I have been on the west coast at a series of meetings with employers and insurers as well as managed care firms. A meeting earlier this week with a very large self-insured employer group highlghted some of the significant problems that still exist in work comp managed care. And these problems are not limited to California.
This group is self insured with a high deductible; the insurance, claims service, and managed care services are all provided by a top ten WC insurer. A common name, a fairly well-respected insurer.
This insurer is charging for medical bill review on a percentage of savings basis – that is, they get to keep 20% of the difference between what the provider bills and what is actually paid. Most of the providers in California bill way over the state fee schedule, which is all insurers legally have to pay in Ca. But this insurer wants to get paid an outrageous sum just for doing its job – for applying the law.
The right way to pay for bill review is on a flat rate basis – between $6 and $9 per bill.
Why? Simple – the percentage of savings method of pricing for bill review is costing this group five to ten times more than it should.
Note – I met with two gentlemen in FL last week who had a client with the identical problem – ridiculously, outrageously high charges for managed care – costs that were well in excess of the claims admin expense! This is not a rare occurence…
For more on this read my article on unintended consequences.
I bring this to your attention to encourage all to review how they are being charged for managed care, to scrutinize bills, referral rates, nurse case manager charges, and the like. Managed care has become a huge money maker for insurers and TPAs, and employers who fail to pay attention to this are being hammered.
What does this mean for you?
Hopefully not much – but if you aren’t paying attention you better start now.

More from the Coventry investor call last week…
Coventry views its businesses as in two main sectors – health plans or specialty businesses. Workers Comp and Medicaid are the specialty businesses.
CEO Dale Wolf sees substantial growth in 2006 in WC. According to Wolf, Workers Comp will grow from $215mm (Estimated) in 2005 to $240mm in 2006. While I guess anything is possible, I’m somewhat surprised about the level of optimism given First Health’s recent difficulties in the WC arena. On top of their losses at the Hartford and elsewhere, another large carrier has just moved a major state away from First Health. While I don’t pretend to know all that goes on with their new business and renewals, sources also indicate that renewal contracts are being negotiated on terms somewhat less favorable to FH.
FH’s bill review and network customers are large insurers and TPAs. Wolf views Coventry’s WC sector as a nicely profitable business with a dominant market position, based on what he views as the leading network in the country. The slides accompanying the presentation indicated Coventry is expecting a 12% growth rate in 2006. Again, I’m sure he knows a lot that I don’t. Or perhaps the market knows a few things that have not yet hit the executive suite at Coventry…
Notably, Wolf stated that Coventry will invest additional capital in this business.
My view is FH, which is yet to name a leader for the WC business unit, will be significantly challenged by Aetna which is gaining traction amongst payers for its very strong discounts and more approachable style. If Kaiser can promote its excellent On-the-Job program, United gets its act together, and the Blues make any additional inroads into WC, FH will have a real battle on its hands.
What does this mean for you?
The drive for top line from Coventry may help WC payers negotiate deals on more favorable terms as FH seeks to replace lost revenue from major insurers.