Multiple-Employer-Trusts (METS) have been illegal in Wisconsin for some
time. This is a situation that may well change in the near future. It
important to look at why they were made illegal in the first place, to
help determine if they hold hope for the future.
What is a MET?
Traditionally, a MET is a group of disparate companies that come
together for the purpose of buying health care coverage. The key is
disparate. These companies generally have little else in common. METS
can be fully-insured or can be self-funded. Both models have operated
in the past. Their outcome didn’t depend on that factor. (METS share
attributes with “association plans” and as a result, many of the
comments that I share with respect to METS are also true for
association-type plans.)
At the outset,
METS look like a good idea on paper. Bringing a group together often
results in the ability to negotiate a deeper discount/better contract
with the provider community (at least relative to what the individual
components would otherwise pay). It also offers opportunities to pool
risk arguably providing a more stable risk environment (by spreading it
over a larger group). Presumably, a premium rate is set for the entire
group based on the provider contracts and the general risk of the
group. Even at the outset, this means that some groups that may not
have high-risk factors (or poor experience) will pay more to offset the
poor risk (experience) in the group. However, it may not be
pronounced. What happens over time is that the poor risk/experience
segments from the good risk. Those companies with good risk
increasingly supplement premium cost to offset the poor risk of other
groups (by design- an integral feature of insurance). At a point in
time, the “good risk” companies have options for other coverage that are
less expensive; (the poor risk companies have few options and cannot
leave the plan because they either can’t get written elsewhere, the
premium increase to move to another plan isn’t tolerable or key
high-risk individuals will be denied coverage). Ultimately this
“flight” to lower cost by the good risk companies creates adverse
selection and the only companies remaining in the plan are those
that can’t leave. The premium becomes increasingly expensive
(correlating to the risk and experience) and the MET fails.
Even if one were
to buy into the MET theory, a substantial amount of the success hinges
on the ability to collectively purchase health care at reduced rates. I
do not believe that is a valid conclusion. For many years the market
place has been involved in collective purchasing. Although it was not
thought of as such, Preferred Provider Organizations (PPO), provided
that service for the past twenty years. Several of the local
(statewide) PPOs represented more than $500 million in “buying power” to
the market place; (today that has reached almost $1 billion in some
instances). At a point in time, they did command relatively better
pricing than “retail”. [In hindsight, it might be argued that the
traditional broad-based PPO may have simply redefined what retail is in
the market.]
It might also be
said that there is so very little actual retail care, (care being
purchased without a contract/discount), that the care and pricing
afforded to PPOs really is the prevailing rate- or retail, if you will.
Virtually no organizations or organizational structures have been
proposed, to date that come close to the buying power assembled under
the PPO banner. It seems difficult to believe that the prevailing
thought - more volume will drive better pricing/lower costs- can be a
successful strategy.
The remaining (and
burning) question is – can something be done. The resounding answer is
yes- there are fundamental strategies that can (and are) lead(ing) to
lower health care costs.
The
NBHRC has been working to develop a variety of resources that are
designed to impact on the current cost drivers in the health care
system. The NBHRC has initiated a Health Care Sub-Committee whose sole
responsibility is to identify and deploy those resources to the
consortium. The strategies are designed to help you specifically
understand each company’s unique health care risk and their attendant
costs (over the next one to three years). And, most importantly, how
then to reduce/address those costs. We do plan to use the
Consortium’s “buying power” as leverage to achieve lower costs on
various services directed toward the lowering of health care costs.
We will be featuring a variety of speakers over the next year to provide
each organization with the opportunity to identify their needs and
deploy strategies that will reduce health care costs and have a positive
affect on additional areas of the business!
Led by Mr. Dirk
Carson, the NBHRC Health Care Subcommittee shall be working diligently
on behalf of
New Berlin employers.
