Chargemasters place a value on a hospital’s goods and services. Chargemasters are opaque and hide the “cost” before Blue, United, Humana, Aetna or CIGNA (collectively “BUCA”) apply their unique network discount. The familiar comment about chargemasters and discounts; “Discount off What?”. Hospitals say chargemasters are proprietary, BUCA claims the same privilege on their contracts with hospitals.
Declining hospital revenues from COVID-19 is real, evidenced by 29 hospital bankruptcies in 2020. Milliman indicates healthcare spend in 2020 will be $75 to $575 billion lower than 2019.
60 of the largest hospital operators received approximately $15 billion in bailout dollars in the federal CARES Act. The hospital systems retain billions in cash reserves, yet 36 of the hospital systems laid off employees.
Individual Employers cannot negotiate price with hospitals for goods or services. Employer health insurance expense is a large part of hospital revenue. When hospitalizations go down, self-insured employers benefit directly from lower medical use. Fully insured employers pay monthly premiums transferring all risk to the insurance carrier, i.e. 100% fixed cost. Insurance company profits increase if hospital use declines or medical loss ratio provisions kick in.
Traditional annual increases to the hospital chargemaster are limited. For 2020 annual incremental rate increases will be insufficient to replace the revenue lost during the pandemic. Hospitals and BUCA’s are now tearing up their current network contracts, changing the ‘Discount off What” to replace lost hospital revenue. The movements in the chargemaster could lead to 20% to 30% increase for the same goods and services before the pandemic. Health insurance costs will go up by this industry action.
Self-funding in a medical group captive benefits the Employer. Reducing monthly medical spend due to a lower percentage of fixed costs. Medical group captive renewal cost is transparent with data supporting the increase or decrease. If covered member’s use of medical procedures is down, self-funded Employer cost reduces. Employer’s retain control over plan(s) and gain cost mitigation tools: reduce cost MRI/x-ray by removing from a hospital setting, avoid an unnecessary surgery or obtain a better priced outcome or use of direct primary care. Self-funding is more important during economic downturns for employers seeking new solutions to old problems A medical group captive using stop-loss is a safe and effective method to access self-funding, law of large numbers.
Don McCully runs Medical Captive Underwriters LLC, (www.medicalcaptive.com). Focus is lowering medical trend and spend for enrolled employers. ClearCaptive is a 50-state open access medical stop-loss group captive solution for middle market employers with 50 employees enrolled or greater