Strategic Benefit Modeling

Transparency in an

industry cluttered with

black boxes.

Strategic Benefit Modeling

Black Boxes and BeyondAgenda

Current Landscape

Approach, Implementation and Timelines

Medical Concierge

Navigant Report – North Carolina

Claims Recovery

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ASO and Risk Management

Plan Design…wellness, telemedicine

The Current LandscapeLack of Transparency

What if it became normative business practice for your payroll service provider to set salary and wage increases and after years of near double digit increases you request an audit and are told it’s their proprietary information and really off limits to you, the employer?

Sound absurd?

It is, but this is the normative landscape for many

self-insured employer group health plans in

the country.

TransparencyTransparent Negotiations, Networks and Fees

“The lack of price information

stems from the confidential

nature of negotiations between

providers and payors.

Providers compete with each

other trying to get the highest

payment from payors, and

payors compete with each other

trying to set the lowest payments

to providers. In hopes of getting

the best deal, both providers and

payors want their

negotiated rates to be kept

confidential. Information is kept

from the consumer that is

necessary to make the best

choices and drive an improved

market.” Will Fox, 2011

insight – Expert Thinking From Milliman

Transparency

Solutions for

the Future

Recovery from

the Past

Performance Audit State Health Plan Risk Assessment September 2011

Plan Participant Totals 662,000 lives and equates to $2.8 Billion spend

“Although the Plan pays BCBSNC to access its provider network and

to benefit from its contracted discount rates with medical providers, all

contracts are between BCBSNC and its providers and are considered

proprietary information….Consequently, the plan is at risk for overpaying

claims because it must rely solely on BCBXNC auditors and information

from BCBSNC computer system to identify discount errors.”

Beth Woods, CPA, State Auditor

Navigant ConsultingPerformance/Efficiency Audit

Because of the test nature and other inherent

limitations of an audit, together with limitations of any

system of internal and management controls, this

audit would not necessarily disclose all performance

weaknesses or lack of compliance.

Minimal Fraud

Recovery Efforts

Standard

Business

Practice Flaws

Methodology =

Transparency

Navigant ConsultingPerformance/Efficiency Audit

Your own footer Your Logo

“Specifically, the Plan does

not follow up on potential

overpayments estimated by

Plan auditors, does not

provide adequate oversight

for its recovery audit

function, has not taken

corrective action to

eliminate or reduce

potential errors, and cannot

independently verify that the

Plan receives the proper

discount rate on medical

claims.”

t

ASO

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ASO

“The State Health Plan’s

contract with Medco lacks

provisions that would

provide the SHP information

that is important to its

oversight of contractor

performance. The contract

does not require Medco to

provide information about

the unit cost of

pharmaceuticals to the

State Health Plan. In

addition, the current

contract with Medco does

not allow the SHP to audit

the MAC list to determine

the competitiveness of

Medco’s pricing.”

PBM

32“The State Health Plan

does not have policies

and procedures in place

to mitigate certain risks

that could result in

overpayments on member

medical claims.”

Your MoneyContracts That You Are Not Privy To….

Your own sub headlineIt’s Your Money


3Therefore – any and all funds should have no “lock boxes” or “proprietary contracts” reducing the

efficiency of your health care plan!!!

Transparency is the KEY!

Two of every Three “health insurance” plans in the U.S. are “self insured plans”, meaning, there is NO

policy. The employer is the insurer.

Welfare Benefit Plans

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The TPA is merely a paperwork processor, an intermediary. ALL money paid for health claims is “Plan

money” supplied through the employers Welfare Benefit Plan.

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Third Party Administrator

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•Risk Management – Structure Determines Function

Pure Risk vs. Speculative

Plan Design for optimal outcomes

CDHP

Wellness

Concierge

Telemedicine

•Risk Management

Infrastructure for optimal outcomes

Proprietary Networks

Cost Plus

Real Time

Can one cut costs and deliver better benefits?

“You cut costs by

eliminating claims

or reducing the cost

per claim.” Ron Dobervich

What Do Optimal Medical Outcomes at Lowest

Net Cost Really Mean?

In 2009, Our proprietary

net-work system’s clients

averaged a composite cost for

benefit plans 28.6% below the

Kaiser Foundation’s published

national average.

Cost Plus is Quantifiable: The numbers

tell the story….

Data driven diagram – Line diagram

$1,880,795 $1,130,134 41.33% $299,602 77.83%

377% Difference DO YOU THINK THIS WILL

AFFECT TREND?

Risk Management Done Right

Robust Case

Management if

Needed.

Subject to over

230 Proprietary

Networks.

Claim incurred.

Hospital claims

are subject

to COST

Plus audits.

Hospitals are

paid more on

average - all

while you save

money.

Your data

accessible in

real time.

Virtual OnSite: This is our Network

system’s name for its administrative

services product in which administrative

operations occur at the client’s worksite,

with client access to individual records

and reports via secure Internet access.

You will have access to information

regarding your health plan as if you

were administering the benefits on-site

at your facilities.


Imagine owning your own data!Data – unencumbered by ”proprietary” contracts....

Cost Plus


Real Time

Data

Plan Design

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A qualified high deductible plan

coupled with an HSA or HRA can

equate to significant savings without

sacrificing benefits.

CDHP

A standard based or participatory

plan can incent healthy behavior.

Wellness

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A concierge service that shops cost

effective procedures and

telemedicine for consumer

convenience.

Tools to further efficiency

With regard to first year cost savings, all

studies showed a favorable effect on cost the

first year of a CDH plan. CDH plan trends

ranged from -4 percent to -15 percent.

Coupled with a control population on

traditional plans that experienced trends of +8

percent to +9 percent, the total savings

generated could be as much as 12 percent to

20 percent in the first year. All studies used

some variation of normalization or control

groups to account for selection bias.

American Academy of Actuaries

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TransparencyTransparent Negotiations, Networks and Fees

“In no other area of our economy

do consumers receive services

where they do not know the cost

in advance and are

not able to make comparisons to

alternative suppliers. As a result,

healthcare provider costs have

remained immune

from the economic forces that

could control them. This

immunity has contributed to

greatly increasing provider costs,

a major component in todays

rising healthcare costs.”

Will Fox, 2011

insight – Expert Thinking From Milliman

Transparency

Solutions for

the Future

Recovery from

the Past

Medical Concierge

395% Difference

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A single procedure can have price variation of 500% or more and facility charges ranging 1,000%.

So how do you know if your getting the best price? YOU DON’T – “Blind by Design”

$291

$2,089717%MAX RISK

Providers often pay large sums back to

intermediaries. These payments in the provider

world are called “overpayments” or

“recoupments”.

Intermediaries have several, complex, often

obscure, methods of receiving theses monies.

Our discussions with traditional audit firms

demonstrate they are often not familiar with the

provider claims nor ERISA regulations pertaining

to those claims and hence, are not aware of all

the sources of your refunded money.

Recovery from the Past

Who should

audit?

Recoupments

Overpayments

Recovery from the past…Who should audit your plan?

“The lack of follow-up will prevent the Plan from identifying and correcting the conditions that allowed the overpayments to occur. Additionally, the Plan will fail to recapture a potentially significant amount of overpayments.”

Beth Wood, CPA, State Auditor

In fact, a 2010 performance review by Navigant Consulting, Inc.

indicates that the Plan does not receive value for money on its fraud

recovery audit efforts. Navigant noted that fraud recovery efforts by

the Plan’s vendor, Blue Cross Blue Shield of North Carolina (BCBSNC),

do not meet industry standards.

“BCBSNC’s level of fraud recoveries for the SHP [State Health Plan] is

well below the industry average. For every $1 the SHP spent on fraud

and abuse detection, the SHP received only 10 cents in actual fraud recoveries.

Overall, the BCBSNC recovery dollars are equal to a little more than 1 percent of the SHP’s total medical expenses, which is significantly below the industry average of 3 to 5 percent.”

Federal Court Ruling

Recovery from the past….


Federal Court Ruled Against BCBSRI's

Overpayment Practice on October 27,

2010 - Relied Upon U.S. Supreme Court

ERISA Rulings

The Court Ruled that BCBSRI’s Post-

Payment Overpayment Recoupment is a

Plan Fiduciary Conduct Governed by

Federal Law ERISA Instead of Provider

PPO Contract.

Subsequent Federal Court Rulings Give

Self-Insured Health Plans solid foundation

to proceed.

Self Insured Welfare Benefit

Plans have a fiduciary

obligation to pursue these

funds.

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Recovery from the past….Claims Recovery Audit

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Strategic Benefit Modeling