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Self-Insurance Is Just the Start, Say Health Plan Innovators | SHRM

A Maze of Costs

For both fully insured health plans and self-insured plans that use an insurance carrier as the third-party administrator (TPA), “the revenue and profit model is built on costs going up,” said Contorno. Paying brokers a percentage of premiums, typically through the carriers, is part of the problem. The insurance carriers’ view, Contorno said, is “our costs go up, and your revenue goes up, Mr. Broker, so it’s a win-win for everybody except for the employer and employees.”

Contorno pointed to the wide range of prices for common surgeries, if the price can be found at all, as he described in this video. When investigating costs for his own hernia operation, he was quoted prices at area facilities ranging from $8,900 to $47,500, “and the highest-cost facility had the worst outcomes, with the highest reinfection and readmission rates.”

He described the Surgery Center of Oklahoma, where he had his surgery for $3,060, as an example of a best-practice alternative and, he said, a model of price transparency and cost effectiveness, even when taking into account travel and family accommodation costs.

However, he said, “if employers tell their carrier or TPA they want to contract directly with a facility like Surgery Center of Oklahoma, which has a quality record of above-average outcomes for procedures that are offered at 40 [percent] to 60 percent below typical preferred-provider organization pricing, and that you want to pay claims [from such centers of excellence] at 100 percent to provide employees with an incentive to go there, carriers typically will respond, ‘Oh, no, we can’t do that,’ ” because their plans are designed to favor a network of local health providers.

Can Fortune 100 corporations “bully their carriers, kicking and screaming, into doing these things? Absolutely,” Contorno said. But smaller, self-insured companies lack that kind of leverage.

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Self-Insurance Is Just the Start, Say Health Plan Innovators.

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