Direct contracting

A reader asked several excellent questions about when and under what circumstances direct contracting makes sense. That’s when an employer contracts directly with health care providers.
My take is an employer has to have at least 750 lives in one area – plant, school, city government, facility, etc. in order to have any buying power at all. And 750 may well be on the low end.
As to whether a partially self-insured employer, say one with a specific deductible of $50,000, should do this, I’d say yes. The vast majority of bills will come from members with total costs well under the $50,000 limit.
Lastly, direct contracting takes expertise and patience. Knowledge of provider payment mechanisms and expectations, an understanding of the related legal issues, an intimate understanding of the local provider community, and really good employee relations are the bare necessities. Without these, stick with a “regular” health plan.

If I were an employer, here’s what I’d do.
I’d set up a plan that pays 100% for in-network tertiary care, has a very low copay for preventive care including maintenance drugs, and has a very high out-of-pocket max for non-network tertiary care. I’d give significant discounts on premium sharing to those employees with healthy habits (this is the same as charging smokers more, but more politically palatable (sorry Rommy). Do not cover any medical costs incurred if a motorist is not wearing a seatbelt or a motorcyclist is not wearing a helmet. Contract directly for primary care, ob/gyn, pediatrics, and emergency care.
For tertiary care, work with one of the medical tourism companies to identify high quality, low cost overseas providers. And then let your insureds determine if they want to sign a big check to get tertiary care here, or go overseas and pay nothing and get excellent care.