The key to transparency, cost reduction and more...

1. Strategic Benefit Modeling
Transparency in an
industry cluttered with
black boxes.

2. Agenda
Black Boxes and Beyond
1 Current Landscape
2 Navigant Report – North Carolina
✓ 3 ASO and Risk Management
4 Plan Design…wellness, telemedicine
5 Medical Concierge
6 Claims Recovery
7 Approach, Implementation and Timelines

3. The Current Landscape
Lack of Transparency
What if it became normative business practice for your payroll service
provider to set salary and wage increases and after years of near double digit
increases you request an audit and are told it’s their proprietary information
and really off limits to you, the employer?
Sound absurd?
It is, but this is the normative landscape for many
self-insured employer group health plans in
the country.

4. Transparency
Transparent Negotiations, Networks and Fees
insight – Expert Thinking From Milliman
“The lack of price information
stems from the confidential
Solutions for nature of negotiations between
the Future providers and payors.
Providers compete with each
other trying to get the highest
payment from payors, and
payors compete with each other
Transparency trying to set the lowest payments
to providers. In hopes of getting
the best deal, both providers and
payors want their
negotiated rates to be kept
Recovery from
confidential. Information is kept
the Past from the consumer that is
necessary to make the best
choices and drive an improved
market.” Will Fox, 2011

5. Performance Audit State Health Plan Risk Assessment
September 2011
“Although the Plan pays BCBSNC to access its provider network and
to benefit from its contracted discount rates with medical providers, all
contracts are between BCBSNC and its providers and are considered
proprietary information….Consequently, the plan is at risk for overpaying
claims because it must rely solely on BCBXNC auditors and information
from BCBSNC computer system to identify discount errors.”
Beth Woods, CPA, State Auditor
Plan Participant Totals 662,000 lives and equates to $2.8 Billion spend

6. Performance/Efficiency Audit
Navigant Consulting
Methodology =
Transparency
Standard
Business
Practice Flaws
Because of the test nature and other inherent
limitations of an audit, together with limitations of any
Minimal Fraud system of internal and management controls, this
Recovery Efforts audit would not necessarily disclose all performance
weaknesses or lack of compliance.

7. Performance/Efficiency Audit
Navigant Consulting
ASO ASO PBM
1 “The State Health Plan 2 “Specifically, the Plan does 3 “The State Health Plan’s
does not have policies not follow up on potential contract with Medco lacks
and procedures in place overpayments estimated by provisions that would
to mitigate certain risks Plan auditors, does not provide the SHP information
that could result in provide adequate oversight that is important to its
overpayments on member for its recovery audit oversight of contractor
medical claims.” function, has not taken performance. The contract
corrective action to does not require Medco to
eliminate or reduce provide information about
potential errors, and cannot the unit cost of
independently verify that the pharmaceuticals to the
Plan receives the proper State Health Plan. In
discount rate on medical addition, the current
claims.” contract with Medco does
t not allow the SHP to audit
the MAC list to determine
the competitiveness of
Medco’s pricing.”
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8. Your Money
Contracts That You Are Not Privy To….

9. It’s Your Money
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Welfare Benefit Plans
Two of every Three “health insurance” plans in the U.S. are “self insured plans”, meaning, there is NO
1 policy. The employer is the insurer.
Third Party Administrator
The TPA is merely a paperwork processor, an intermediary. ALL money paid for health claims is “Plan
2 money” supplied through the employers Welfare Benefit Plan.
.
Transparency is the KEY!
Therefore – any and all funds should have no “lock boxes” or “proprietary contracts” reducing the
3 efficiency of your health care plan!!!
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10. Can one cut costs and deliver better benefits?
•Risk Management – Structure Determines Function
Pure Risk vs. Speculative
Plan Design for optimal outcomes
CDHP
Wellness
Concierge
Telemedicine
•Risk Management
Infrastructure for optimal outcomes
Proprietary Networks
Cost Plus “You cut costs by
Real Time eliminating claims
or reducing the cost
per claim.”
Ron Dobervich

11. What Do Optimal Medical Outcomes at Lowest
Net Cost Really Mean?
In 2009, Our proprietary
net-work system’s clients
averaged a composite cost for
benefit plans 28.6% below the
Kaiser Foundation’s published
national average.

12. Cost Plus is Quantifiable: The numbers
tell the story….
Data driven diagram – Line diagram
$1,880,795 $1,130,134 41.33% $299,602 77.83%
377% Difference DO YOU THINK THIS WILL
AFFECT TREND?

13. Risk Management Done Right
Your data
Claim incurred. accessible in
real time.
Hospitals are
Subject to over paid more on
230 Proprietary average - all
Networks. while you save
money.
Hospital claims
Robust Case are subject
Management if
Needed. to COST
Plus audits.

14. Imagine owning your own data!
Data – unencumbered by ”proprietary” contracts....
Virtual OnSite: This is our Network
system’s name for its administrative
Cost Plus services product in which administrative
operations occur at the client’s worksite,
with client access to individual records
and reports via secure Internet access.
You will have access to information
regarding your health plan as if you
Real Time were administering the benefits on-site
Proprietary at your facilities.
Data Networks
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15. Plan Design
CDHP
With regard to first year cost savings, all
A qualified high deductible plan
1 coupled with an HSA or HRA can studies showed a favorable effect on cost the
equate to significant savings without first year of a CDH plan. CDH plan trends
sacrificing benefits. ranged from -4 percent to -15 percent.
Coupled with a control population on
Wellness traditional plans that experienced trends of +8
percent to +9 percent, the total savings
A standard based or participatory generated could be as much as 12 percent to
2 plan can incent healthy behavior.
20 percent in the first year. All studies used
some variation of normalization or control
groups to account for selection bias.
Tools to further efficiency
American Academy of Actuaries
A concierge service that shops cost
3 effective procedures and
telemedicine for consumer
convenience.

16. Transparency
Transparent Negotiations, Networks and Fees
insight – Expert Thinking From Milliman
“In no other area of our economy
do consumers receive services
Solutions for where they do not know the cost
the Future in advance and are
not able to make comparisons to
alternative suppliers. As a result,
healthcare provider costs have
Transparency remained immune
from the economic forces that
could control them. This
immunity has contributed to
greatly increasing provider costs,
Recovery from a major component in todays
the Past rising healthcare costs.”
Will Fox, 2011

17. Medical Concierge
A single procedure can have price variation of 500% or
more and facility charges ranging 1,000%.
So how do you know if your getting the best price?
YOU DON’T – “Blind by Design”
$291
717% $2,089
MAX RISK
395%
Difference
1

18. Recovery from the Past
Providers often pay large sums back to
Overpayments intermediaries. These payments in the provider
world are called “overpayments” or
“recoupments”.
Intermediaries have several, complex, often
Recoupments obscure, methods of receiving theses monies.
Our discussions with traditional audit firms
Who should demonstrate they are often not familiar with the
audit? provider claims nor ERISA regulations pertaining
to those claims and hence, are not aware of all
the sources of your refunded money.

19. Recovery from the past…
Who should audit your plan?
“The lack of follow-up will prevent the Plan from identifying and correcting the conditions that
allowed the overpayments to occur. Additionally, the Plan will fail to recapture a potentially
significant amount of overpayments.”
Beth Wood, CPA, State Auditor
In fact, a 2010 performance review by Navigant Consulting, Inc.
indicates that the Plan does not receive value for money on its fraud
recovery audit efforts. Navigant noted that fraud recovery efforts by
the Plan’s vendor, Blue Cross Blue Shield of North Carolina (BCBSNC),
do not meet industry standards.
“BCBSNC’s level of fraud recoveries for the SHP [State Health Plan] is
well below the industry average. For every $1 the SHP spent on fraud
and abuse detection, the SHP received only 10 cents in actual fraud recoveries.
Overall, the BCBSNC recovery dollars are equal to a little more than 1 percent of the SHP’s total medical
expenses, which is significantly below the industry average of 3 to 5 percent.”

20. Recovery from the past….
Federal Court Ruling
Self Insured Welfare Benefit Federal Court Ruled Against BCBSRI's
1 2 Overpayment Practice on October 27,
Plans have a fiduciary 2010 - Relied Upon U.S. Supreme Court
obligation to pursue these ERISA Rulings
funds.
The Court Ruled that BCBSRI’s Post-
Payment Overpayment Recoupment is a
Plan Fiduciary Conduct Governed by
Federal Law ERISA Instead of Provider
PPO Contract.
Subsequent Federal Court Rulings Give
Self-Insured Health Plans solid foundation
to proceed.
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21. Recovery from the past….
Claims Recovery Audit
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2005 2006 2007 2008 2009 2010
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25. Risk Management
Data driven diagram – Bar diagram
Cost Plus
Real Time Data
Proprietary Networks
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26. Arrow Process
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Plan Com
ARM Design CRC
pass
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27. THANK YOU!
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