Thursday, May 08, 2008

Carriers Hate to Pay

[Welcome Industry Radar readers!]

Here is a thought.

Carriers hate to pay claims with their own money.

They don’t mind using your money but they really don’t want to use any of their own money unless they absolutely have to.

(More on this later).

This became quite clear to me several years ago when I worked in the medical stop loss business. I noticed that carriers became quite aggressive in case management if a claim looked like it would become expensive.

This was especially true if the claim had the potential to get into their wallet.

Want to know something else?

Your doc may not know the most effective treatment for your illness.

Much of what docs do is trial and error. “Let’s try this. If it doesn’t get better, call me and we will try that.”

Carriers have programs that most policyholders (and agents) don’t know about. They fall under Disease Management, Large Case Management and other titles.

Carriers have access to vast databases, both internal and external by subscription. They spend a lot of time and money learning what treatment protocol’s are effective and which ones aren’t.

Some view this as invasive and punitive. Why shouldn’t the carrier pay for the latest drug or procedure?

Isn’t newer better?

Not always.

In fact, rarely ever.

Remember the recent flap over Lipitor? A widely popular (and heavily advertised to consumers) medication has recently lost favor as studies have shown it is no more effective than older meds costing much less.

Lipitor, 20mg is about $120 per month after carrier discounts. Generic equivalents are as little as $4.

When you are paying a $35 copay and the carrier is paying the balance you can expect calls and correspondence from the carrier suggesting lower priced alternatives. Most likely that will fall on deaf ears . . . until you switch away from a copay plan.

Doctors and pharmaceutical companies know this and really don’t care. After all, when you buy the higher priced med the only one that is hurt is the carrier.

So what does a carrier do to discourage you from filling the $120 med?

They shift some of the responsibility to you by first requiring you to fund the first $500 - $1000 in Rx benefits out of pocket before you can access the Rx copay. They also pad the premium on the copay plan, especially if you are already taking the med, so they will be out little (if any) of their own money.

In other words, they use YOUR money to pay YOUR bills and they do this by way of the overcharge.

What are other ways the carriers avoid using their own money?

They are masters at finding the most cost EFFICIENT way of treating patients. If there is a way to stabilize or cure you before they get into their pocket they will do that.

Note that cost efficient does not mean ineffective.

Treatment for a condition that is ineffective more often than not ends up being more expensive. That’s why they rely on efficacy data to design and implement their DM and LCM programs.

Disease management and large case management become very important tools for those who opt for higher deductible plans, especially plans that are HSA compliant.

Working with your agent, and carrier, can help you find ways to minimize your out of pocket expenses without sacrificing effective treatment.

The more you learn about using tools that are readily available the better equipped you will be to maximize ALL your health care dollars . . .both on the premium side and on the claim side.

With careful management, most people can cut their outlay in half without sacrificing quality.
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