around, you present them with options from a short list of conventional, fully-insured health plans – similar to their existing coverage.
However, depending upon your clients' circumstances, a self-insured approach to providing health benefits, particularly one that benchmarks claims against Medicare rates, may be a better option for your clients. Moreover, your expertise on the subject can elevate your position to "trusted advisor" and earn you handsome income in the process.
As a rule, self-funding health benefits delivers significant savings compared to premiums for a fully-insured health plan. From 2000 to 2010, premiums have increased by 132% in fully insured companies. By contrast, self-insured employers' health coverage costs increased by only 116% during the same timeframe.
What can you do about it? As your clients' headcounts grow, they will likely turn toward a self-insured solution with or without your lead. However, you have a great deal of influence on how they approach the transition, and you can look like a hero if you advise them wisely.
The Basics Of Self-Funding Health Benefits
In a self-funded environment, the employer takes on the financial burden of paying employees' health claims. A third party administrator, or TPA, helps design a plan to meet the employers' particular needs, including determining the cost-sharing between the employer and employees. The cost sharing mirrors fully-insured plans, usually in the form of monthly payroll deductions, copayments, and deductibles. The TPA contracts with provider networks and administers the claims.
To protect the employer from catastrophic costs associated with a major health expense or a particularly high number of aggregate claims, the employer also purchases stop-loss coverage.
In 2015, 63% of employers in the U.S. self-funded their health benefits, 10% more than only a decade earlier. As you might expect, the frequency of self-funding increases with employee number. For example, 82% of employers with 500 or more employees self-insure, compared to 26% of employers with 100 to 499 employees, and less than 5% of employers with 50 or less employees.
What's Good Enough For Uncle Sam…
Among your clients for whom self-insurance makes good sense, "reference-based pricing" of "Medicare-plus pricing" may be an even more attractive option. Medicare-plus plans are a relatively new option where employers typically pay the provider 1.2 to 2 times the rates set by Medicare, which can translate into tens of thousands of dollars of savings for your client – even compared to pre-negotiated rates for network providers. And that's just for a single claim. Imagine the savings for a large group with hundreds or thousands of claims each year.
Employers can use the Medicare-plus approach for all claims, hospital claims only (and pay contracted rates through a PPO for physician services), or for specific services like dialysis.
Here's how it works. An employee accesses care, and the provider submits a bill to the TPA. The TPA, in turn, works with a medical claims, cost-reduction company like ours. We determine the Medicare rate and re-price the provider's bill accordingly. Finally, the TPA pays the reduced amount.
Keep in mind, not all providers will accept the re-priced bill as payment in full. In these instances, the provider can pursue the unpaid balance from the employee. In some states, this collection approach, known as "balance billing," may soon be illegal, but for now, it's not uncommon. As a protection against the practice, many TPAs have "patient advocacy plans" where they agree to serve as advocates for the employee in these scenarios and will oftentimes engage companies like ours to negotiate an acceptable resolution for the provider, the employer, and the employee.
Advisor, Salesperson, Or Both?
For large groups, self-funded plans often make good sense. And for employers that have to provide coverage under the ACA but want to minimize costs, a Medicare-plus approach makes even smarter sense.
Fortunately, as a broker, you're in an enviable position to advise your clients toward these options, and you can earn substantial revenue in the process. TPA's often pay commissions to brokers, usually on a per employee/per month basis (PE/PM), and the amount can range from $1.00 to $2.00 per employee. For large groups, that translates into big dollars. In addition, stop-loss insurance carriers pay commissions.
Lastly, many brokers charge consulting fees, demonstrating the significant value employers place on their advice and counsel. For these agents, knowledge and a passion for saving their clients' money makes them trusted advisors for years to come.
About The Author
Dr. Bruce Roffé is a pharmacist and President and CEO of H.H.C. Group, a medical claims, cost-reduction company that works on behalf of self‐insured employers throughout the United States. At one time, he was Assistant Director of Hospital Pharmacy at Detroit Receiving Hospital and University Health Center and was also an Adjunct Assistant Professor of Hospital Pharmacy at Wayne State University, College of Pharmacy and Health Sciences, Detroit, Michigan. He may be reached at email@example.com.