When I first got into insurance, I didn't say, “I want todeliver worse news to my clients and their employees by deliveringhigher cost plans that provide less coverage each year.” Yet, thatis the position I found myself in. I hated that my clients andtheir employees dreaded my arrival each year.

I have spent the last few years vowing to change that.

So, I want to share some strategies that we deploy to lowercosts, improve benefits, protect employers and employees, and bringin better news, options, and results each year.

Allow me to dissect one problem and some solutions around it andhow it can result in better benefits and lower costs.

Problem # 1 – Networks

Networks are by far thegreatest contributing factor to current strategies that increasecost, reduce transparency, and perpetuate the misappropriation ofthe value that provider contracting brings. Prior to the creationof networks for HMOs, you could see any provider you wanted. Theinsurance company paid its part and you paid yours. Consumers werefar more aware of total cost and potential for excessive care thanthey are today.

Networks brought the promise of lower insurance costs bycreating a system of providers in which the costs were negotiateddown, and known in advance. Insurance loves certainty. So, theadvent of fee for service was created. Around the same time (1975,to be exact), the American Hospital Association created a committeecalled the National Uniform Billing Committee (NUBC) designed tosimplify medical billing. They created standardized forms andcoding for billing purposes. Thirty years later, on May 23, 2007,NUBC created, and mandated the use of, a new form called UB-04.This was the game changer.

The UB-04 is the form by which all facilities (i.e. hospitals)file claims. Keeping in mind that claims on these forms can easilybe five or even six figures, it seems crazy to me the scarcity ofdata needed. Here is the gist of what goes on that form: patientand insurance identifying info, diagnosis code, and then broad lineitems like “operating room” or “hospital charges.”No one isrequired, or even asked, to break down the hundreds or thousands ofitems that can go behind those line items.

Further, nearly every network contract forbids thepayer (the insurance company, if fully insured or the employer ifself-insured) from asking for an itemized bill. Yes, you read thatright. The patient can ask for it anytime, although even if theyfind something amiss, there is little their carrier can or will doabout it. It is estimated the 80 percent of medical bills have“mistakes” for supplies not given or procedures not performed ornot needed. And all this gets bundled into that price with nochecks on what's behind it.

Speaking of price, let's speak to the prices charged for thoseitems behind the universal charge. How about $1,000 for a manualtoothbrush? Or $540 for a tongue depressor? This hugelyoverinflated bill with no detail comes to the carrier. Now what?Well, it applies its “discount.” That could be 10 percent to 70percent. Carriers love to tout their discounts. The bigger thediscount, the higher the starting price. Seventy percent off aprice marked up 1000 percent is still almost a 300 percentmarkup.

So we all know our health care system is severely messed up.What can we do about it?

For these particular issues there are two strategies that have apowerful impact.

Medical bill review – This might require dumping the biggernetworks and making sure your plan uses a network that allows thepayer to request itemized bills. By having independent expertsreview every line item to make sure it was appropriate, necessary,and actually performed, it is estimated we can reduce costs by asmuch as 30 percent.

Referenced based pricing – This is my personal favorite. In thisenvironment, we remove the network completely. This allowsemployees to go to any facility they wish. When the bill comes in,it can first be reviewed (if combined with MBR) and then pricingcan be applied more in line with other measures for paying forcare. Often it is marked up a certain percentage above Medicarepricing. This is a pretty good benchmark because the governmentregularly exerts its muscle in this regard to tie payments to morereasonable markup on actual price with increases at a much lowerinflation rate.

These two strategies combined can easily save $150,000 or moreper 100 members. Keep in mind that for the average group, this isonly 10 percent of claim volume, so 90 percent of claims are notimpacted and can continue on as all know them to be today.