Amid the ever-increasing complexity of US healthcare, the escalating costs are more than a line item on your balance sheet - especially if you’re the CFO of a self-insured employer. As the second-largest expense trailing only behind payroll, healthcare spending has surged to unprecedented levels, with employer claim costs for family coverage skyrocketing by an astonishing 75% over the last two decades. And these costs will likely climb even higher as financialization and misaligned incentives within the healthcare ecosystem continue to go unchecked.
As a steward of your company’s financial health, you can no longer afford to overlook this growing burden. You need to confront it head-on, armed with the knowledge that you have the power to meaningfully lower healthcare costs and prevent further financial leakage in the future.
3 out of every 5 healthcare claims contain errors
Picture your company's finances as a vast water reservoir, providing a critical source of sustenance and growth. Now, envision this reservoir riddled with fissures. Each small fissure allows a trickle of water to escape, and collectively, these trickles become a steady stream. Unchecked, they silently erode the foundation, draining more and more water from the reservoir each year. This metaphorical scenario is, in fact, an all-too-real predicament for many self-insured employers due to widespread errors in healthcare claims, which account for an unhealthy portion of the fraud, waste, and abuse (FWA) that is so pervasive across the healthcare industry. Today, up to 80% of healthcare claims contain errors, resulting in significant financial leakage.
These errors take various forms, each with its own impact on your bottom line. A common issue is the discrepancy between the negotiated pricing and the actual charges billed, often leading to overpayments and unnecessary financial outflows. Other areas where mistakes are commonly found include:
- Adjudication errors: overbilling often results from incorrectly unbundling services that should be charged as one comprehensive treatment, or from inaccuracies in medical coding modifiers. These mistakes can skew and compound costs with specific procedures, resulting in inflated and sometimes unexpected bills.
- Limitation errors: when Third Party Administrators (TPAs) mistakenly pay for claims that include charges for services that are either explicitly excluded or extend beyond the scope of coverage in the employer’s plan.
- Eligibility errors: when companies mistakenly pay for claims processed for individuals who are no longer covered under the plan, such as former employees or dependents who no longer meet eligibility criteria.
Self-insured employers have a fiduciary responsibility for the financial health of their plans
Self-insured employers are more than business operators - they are also vested with the crucial stewardship of their healthcare plans. This pivotal role is underpinned by fiduciary responsibilities, governed by regulatory frameworks like the Employee Retirement Income Security Act (ERISA).
Fiduciary responsibility extends beyond mere legal compliance. It imbues employers with the duty of judiciously managing their healthcare plans, ensuring every decision and action taken is in the interest of plan members. This entails a continuous cycle of assessing and enhancing plan performance, focusing on optimizing the delivery of healthcare services that are not only cost-effective but also of high quality and aligned with the needs of employees.
As companies like Johnson & Johnson know all too well, failing to adhere to these fiduciary duties can precipitate significant consequences, including the potential for legal and financial penalties, as well as reputational damage. The number of lawsuits against self-insured employers have increased dramatically over the past year, and this trend will likely continue. In this new environment, companies may also find themselves under increased scrutiny from regulators.
Managing financial risk in healthcare is extremely complicated
Managing risk for self-insured employers within healthcare is an inherently complex task. The complexity is not just in the need to navigate through vast amounts of data but in the nuanced differences between healthcare plans, the unpredictability of future healthcare needs, the intricate details of your coverage, and financial implications.
For HR departments and CFOs, this complexity is magnified by the specialized nature of healthcare management, which often falls outside core areas of expertise. The detailed knowledge required for deciphering medical coding, navigating claims processing, and ensuring regulatory compliance is generally outsourced to third party administrators (TPAs) and is beyond most internal teams' purview, making managing healthcare risks an uphill battle.
Leaning exclusively on partners with financial ties to carriers bridge this expertise gap is not always financially prudent. While these vendors play a crucial role, the inherent complexity of healthcare plans limits their ability to gain a complete and unbiased understanding of a company's healthcare spending. Ultimately, the onus remains on employers to develop a deep understanding of their healthcare landscape, ask the right questions, and make informed decisions that align with their risk management strategies and financial goals.
Uncovering the truth behind medical overbilling
Medical overbilling is a pervasive issue that affects both healthcare providers and patients alike. At its core, it involves charging for medical services at rates higher than what is deemed reasonable or customary. This practice not only drives up healthcare costs but also erodes trust between patients and providers.
One of the primary reasons behind medical overbilling is the complexity of the healthcare billing system. With numerous codes, regulations, and reimbursement schemes in place, billing errors and discrepancies are bound to occur. These errors can range from simple mistakes in coding to deliberate upcoding and unbundling of services.
Moreover, the fee-for-service model incentivizes healthcare providers to maximize their billable services, leading to potential overutilization of medical procedures and tests. This not only inflates healthcare costs but also exposes patients to unnecessary treatments and interventions.
Another contributing factor to medical overbilling is the lack of transparency in healthcare pricing. Patients often receive bills that are incomprehensible or include charges for services they did not receive. Without clear visibility into healthcare costs, patients are left feeling frustrated and powerless.
Addressing medical overbilling requires a multifaceted approach that involves greater transparency, improved billing practices, and enhanced oversight. Healthcare providers must prioritize accuracy and integrity in their billing processes, ensuring that patients are billed fairly for the services they receive.
Furthermore, patients should be empowered with tools and resources to understand their medical bills and challenge any discrepancies they encounter. By shining a light on medical overbilling and advocating for greater accountability in healthcare billing practices, we can work towards a fairer and more transparent healthcare system for all.
Over-reliance on fixed fee (PEPM) plan administrators is costing you more than 10%
Outsourcing plan administration is essential, but without vigilant oversight by self-insured employers, the complexity of claims can lead to escalating costs. Complex coding and an intricate web of regulatory frameworks complicate billing accuracy. At the same time, the process of adjudicating benefits, with plan-specific nuances across multiple health contracts, is inherently error-prone. In the absence of diligent supervision, there’s a heightened risk of costs diverging markedly from planned financial forecasts.
The situation is further complicated by a misalignment of incentives between employers and plan administrators, which can compromise the integrity of their services. Under the PEPM pricing model, TPAs receive a fixed rate regardless of the actual costs incurred by the plan, but because they are not using their own money to pay claims, errors or unwarranted charges sometimes slip through the cracks. Moreover, the effort and resources required to dispute complicated claims may deter some administrators from pursuing potential savings, resulting in employers bearing higher costs than necessary.
Audits are expensive and insufficient
The conventional wisdom that positions audits as the panacea for finding errors and managing escalating healthcare costs is incorrect and misguided. Even though your health plan is most likely subject to an annual audit according to your contract with them, traditional audits typically focus exclusively on high-stake claims (often less than .1% of actual claims and spend). This is akin to using a scalpel when a more comprehensive diagnostic tool is needed. Because auditors often examine only the tip of the iceberg, most claims are unchecked and potential savings untapped.
The inherent flaw in this approach lies in its resource intensity. Traditional audits demand a significant investment of time, expertise, and financial resources. This makes them an expensive endeavor, often reserved for a small fraction of claims with the highest dollar values. As a result, 99% of claims escape scrutiny, allowing potential errors and overpayments to pass unnoticed and squandering opportunities to recover substantial amounts.
Moreover, the infrequency of these audits, usually conducted annually due to high costs, further limits their effectiveness. The narrow time frame for reviewing claims, governed by statutes of limitations, means that many chances for recouping funds are lost to time constraints. Given these limitations, self-insured employers must rethink their approach to healthcare cost management. Transitioning to more regular, continuous, and comprehensive oversight and monitoring practices can cast a wider net, uncovering a broader range of discrepancies and overpayments.
There’s a better way for you to control healthcare costs
As a CFO, you have every reason to cautiously approach the complex task of managing healthcare plans, especially given you’re already juggling numerous other critical responsibilities. The sheer complexity of healthcare can lead you to feel overwhelmed and skeptical about the potential to drive significant cost reductions.
However, a viable path exists for you to assert control over healthcare costs without the need to enlarge your teams, upskill their expertise, or allocate extensive hours to oversight. That’s where Bluespine comes in.
Bluespine has developed a cutting-edge solution to revolutionize healthcare spending management for self-insured employers. Our fully automated, AI-driven platform empowers companies to proactively streamline their healthcare expenses, mitigate financial risks associated with plan management, and significantly reduce annual healthcare costs by 10% (or more). By meticulously sifting through, analyzing, and correlating diverse data points across claims submissions, individual summary plan documents, and Machine Readable Files (MRFs) that contain standardized pricing, Bluespine excels in identifying and correcting billing inaccuracies across 100% of all claims with unparalleled precision.
What sets Bluespine apart is its innovative approach to addressing medical overbilling on a scalable level, offering a customizable and detailed claims review process tailored to each employer's unique needs. This approach facilitates comprehensive, post-payment recovery services and integrates smoothly with existing claims processing workflows. Such integration is critical to avoiding the inefficient and often fruitless "pay-and-chase" recovery methods, streamlining the entire claims cost management process.
Contact us at info@bluespine.io or book a demo.
Start Saving Money Now
