By: Ron E. Peck, Esq.
At the risk of beating a dead horse, I want to address transparency – at least one more time. I’ve noticed of late calls from both our industry, and from Capitol Hill, for transparency. Of course, I don’t think these people really know for what they’re hollering. Let’s expand our focus from healthcare, and wag the finger at people who failed those noble spirits who crusaded for transparency already – and suffered the consequences.
Exhibit A: JC Penny’s. Recall in 2011, when JC Penny’s made what most experts have deemed a catastrophic, strategic mistake, regarding its pricing strategy. What horrific miscalculation did the retail giant make? It replaced “sales” (a/k/a “discount”) and “coupons” with everyday low prices. JC Penny’s told consumers: “Hey! We aren’t going to bamboozle you by inflating prices, and then throwing arbitrary discounts at you. Instead, we’ll offer you fair prices without any games.” This was one example where transparency failed miserably.
Exhibit B: Payless. If you want to buy some sneakers from Payless, you’d better do it soon. Payless ShoeSource, Inc. is closing for good. I’ve never shopped at Payless myself, but they hold a special place in my heart by virtue of something they did in November of 2018. Yes indeed; it was only a few months ago that they supported my theory that transparency without quality awareness is not only useless, but potentially dangerous. Payless opened a fake luxury store, dubbed “Palessi.” At this “boutique,” they displayed shoes (for which they normally charge $20 at their Payless stores), with price tags that ranged up to $600+ (a 1,800% markup). Shoppers saw the higher prices and assumed that – if it costs more, it must be better.
I could keep sharing stories of “transparency” gone bad, such as my everyday example (people pay more for brand name OTC medication instead of the identical store brand drug), but these two examples above are particularly heinous because they not only both feature businesses that proved people don’t actually care about transparency – but both businesses are now failing! Or should I say, we’ve failed them?
I’ve said it before, and I’ll say it again – people want the most expensive option. People don’t want to pay for the most expensive option, but they want to have the most expensive option. Look no further than the credit crisis bankrupting so many Americans, who bought more than they could afford. Credit cards made it so easy to dig that hole, from which people can’t emerge, because they made it “feel” like it was someone else’s money.
So… let’s review. People inherently want the most expensive option, because they are convinced price is an indicator of quality. Additionally, luxury purchases are a status symbol. So we want the best, assume the most expensive must be the best; and we want other people to think we have the best (a/k/a most expensive) stuff as well. The only roadblock is that I don’t have money with which to buy the best (most expensive) stuff, but, when someone gives me a “card” and that “card” grants me access to deeper pockets than my own, I can now use that “card” to buy the best (most expensive) stuff. The fact that I have to pay for that “stuff” later (either in the form of credit card payments … or … [assuming my metaphor didn’t go over your head] insurance premiums) won’t stop me from running up an unaffordable bill.
Transparency did nothing to stop people from getting themselves into credit card debt. Transparency will do nothing to curb people’s health care spending, and I actually foresee it making things worse. Consider the proposals to have drug prices on TV advertisements. I’m watching the Patriots beat another opponent, when a commercial for Viagra pops up; (pun intended). The commercial ends by telling me the cost of the drug is $400. Next, a commercial for Cialis appears, and tells me that drug costs $600. Well – don’t I and my spouse deserve the best? Cialis it is!
Unless and until reliable quality measurements are included in the transparency discussion, and that information is delivered in such a way that the consumer will understand and appreciate that price has no relationship with quality, I fear “price transparency” on its own is not only a step too short, but potentially a step backwards, in Palessi boots.
By: Jon Jablon, Esq.
You asked whether your clients can decide to not utilize their wrap network for a given claim, right? Oh, you didn’t? Well, why didn’t you?
We get it. Wrap networks are very simple to use and they guarantee against balance-billing. Those are great things. But despite the ease of use, do wrap networks offer the best bang for your buck?
Research shows that the average wrap network discount ranges from 18% to 25%. There may be outliers, though; if you’ve got a 65% discount, it’s often worth it to take it with no questions asked. But if you’ve got a 20% discount on a very large claim, it will probably be beneficial to explore other options. In many cases, individualized negotiations can yield far better results than wrap discounts, since wrap discounts are pre-determined and predicated on arbitrary percentages off arbitrary billed charges. When negotiating a claim on an individual basis, though, there’s an opportunity to use benchmarks (such as Medicare), examine the specifics of the bill, and actually discuss the claim and its merits with a human being. More often than not, individualized negotiations yield better savings than pre-negotiated wrap discounts.
In a recent poll of many of The Phia Group’s clients, 75% of those who responded indicated that they weren’t aware that they were able to forego utilization of the wrap network on a case-by-case basis. It’ll depend on the contract, but in just about every case, a health plan does have that right.
Plus, if a negotiation outside the wrap isn’t successful, the health plan will still have the wrap discount to fall back on!
If you need a contract reviewed, The Phia Group can do just that – and if a benefit plan incurs a large claim that should have a better rate than what the wrap will offer, let us know as soon as possible, because we can help.