All Brokers Are Not Created Equally Part 4

A few weeks ago we talked about the importance of stop-loss as it relates to self-funded groups and the lack of attention this product often receives. Today we focus on administrative fees.

As carriers have been pushed to evolve into more than a claims processor, they have had to invest millions of dollars into their own internal infrastructure to accommodate the market demands of their clients. This includes offering comprehensive reporting, member transparency tools, mobile apps, and being tasked with policing providers and their practices to identify fraud, waste, and abuse, as well as attempting to transform from a fee-for-service to a fee-for-value model.

In doing so, clients today have access to significantly more information and resources, but please be aware that this comes at a cost to you, the client.

Carriers have developed other revenue streams beyond what many agents and groups believe to be the “administrative fee” or a fixed fee for partnering with the said insurance carrier to help recoup their costs and keep shareholders happy.

Here in Michigan, national carriers are charging self-funded groups an administrative fee in the $50-$65 range, depending on size and a number of factors. Third-Party Administrators who rent networks and serve as a claim processor are touting administrative fees 20-30% lower than stated above but make no mistake, the true “administrative fee” isn’t as black and white as a flat dollar amount.

Many of those enhanced services that groups have come to experience and enjoy are being funded by shared saving situations where a group’s respective carrier is increasing revenue streams through the use of items such as:

• Claim subrogation
• Pharmacy rebates
• Pre-pay hospital bill review
• Negotiated billing on large claims
• Negotiated billing on non-network claims

This represents a handful of the items where groups need to be wary of the true costs associated with working with their carrier or TPA partner. These can add up quickly; how quickly, you might ask? We have seen these programs represent as much as an additional $250 -$300 per contract per year charge for groups. Without an agency partner who can talk through these items and negotiate on your behalf, you may be left holding a not-so-transparent bill for these items. Wouldn’t you love the opportunity to negotiate these items down and use the dollars elsewhere within your organization?