Tuesday, December 11, 2018

From Zero, A Hero

So the other day, I ran into a (newish) outfit called The Zero Card, which appeared to promise that now ubiquitous "free" health care. And since this didn't appear to be a state-sanctioned (or run) program, I was intrigued, and so I reached out to FoIB Dutch Rojas for introductions.

Dutch hooked me up with TZC's Chuck Foster, who graciously spent almost an hour with me explaining how the plan works, its limitations and benefits:

The Zero Card is based out of Tulsa, Oklahoma, and its plans are currently available in almost a dozen markets (with expansion plans in the works). It's available to self-funded groups exclusively (why that must be will become evident shortly), and operates as a sort of "sub-network" to a company's primary insurance-provided primary network.

From the employee's perspective, it couldn't be simpler (or better):

By choosing a provider associated with The Zero Card, all deductibles, co-pays and co-insurance is waived, the procedure or service becomes free to that patient. This in contrast to using the primary network which would entail potentially large out-of-pocket expenses. Best of all, the employee (or covered dependent) incurs no charge or fee. And because of how it's designed, there are no pre-authorization or second opinion hassles. Sweet!

But of course, the actual service does come at a price, and entails a bit more framework. From the employer's end, there's a percentage of claims ("spend") cost, but the plan is designed to nullify that: everything is in a bundled transparent price agreement, no "percent of medicare," etc.

Here's how it works:

The employer enters into an agreement with The Zero Card folks to offer the benefit, at no upfront cost. What TZC does then is adds 15% to the cost of the service or procedure; the idea is that they've saved the employer more than enough to compensate for this added expense.

How do they do that? Well, they go out to local providers (doctors, hospitals, facilities) and negotiate service "bundles." This results in more business for those providers, and helps to drive down the service costs. Chuck explained it like this:

In a typical plan, a service that costs $10,000 means that the employer is on the hook for $8,000, the employee for $2,000 [ed: excludes deductibles and co-pays].

The Zero Card folks have negotiated rates to a point that, even though the employer is on the hook for 100% (plus the 15% The Zero Card fee) that they still save money and, of course, have very happy employees. In order for this to actually happen, they strive for at least 35% savings off the traditional insurers' networks.

Another thing that Chuck stressed to me is their data analysis prowess: they are able to pinpoint how and what claims are paid in a way that really helps employers understand what's happening with their employees' and their plans. One can see where that could be a major benefit for both the employer and the employees.

Of course, this model really only works with self-insured group plans (because there’s no way to incorporate it into traditional fully-funded insurance plans), so it's limited, but as more and more carriers roll out self-funded plans for smaller and smaller groups, that's bound to mean market growth for TZC, too.

One thing we didn't discuss, but which occurred to me afterwards was what, if any, role they might play in the Association Health Plan space. Maybe next time.

[IB Thanks to Dutch and Chuck!!]
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