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Van's Blog ~ AskAFinancialAdviser.com

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October 2013

Health Insurance PPO’s: From Glory to Gory?

sony walkman

Remember the Sony Walkman, disposable cameras and the compact disk?  Are you still relying on health insurance strategies that had their hey-day in the 80’s?  Preferred Provider Organizations (PPO’s) are the heart of many group health insurance plans.  They are also one of the reasons for over inflated prices today.  In the 80’s an insurance carrier could approach a hospital system or other health service provider and offer them access to their thousands of customers if they would offer a discount.  Times have changed.  Instead of dozens of insurance carriers, there are now about a half dozen.  Here is the biggest difference today: every hospital system is in every PPO network and as a result every hospital network is in every insurance plan.  There is no leverage.   The prices you see are not real.  The prices and the discounts you see are structured to give you the perception of value.  Plus the consolidation of hospital systems gives hospitals power to manipulate PPO pricing.  A study done by Cory Capps, an economist at Northwestern University found the following: “Most consolidations among competing hospitals lead to higher, not lower, prices.”[1]

Some health care providers are beginning to change the way they do business and the trend is catching on as consumers realize what they are actually paying.  Here is how one hospital in Oklahoma is changing to help their clients and be competitive in the marketplace:

So what can you do with your group health insurance plan?  Forget the PPO concept of discounts.  There are strategies that will allow employers to replace the PPO discount concept and replace it with a real-world pricing system.  For more on pricing models that could save as much as 30% in premiums, contact me through LinkedIn at www.linkedin.com/in/vanrichards/ or visit our website at www.abs-insurance.com

 


[1] Capps, Cory. “Hospital Consolidation And Negotiated PPO Prices.” HealthAffairs. 23.2 (2004): 175-181. Web. 30 Oct. 2013.      <http://content.healthaffairs.org/content/23/2/175.full&gt;.

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The Cost of a Heart Attack in Houston!

The Cost of a Heat Attack in Houston (2)

The public’s fixation on the individual mandate detracts from parts of the ACA that are good, yes good.  This is not a Democrat or Republican issue, this is an American issue.   Healthcare is such complicated problem that the breath of the Affordable Care Act will never get through to the average American.  Congress needs to break it down into smaller portions and make a more reasonable plan of implementation.  The ACA is more than the individual mandate.  One of the major problems today is that the average family pays over 20% of their income for health insurance.  At the current inflation rate of healthcare premiums that same family will be paying over 40% of their income for health insurance within 10 years.  That is an unsustainable rate of increase.  The part of the ACA that is good is it is shining the light on parts of the healthcare system that are causing cost to be out of control. Acting on disclosure requirements of the ACA the Centers for Medicare and Medicaid Services released a document called Medicare Provider Charge Data.  This details cost of medical procedures at hospitals from around the United States. Information from this report shows that if you had a heart attack and were treated at Methodist Willowbrook Hospital in Houston it would cost $72,128.  If you were taken 15 miles away to Memorial Hermann Hospital’s Memorial City location in Houston, it would cost you $31,313.  Both are great hospitals.  Why such a big difference?  The answer we have found in similar situations is unreasonable mark-ups and billing practices.  The Constitution allows Congress to pass tax laws to control commerce.  Control the cost of healthcare and you bring down the cost of health insurance.  Lower cost means more people will voluntarily buy health insurance.  When it comes down to feeding your family or buying health insurance, you feed your family.  The President and Congress need to drop the individual mandate and concentrate on fixing the current system not creating a new one.  But until Congress catches on private enterprise has already begun to fix problems like this by creating health insurance pricing models that are based on cost and a reasonable profit.  We’ve been using this model with a great deal of success thereby reducing cost over traditional pricing models by as much as 30%. For more information on fee model pricing vs. mark-up pricing contact me through LinkedIn at http://www.linkedin.com/in/vanrichards/, or visit our website at http://www.abs-insurance.com

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