Are you wondering “What is going on with my local hospital and my insurance company?” or are your employees curious if they are going to “lose their doctor”?
The healthcare service model has always been challenged by reimbursement issues - the way insurance carriers pay hospitals and doctors. Hospitals and clinics are often in the news citing inadequate payment as a major financial stressor. Insurance carriers often point to costs, wastes and duplication of healthcare services as major reasons for rising insurance premiums.
And so, the cycle begins, and repeats every few years as these “provider contracts” renew and are renegotiated.
Florida is no stranger to the ups and downs of the healthcare industry. Right now, two major providers in the state are in heated contract negotiations with insurance carriers, with both sides using bold tactics—even turning to social media to stir up concerns among health insurance consumers.
Patients are receiving scary letters about the possibility of losing their “in-network” provider; employers are solicited by both the insurance companies and the local medical providers; and even the broker community is called upon to “lobby” the cause from both sides.
Commercial Marketplace
The reality is that the commercial market (aka employer sponsored group health insurance market) and those paying cash for services are often expected to bear the burden of the reduced revenue medical providers receive from other programs like:
- Government programs that pay substantially less like Medicaid and Medicare, IHS and other programs non-profit hospitals (which are the majority of systems) are required to accommodate.
- Charity Care. With no requirement to maintain insurance coverage, many Americans remain uninsured and are unable to pay for their medical care.
Like all business contracts, reimbursement rates are subject to negotiation between providers and insurance companies. When metrics change, providers need to produce data showing that the cost of delivering services has increased, as well as demonstrate the quality of care and outcomes, to justify an increase in reimbursement rates.
Many healthcare provider contracts are still based on a percentage of 'BILLED CHARGES,' which is the full amount a provider charges for a service before any insurance adjustments. However, if the negotiated percentage results in a reimbursement that does not cover the provider’s costs, the provider will often increase the BILLED CHARGES to increase the reimbursement. This leads to inflated costs that burdens the insurance system and the consumer, making healthcare more expensive for everyone. This cycle creates tension between providers and insurers, driving up premiums and out-of-pocket expenses.
To address rising healthcare costs, 'pay for performance' programs have become more common in healthcare. These programs reward or provide bonuses to healthcare providers who meet specific objectives, such as improving patient outcomes, reducing hospital readmissions, or achieving high patient satisfaction scores. When structured properly, these programs can benefit both patients and providers by encouraging higher quality care at a lower cost. However, not all providers are eager to participate. “Pay for performance” can increase a provider’s cost by requiring an investment in additional resources like staff, technology, or training. This can be challenging, especially in today’s post-COVID environment, where many providers are already stretched.
Shift Towards Innovative Health Plans
Another innovation in the group-health plan market is self-funded health plans. In a self-funded health plan, the employer pays healthcare costs out of general assets, instead of shifting the risk to an insurance company. These plans are often able to negotiate a reimbursement rate that is based on a percentage of Medicare reimbursement rates, which are typically lower and more stable than the rates negotiated in commercial insurance contracts. By using these Medicare rates as a benchmark, self-funded plans can reduce overall costs and reduce the unpredictability that often comes with traditional insurance agreements. Since hospitals have already agreed to Medicare’s rates, these plans benefit from less pricing volatility, making them more predictable and cost-effective.
Conclusion
At RMC Group, we specialize in helping employers think outside the box to design employee benefit programs that are not only innovative but resilient. We understand the ever-changing landscape of healthcare, with provider and carrier negotiations often leading to disruptions. That's why we work with businesses to create custom benefit solutions that can withstand these challenges, ensuring your employees continue to receive the care they need, even during turbulent times. Our approach is proactive and flexible, giving you the confidence that your benefits plan is built to last, no matter the storms ahead.
Regardless of where the current local contracts wind up – there will always be creative market strategies to help employers provide solid solutions for their employee benefit needs. It’s what free markets demand and provide. It may take stepping outside of the big insurance carrier world and getting more engaged in your benefits program. But the end result may be a better healthcare program for your employees at a lower cost.
For more information or help with your employee benefits, contact RMC Group today at 239-298-8210 or health@rmcgp.com.
