For Employers: Direct Contracting Cuts Plan Costs & Problems
A.J. Lester
& Associates helps self-insured employers reduce medical plan costs
and problems by eliminating the PPO middleman. By negotiating
direct “win-win” agreements between employers and medical
providers, we create direct provider networks that the employer
controls. A.J. Lester & Associates offers a broad range of services,
including innovative Direct Provider Contracting and traditional
Managed Care and Group Benefits Consulting.
Direct Provider Contracting >
Managed Care and Group Benefits Consulting >
Direct Provider Contracting
Though 85% of major American companies offer PPO and HMO
plans, employers everywhere still suffer double-digit rate increases,
mounting service problems, and growing dissatisfaction among employees
and physicians. Direct contracting between employer and medical
provider solves these problems with an idea as old as business itself:
Cutting out the middleman.
For self-insured companies, direct contracting allows the employer
to own its networks, giving employees access to physicians and hospitals
under direct agreement to provide their medical care. In every aspect,
an employer-owned network facilitates better access to providers;
saves claim dollars; reduces service problems; and improves employee
satisfaction.
Whether your company's employees are concentrated in a few metropolitan
areas or are spread throughout many small to mid-sized towns and
rural areas across dozens of states, direct managed care contracting
is worth seriously considering. Here's why:
1. Access to Network Providers for
Your Employees Everywhere
Direct agreements with medical providers mean you can offer
managed care benefits to employees wherever they live, including
those areas in which your present HMO or PPO has limited networks
or none at all. Managed care companies develop provider networks
only in areas with sufficient membership revenue potential and seldom
consider one employer's need for a network in areas where their
other clients don't also have employees. Direct contracting allows
you develop provider networks based exclusively on the needs of
your company, and doesn't restrict you from having networks where
and when you need them. Back >
2. Never Pay Retail for Medical
Claims
If you currently have employees in outlying areas where your HMO
or PPO has no networks, your claims fund is subject to full retail
charges from medical providers in those locations. Because they
don't have networks in those outlying areas, managed care companies
are quick to suggest that network access is simply not available,
so no savings are possible. Direct contracting, however, is particularly
effective in outlying areas where medical providers will do business
directly with local employers and agree to reduced or discounted
fees. Everywhere your company is paying full retail charges is a
viable candidate for a direct network and an excellent prospect
for substantial claims fund savings. Back
>
3. Eliminate Network Access Fees
Because your company owns the direct network, there are no monthly
access fees. Managed care companies typically charge network access
fees which can range from $3 to $5 or more per employee per month.
Other costs associated with HMO and PPO networks usually include
directory production, I.D. cards, reports, and other administrative
services. All these recurring fees can add substantially to the
cost of providing managed care benefits year after year, and can
greatly mitigate any actual savings from the commercial networks.
Back >
4. Full Disclosure of All
Contractual and Financial Terms
Direct agreements are designed to fully disclose all contractual
and financial terms to both parties. Managed care companies rarely
disclose their provider contracts to the employer, nor their employer
contracts to the provider, protecting their position as middleman.
By keeping both sides uninformed and apart, the middleman obfuscates
the very viable alternative of doctors and employers doing business
directly with other. Direct agreements encourage openness and are
built upon mutual trust, knowledge of the facts, and the desire
for a long-term
business relationship. Back >
5. Immediate Savings of
Health Plan Claim Dollars
Direct contracting generates immediate savings in every location
in which employees previously had no network access. With medical
providers under direct agreement and no covered service subject
to full retail pricing, your company will save money on every network
claim. What's more, physicians and hospitals will often give employers
better discounts than other managed care contracts because the direct
agreement is favorably perceived as both valuable and in the providers'
best interests. The bottom line is that medical providers everywhere
will offer
savings directly to employers when those providers are offered fair
and
mutually-beneficial agreements. Back
>
6. Greater Savings for More
Employees
When your company establishes direct networks in more locations
allowing more employees access to managed care benefits, the opportunity
for out-of-pocket savings on medical care becomes available to a
greater segment of your employee population. Because employees typically
share in the cost of the health plan through deductibles and co-insurance,
reducing provider charges through contracted discounts not only
saves the plan money, but also results in greater savings for employees.
Back >
7. Improved Employee Relations
These days, employees in outlying are acutely aware of any disparities
in benefits and may find that their fellow employees in metropolitan
areas enjoy less paperwork, fewer out-of-pocket costs, and better
access to more providers. Because direct provider networks are developed
around the actual needs of employees, employers can better meet
those needs than with “off-the-shelf” commercial networks.
For some companies, the employee relations concerns and the desire
to keep employees happy has held equal weight with the potential
savings from direct networks. In fact, employee relations concerns
may be enough to drive the decision to contract directly with providers
in certain outlying areas. Back >
8. Enhanced Community Relations
Direct contracting is good for the community because physicians
and employers share the same objectives of keeping people healthy
and keeping claim dollars in the local economy. Commercial managed
care companies often have little vested interest in the community
beyond whatever profits can be gained from it. It's always in a
community’s best interests for physicians to directly contract
with local employers whenever possible. Back
>
Managed Care and Group Benefits Consulting
A.J. Lester & Associates consults with clients on a wide range
of health and group benefits. We combine a thorough understanding
our clients’ benefit goals with the expertise and technical
resources to design, implement, and evaluate benefit plans that
simultaneously meet the clients’ needs and those of its employees.
We offer employers the following consulting services:
- Health and group benefit plan design and funding, including
life and disability insurance.
- Plan monitoring, evaluation, and review.
- Vendor search and evaluation, including RFP development, bid
submission, contract review, and renewal negotiation.
- Health benefits market cost survey and trend comparison.
- Advisement on plan administration processes.
- Periodic review of Summary Plan Description (SPD), benefit manuals,
plan documents, communication instruments, and other benefit program
materials.
- Monitor and evaluate applicable legislation and regulations
for plan compliance.
- Survey and appraise emerging benefit trends and suggest strategies
for incorporating those of value.
- Analyze and evaluate existing HMO and/or PPO vendors for access,
quality, cost-containment, service, and effectiveness.
- Advise on adding or eliminating HMO and/or PPO networks to select
client locations. Handle new and renewal contract negotiations
with vendor networks, and on-going monitoring of service and performance.
- Review/negotiate renewals with life, AD&D, LTD, and other
insurance vendors. Coordinate RFP, vendor solicitation, and proposal
evaluation process for new or replacement vendors when necessary.
- Calculate annual premium equivalent and COBRA rates for medical
and dental plans.
- Assist client in all group benefit matters that require expertise
in the objective analysis, review, evaluation, and recommendation
of viable, cost-effective solutions. Top>
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