Federal and state regulators find it hard to resist getting involved in the health care system. Although the effects of public sector participation are debatable, one thing is certain: Health-care costs continue to skyrocket, creating an opening for private-sector alternatives.

“What costs $1 today will cost $1.50 by 2022 if we follow the current trend and if we have to finance risk,” says Daniel Meylan, national sales director for Allied National in Overland Park, Kansas. “In 2012, we had one claim over $1 million per 17,000 population. By 2017, it was one per 9,100. That is almost a 90 percent increase in the frequency of million-dollar claims. If you project that to 2020, it's going to be a 232 percent increase over what it was in 2012.

“We are now sitting at 1,200 percent more $5 million claims than we had five years ago,” he adds. “Do you suppose unlimited lifetime maximums may have something to do with that?”

Industry leaders tackled such access and affordability challenges in “Health Care Affordability—Real Cost Cutting Today,” a professional development session held during the 88th NAHU Annual Convention in Kansas City. Meylan identifies 12 factors that drive health care costs:

Business practices (marginal business practices of government, insurance companies, providers, and medical vendors and suppliers)
Drug costs (mercenary pricing)
Transparency (lack of transparency with actual costs and appropriate profit margins)
Litigation (threat of litigation drives cost through redundant defensive medical practices and malpractice costs)
Wellness (unhealthy lifestyle choices)
Media distortions (promoting an entitlement mentality—”free” is not free)
Consumer education (lack of informed medical consumers)
Technology (state-of-the-art medical technology prolongs life)
Aging population (baby boomer generation experiencing deteriorating health)
Government (cost of compliance, ACA, EHR and additional taxes)
Politics (marketplace volatility driven by political uncertainty)
Catastrophic claims (unlimited lifetime benefits driving cost increases)

Experts have no shortage of innovative ideas to make health care more affordable, such as level-funded, value-based and reference-based plans. But what if part of the solution is bypassing insurance altogether by enabling consumers to contract directly with providers? Just as importantly to brokers, how would such a scenario affect their business? Brokers may agree or disagree with free-market approaches, but the one thing they can't do is ignore them.

“I've been in the business for 46 years, and over those years I've experienced nothing but change,” says broker David Berman of Assured Partners in Indianapolis. “A lot of us panicked and got out of the business when the ACA passed. Those of us who stayed tried to figure out how to continue to provide the services that we do to our clients.”

Free-market solutions

At the foundation of free-market health care is the belief that many carriers, providers and consumers have the wrong conception of the purpose of health insurance. Instead of covering everything from routine checkups to catastrophic illnesses, proponents say, insurance should provide a safety net for big-ticket charges, while consumers pay routine costs out of pocket. One analogy is auto insurance, which covers accidents, not oil changes and gasoline.

Dr. Josh Umbher of Atlas MD in Wichita, Kansas, emphasizes that he has nothing against insurance, but believes that the system can be more efficient. He started his first clinic in 2010 and has since become a nationally recognized expert on direct pay.

“There is a more efficient way to reach the end goal, which is more health care, more often, for more people at a better price,” he says. “So we innovate solutions that don't make insurance obsolete but make it more effective. We are better together than we are apart.”

He offers a few concrete examples. “An EKG in our office costs us 36 cents in hard costs, but the coffee in the waiting room costs us 60 cents a cup,” Umbher says. “Should we bill insurance for coffee? We can do X-rays for $40, ultrasounds for $100, CT scans for under $200 and MRIs for under $400. We don't have to fill out paperwork, hire extra staff and do coding. We sure don't need an insurance company to approve $1.65 for a blood test. So everybody gets more efficient. If the insurance company has fewer claims, they also have less administrative costs and more profit.”

Atlas members pay a flat fee based on their age. What does this monthly fee cover?

• Unlimited doctor visits • Extended, relaxed visits • Same-day and next-day service scheduling • House calls • Full access via technology • Annual physical • Wholesale labs and medication costs • Absolute cost transparency • Diagnostics and procedural benefits

Atlas MD also offers pharmaceuticals at substantial discounts. “Forty-four states allows physicians to sell medicine,” Umbher says. “We get medications wholesale, just like pharmacists. This can result in up to 95 percent savings.

“In one example, we got a patient with breast cancer chemotherapy her medication for 99 percent less than she was quoted at the pharmacy with her insurance. She went from name brand retail to generic wholesale and from $600 a month to $6.”

Surgical savings

Dr. Sean Kelley uses a similar model at Texas Free Market Surgery in West Lake Hills, Texas, which he and his brother started in 2016.

“Our company bundles outpatient surgical care into one all-inclusive price, and we post that on our website,” he says. “The only price changes we have had since we started have been decreases.” Their approach results in a per-person savings of around $15,000, Kelley says.

“Our patients save so much money that it creates an incentive to pay for all of their out-of-pocket costs,” he says. “Patients make one call to a medical concierge who takes care of everything. You usually are scheduled for a consultation in seven to 10 days and surgery shortly thereafter. It's fast and easy.”

Kelley contrasts the transparency of his model with traditional billing practices.

“Cost information is hard to come by,” he says. “You get a discount off of… what? I don't know. Let's roll the dice and find out. Cost manipulation is an art. In some markets, such as Dallas, 1,200 percent of Medicare is not sneered at, and it's bound to go higher. We need to eliminate the costs that don't improve patient value and focus on the costs that do.”

One practical way to hold the line on expenses is to always seek a second opinion before surgery. “Second opinions are great, because they filter out the things that don't need to be taken care of,” Kelley says. “In our model, we guarantee that each patient gets to the right specialist, the right diagnosis, the right treatment and the right facility. We look at the cases that can be done outside a hospital, and that's where you can really ramp down the costs.”

A common counterargument is that direct-market clinics reduce costs by cutting corners on quality. Kelley disagrees. “Quality is the most important thing to us,” he says. “It's the hardest information to get, and when you do get it, it's confusing and often misleading. In health care, there has previously not been competition in value. Value is health outcomes relative to cost. Patient value is not really about health care service; it's about improving health. We can produce a better outcome at a lower cost.”

Umbher and Kelley both believe free-market solutions will steadily catch on because of lower costs, better quality and greater transparency.

“We are proud members of the Free Market Medical Association,” Kelley says. “It's a group of people who are interested in radically transforming how we sell and how we purchase health care.”

What now for brokers?

The question for brokers becomes, if consumers contract with physicians and pay them directly, why would they need a broker? The answer lies in the very definition of the term. The path forward, both in traditional insurance and in free-market alternatives, lies in becoming a provider of solutions, not simply products.

“When you move people to these self-funded plans, you had better check out ways to help manage that supply chain,” says Christopher Yarn, managing partner of WalkOnClinic in Winter Park, Florida. “If you don't want to do that, then just continue to be the broker who sells fully funded plans. I don't see how it's sustainable to continue to sell these types of plans. The employers are at the tipping point.”

Berman also encourages brokers to think outside the box, see what works and offer it as part of integrated health care solutions for clients.

“We have tried a number of ideas in recent years, and the cost still goes up,” he says. “We have hit a brick wall, and if we are looking for solutions, we can either keep hitting our head into that brick wall and not deliver what our clients need and want, or find people who are bright and innovative and then listen to their solutions.

“You cannot believe the amount of money that can be saved by using very simple solutions,” Berman continues. “If you don't deliver those solutions, your good friend or competitor will. You can turn that around with innovative solutions and be the one using disruptive practices to gain business. You can gain more business that you are writing today.”

Instant Insights /

Free-market health care solutions

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