You’re an employer. You are the buyer. You hold the cards in deciding which medical and prescription drug plan vendors you work with, and the price you’re going to pay. You are the boss, right?
We’ve all been there before. We send out an RFP, evaluate the bids, sit in finalist meetings, and negotiate the best deal possible with a vendor you believe is the best fit. But in a world where the vendors we negotiate with are typically as transparent as a David Copperfield illusion, it begs the question: Who’s really holding the cards?
Administrators used to be claim payors and gatekeepers. Employers would pay an admin fee to compensate them for tight claim controls and negotiating strong discounts with hospitals. In an effort to help you, the plan sponsor, “save money” on your paid claims, administrators also offered additional programs like case management, disease management, and second-opinion reviews — often for an additional fee.
But what happens when, under budgetary pressure from your own C-Suite, you’re compelled to pursue a lower admin fee and better discounts at the same time? Is that even a fair request? How will administrators stay competitive and financially sound?
Well, to quote Jeff Goldblum’s character in Jurassic Park, “Life…uh, finds a way.” At the same time administrators were promoting the wonders of 99% automated claim payments, they were also instituting treatment protocols that would require little intervention or prior authorization. While employers demanded better discounts, hospitals were negotiating with administrators behind the scenes to retain case management and treatment autonomy. Likewise, as admin fees decreased, shared savings on out-of-network charges continued to increase.
When we recently requested a renewal on behalf of one our clients with 2,000 employees, the vendor came back with a 2% increase on the admin fee. On the surface — no big deal. But what this administrator didn’t disclose, was that they had retained $500,000 in shared savings on out-of-network claims during the prior year — an amount almost equal to the employer’s total annual admin fees!
Even the sharpest among us can, on occasion, fall victim to a magician’s use of misdirection. The important thing is to not let that illusion determine our future. It’s our shared responsibility to hold vendors accountable and redirect their priorities. Because, after all, YOU are the boss.