Greg Hummer, Gregory Hummer, Simplicity Health, Simplicity Health Plans, CDHP, Consumer Directed Health Plan, HSA, Self Funded Small Group
Self-Funded Small Group - CDHP with HSA & Innovative Point-of-Service Technology
The “Holy Grail” of claims and payment systems has potential to save billions
Key to True Healthcare Reform
By Gregory J. Hummer, M.D.
Despite the current focus on healthcare reform, the recession and escalating costs of healthcare
continue to plague businesses. Given that employers’ healthcare costs have increased
approximately 150 percent over the past decade, and are projected to rise 10 to 25 percent in
2010, it’s not surprising that companies, brokers and agents are nervous about the real effect of
reform. New government rules that govern loss ratios of fully insured plans are causing havoc
with commissions. The answer: Self-Funded Small Group even down to as few as 2 employees.
ERISA self-funded plans have escaped most of Washington’s new rules, including the rules
on loss ratios and how they impact broker and agent “Service Fees”. Self-funded plans can
maintain “Service Fees” to brokers and agents while saving employers money.
Self-funding in combination with CDHP is a winner for everyone – brokers, agents, employers,
employees and even providers. A Towers Watson report from September 2010 shows that 12%
of American employers will convert to full replacement CDHP. The conversion rate to CDHP
has now hit 40%. The proper implemention of a self-funded CDHP eliminates member hassle,
fraud, and much of the intermediate costs that add no value to the stakeholders.
Thomson Reuters Vice President for Healthcare Analytics Bob Kelley published a white paper
entitled “Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System?”
The paper examined published studies, subject experts’ opinions and findings from Thomson
Reuters’ own proprietary healthcare databases to determine that $700 billion is being wasted.
Kelley’s paper goes on to identify the areas fraught with healthcare waste. The top areas found to
be responsible for the greatest amount of waste in the healthcare system are:
- Administrative system inefficiencies
- Provider inefficiencies and errors
- System inefficiencies
To bring true cost control to the system, healthcare reform must address how services are paid.
Without addressing the valueless services, wasted paper bills to members and antiquated claims
processing that grossly exaggerate costs and create agonizing payment delays, all obscuring
transparency, healthcare costs will continue to spiral upward. Costs, rather than controlled,
are reallocated, with no real material reduction. Those who pay for healthcare, employers and
their employees, consequently continue to bear the increasing cost burden. Consumerism in
healthcare cannot thrive without transparency.
Fortunately, there is an innovative technology system that disintermediates the entire claims
processing system, driving significant savings and efficiencies for employers, providers and
members. The first of its kind, this system partners technology for point-of-service claims
processing and payment with the CDHP + HSA model to create a direct and completely
paperless alternative that offers instant payment and does away with member bills and fraud.
Because this technology-based system fundamentally changes the way claims are processed and
paid, it can save employers hundreds of thousands — even millions of dollars annually.
How it Works
The partnering of Internet-based technology with a self-funded CDHP + HSA is the basis for
enormous cost savings over traditional fully insured plans and other self-funded plans. Using a
secure service-as-a-software (SaaS) platform, the state-of-the-art technology minimizes waste
and directly connects brokers/agents with employers, plan administrators, members and care
providers, often instantly, with little human intervention.
Use of the system is simple. For example, once a plan member receives medical care, the
provider files a payment claim directly via the Internet. The claim is immediately adjudicated
against the plan and is clinically edited and re-priced – all at the point of service. The
technology-based system eliminates the traditional patient billing chain that adds months, even
years, to the average reimbursement cycle. Administration costs are significantly reduced as the
time and money spent on time-consuming paper billing processes and multiple billing notices are
Debit cards are also eliminated, which removes the inherent risk of fraud and the cost of
administering the cards. Debit cards represent a variety of hidden costs. For care providers, debit
cards double collection costs, lengthen the collection cycle, and carry a typical 2% plus 30-
cent fee per transaction. For members, debit cards eat up HSA contributions through monthly
checking/debit account fees, require administrative paperwork, and create credit risks when
a member’s HSA lacks sufficient funds to cover a claim. For employers, debit cards create
additional workload on human resources managers to address the questions and problems
associated with such a complex system. They allow employer wealth saved and transferred tax
free to employees to be used for services other than medical expenses. Every employer should
be seriously concerned about the use of debit cards.
There are other systems referred to as “paperless,” but there is no comparison in their ability
to eliminate costs. These so-called "paperless" systems are nothing more than electronic data
exchanges through clearinghouses that pass information back and forth between care providers,
insurance carriers and patients. They do nothing new to eliminate unnecessary cost from
healthcare. Essentially, they put a new face on an old structure and never address the root cause
of escalating costs – bloated paper-driven bill payment and adjudication administration that is
passed along to the consumer as part of a cost-plus payment system. Only by reducing the “plus”
costs that add dollars without value or benefit to the consumer can real cost control be realized.
Built-in Transparency and Simplicity
One of the other benefits of a self-funded Small Group, Internet-based point-of-service system
is that it can be fully transparent for the employer, member and the provider. Because payment
is authorized at the time of service, there’s no more guessing on the part of the member and no
more frustrating payment delay for doctors. Employers also get instant reporting.
The member can know immediately what they are being charged, and the doctor can know
what they will be paid and when. They are no longer forced into accepting as little as 55 percent
of their original charge after months and months of back-and-forth paperwork for what is
essentially a self-pay patient eighty percent of the time when dealing with a CDHP plan.
The technology-based system allows for payment to be handled like a simple electronic banking
Employers, providers and members all benefit from a self-funded plan using Internet-based
point-of-service claims processing and payment technology.
The technology-based system saves employers money and eliminates the debit card waste,
fraud and member frustrations that burden their human resources personnel. Depending on the
number of employees, employers can realize double-digit percentage savings. Most can save
more than 15 percent, year over year, which translates to millions of dollars in savings that can
be reinvested in wages, hiring and other company assets.
For the care provider, the addition of point-of-service claims processing and payment means the
cost of doing business goes down significantly. They save time and money by eliminating all of
the back-and-forth processing of paper-based transactions, credit risks and collections hassles
that drive up costs and delay payment for months.
The technology-based system enables guaranteed same-as-cash payment within 72 hours. If the
provider accepts 100 percent payment of the adjusted plan-allowed amount at the time of service,
payment is instant. To receive payment, the doctor’s office simply enters the member patient’s
charge using the Internet-based system.
Members benefit by diverting non-taxed dollars to their HSA accounts to be used for healthcare
services as needed. With the proper CDHP + HSA health coverage, members also save money
because they pay no deductible on major healthcare screenings. This makes them more likely to
seek preventative care.
It’s also been shown that because members are managing their own healthcare spending, they
become better consumers. According to a McKinsey & Co. study, 25 percent of those with
CDHP+HSA plan change to healthier lifestyles as a result of managing how their healthcare
dollars are spent. To the extent they stay health, members can get wealthy because the plan
enables them to build significant savings. Employees with this type of plan are much more likely
to ask about cost and avoid unnecessary healthcare services. They get more regular exams and
are more likely to comply with treatment recommendations. Members rethink their options and
make better decisions when it is their own money.
By combining self-funding, CDHP + HSA with the industry’s first Internet-based point-of-
service processing and payment system, there is potential to revolutionize healthcare as we know
it. True healthcare reform must focus on cost control, and this innovative technology-based
system proves it can be done. Employers, providers and members can realize the thousands
and even millions of dollars in savings they deserve with this unique approach to eliminating
redundancy, waste and the spiraling costs of our healthcare system while at the same time
preserving the ability of brokers and agents (Service Associates) to maintain their fee structures
for services related to implementing this type of plan and technology.
About the Author
Gregory J. Hummer, M.D., has spent the last 18 years developing and perfecting Simplicity
Health Plans to solve the vexing complexities, out-of-control costs, burdens and inefficiencies
that are associated with healthcare coverage in America today.
Dr. Hummer is chairman and CEO of Simplicity Health Plans. His career includes 16 years as a
Cleveland trauma surgeon, founder of a national group of emergency care centers called MED
Center, and a three-year stint at NASA Lewis Research Center as director of medical screening.
Dr. Hummer’s healthcare solution incorporates a self-funded small group plan (2-250
employees) and technology that provides efficient paperless claims processing and point-of-
service payment with a CDHP + HSA package. Simplicity Health Plans is the first and only plan
that provides instant and completely paperless claims processing and point-of-service payment
Gregory J. Hummer, M.D.
Simplicity Health Plans
Consumer Directed Health Plan (CDHP)