For the past 20 years, preferred provider organization medical plans (PPOs), have been marketed aggressively by insurance carriers as a good alternative to health maintenance organizations (HMOs). Are they really a good alternative to HMOs? In some cases, they can be – but there is an even better way. Better than HMOs and better than PPOs, which over time have gradually become the new “traditional” healthcare plan.
But first, what does a PPO entail? A PPO is a subscription-based medical care arrangement that has contracts with a network of “preferred” providers from which people can choose. With a PPO plan, it is not necessary to select a primary care physician, which means people under PPO plans don’t need to ask for a referral to see other providers in the network (i.e., specialists).
This is one of the primary reasons PPOs are so popular – but another reason is that patients with PPO plans are only responsible for their annual deductibles and the copayments for their visits. The downside with this arrangement is that obtaining healthcare services from a provider that is out of the network will cost the patient a higher amount, and the out-of-network doctor will need to be paid directly. To get reimbursed, the patient has to file a claim with the PPO. An HMO does not have this type of arrangement.
And that’s not the only disadvantage of a PPO plan. Truthfully, PPOs do not necessarily have the widest networks of providers available to patients – although certainly, insurance carriers frequently represent them that way to the employers they market PPO plans to. The direct contracting model actually can deliver a much wider network of providers, and do it at a much lower cost to the employer.
Hospitals and other healthcare providers no longer give deep discounts to employers with PPO plans – but because they did for years, PPOs skyrocketed in popularity, which is why they are now the new “traditional” plan. We have come full circle, and at the expense of both patients and employers. With the direct contracting model of healthcare, there is a wider network for patients to go to, and lower costs for employers. Both of these things are important features in this new healthcare climate.
Can Technology Help Employers Choose a Healthcare Plan?
It certainly can. One of the ways we help employers choose a healthcare plan for their employees is by using our proprietary software to determine what the real cost of covering each employee would be in a direct contracting scenario.
When we say real cost, we mean that we can show them exactly how much the healthcare being provided actually costs, vs. how much the provider is charging the employer. If the employer is self-insured, as many large companies are, we can use the data from the employees’ claims to determine this calculation because federal law grants ownership of claims information to the employer in those cases.
We use a case mix adjustment (CMA) to do this. Using a case mix adjustment, we can take the CMA value of a provider and adjust the average cost per patient at that provider, relative to the adjusted average cost for other providers. Once we have those numbers, we can take this claim data, break it down and case mix adjust all the claims. In other words, we can make a fair comparison and show an employer how much they have been paying for healthcare vs. how much the care actually costs – and of course, this information will tell them how much their healthcare costs can be reduced through direct contracting.
Additionally, our technology enables employers to see how much care their providers actually provide, so that they can make better healthcare decisions for the company. For example, one hospital may appear expensive to the employer but could turn out to actually be the most cost effective provider due to the severity of the care provided. With the technology we use, employers can see the numbers right in front of them, so that they know the right questions to ask.
To learn more about the technology that simplifies healthcare decisions for the employer, contact GM&A today. We will be glad to offer you a consultation to have your questions answered.
It’s no secret that the Affordable Care Act (ACA) law has changed the way many employers look at the idea of providing medical coverage to their employees. In the aftermath of all the changes, some companies have opted to stop furnishing medical benefit packages altogether. That’s unfortunate, of course – but there’s good news. Direct contracting, the service that we offer here at GM&A, offers employers a way to continue delivering medical benefit plans to their employees; best of all, direct contracting can do this without making the employer’s health plan costs go up.
How is it done? In a word, competition. In the direct contracting model, providers contract directly with the employer rather than participating in an HMO. The providers can choose their own rates, charging whatever they feel is necessary in order to earn the business of companies. Consequently, many of those providers lower their costs significantly – because (you guessed it!) they know that lower costs are the way to earn the business of those companies. That means employers that choose the direct contracting model can still provide medical benefits, without worrying that the costs are going to skyrocket. Chances are, costs may actually go down!
Now, back to the Affordable Care Act. We all know that the law (which was passed in 2010 but took effect on January 1 of this year) requires companies to pay for more health care services and products than it did before. In fact, one company quite famously took that issue all the way to the Supreme Court recently. Direct contracting doesn’t change any of that; however, the lower cost of doing business with providers helps companies comply with the ACA law more affordably. Yes, the law puts more onus on what companies must cover – but with direct contracting, they can actually afford to comply.
To learn more about direct contracting and the advantages it offers employers, contact GM&A today. We will be glad to answer your questions during a complimentary employer health plan consultation.