A new rule, effective 2020 allows employers to provide workers with funds to shop for coverage on their own, pay the premium and seek reimbursement through an HRA.
The move, praised by some and met with skepticism by others could dramatically upend employer-sponsored coverage and eliminate its group health purchasing power with insurers and healthcare suppliers.
Currently, hospitals, ASCs home care agencies and physicians evaluate a health plan contract offer by first, analyzing the steerage power and book of business that could be steered to the provider. If the health plan has no significant book of business to dangle as a carrot, the 45-55% discounts granted by providers will vaporize into thin air.
“If the health plan has no significant book of business to dangle as a carrot, the 45-55% discounts granted by providers will vaporize into thin air.”
If the provider also happens to determine that the exchange plan poses significant risk of default or bankruptcy, discounts won’t be as attractive or generous and payment turnaround times will be tighter, if not same day or within 5 days of the date of service.
Worse yet is the fact that an HRA is trickier to use than employer-provided insurance. “For one thing, the “R” stands for “reimbursement.”, says Maria Todd, of AskMariaTodd™, who has guided employers and providers on strategies for using HSA and HRA programs to fund cost containment initiatives to reduce healthcare expenses in the group health setting. Todd has lectured on the topic of HRAs and HSAs and direct with provider contracting since 2002, just before the laws went live for HSA and HRA benefit options in 2003 under the Medicare Modernization Act. HRAs aren’t “new”.
“If the average working American can’t afford a $400 health emergency expense right now, how the heck will they afford an advance payment of $500 or so for an exchange premium and wait for their employer to reimburse them each month?” With this maneuver and the individual mandate eliminated, many people are going to end up purchasing “junk” plans, catastrophic plans and others may purchase no coverage and just pay and submit the bills – if that’s what’s allowed under the HRA. The employer makes the rules on each HRA.
Todd explains the domino effect that could occur: “If people in decent health don’t purchase insurance and pay premiums to offset the risk of the sicker plan enrollees, the insurance exchange plans will be at high risk for insolvency. If the insurance plans collapse, provider bills won’t be honored and paid timely. And if the plan is deemed insolvent, the trustee will send a demand to all healthcare providers who were paid $1000 or more in the past 6 months prior to the date of insolvency, to pay it back to be redistributed to other creditors. With the provider at that much risk, the providers will be less likely to extend generous discounts to “anyone”.
In turn, you will see more providers “circle the wagons” and move toward greater consolidation. Greater consolidation will lead to fewer marketplace options, monopoly and monopsony will be the norm. In smaller towns, consumers will pay more than they do now and get less. All the slick consultants with all their slick formulas for reference-based pricing assumptions will be at risk. Fewer provider will accept Medicare assigned allowable fee maximums, and may even drop out of the Medicare program altogether. Anyone attempting to negotiate reference-based pricing will be told “Go sell crazy someplace else!”
To read all the options that accompany this Executive Order, click here.
So how can Americans affected by this new policy and President Trump’s Executive Order leverage SurgeryShopper.com’s value proposition?
Well, for one thing, they may be more comfortable purchasing catastrophic insurance with high deductibles if they know where to they can purchase lower-cost, high-quality surgery. Most of the other networks who represent hospitals, ASCs, and surgeons have a business model that does not welcome individual consumers. They are designed to only do business with group health and collect per-employee-per-month (“PEPM”) network access fees. They won’t be able to pivot to serve consumers because their income and revenue strategy was to embed fees into provider prices on a utilization basis while also collecting up-front monthly PEPM fees, as well as claim repricing fees, check writing fees and case management and chronic disease management fees.
What if employers elect not to use this approach in 2020?
Todd continues, “TPAs should be petrified if employers move to this defined contribution model with HRA reimbursement, because there won’t be claims for them to process, reprice, or cases to manage, or chronic diseases to cost contain. President Trump’s “new” HRA spin could dismantle group health as we’ve come to know it and place all the TPAs and ASO services at risk. Likewise for all the non-Medicare replacement HMOs, and the move would just about annihilate PPOs once and for all. That’s only “IF” the employers choose to go the HRA option in the Executive Order.
Todd doesn’t like to get into politics, but she has a twinkle in her eye at the thought that a new replacement administration could erase this Executive Order with the stroke of a pen in January, 2021. “How many employers are going to drop everything to pivot to this option and disrupt everything they have in place, with network access contracts in mid-term, long standing broker and TPA relationships, and punt it all out the window knowing that a new president, if elected, could punt all the Trump executive orders out the window. Not many.” They simply cannot and will not.
Todd says she doesn’t take partisan sides at work, but instead tries to strategically respond with solutions for alternative realities as they arise, no matter what she and her clients face. “When you know this stuff forwards and backwards, you just need a little quiet time to think through the options and ramifications of decisions and taking action in haste. This is healthcare. We just roll with what they hand us. That’s business as usual for this industry.”
