Saving Money by Buillding Fee Transparency in Healthcare

January 26th, 2009 by arttaft

One way to significantly impact overall costs is to insist on ‘broker’ fee transparency. The brokers fees can be as high as 15% (they are often less) of the fees paid to the insurance company and are often not identified to the buying employer. Brokers have on occasion caused the buying employer to spend more so they can earn larger fees on the product purchased. This has been identified as one of the items that impact the adoption of consumer driven health plans.

Many brokers obviously do not do this, and for them as well as for the employer clients, full transparency can only make it clearer that they are acting in their clients interests. Full transparency of all fees will help an employer make better decisions on when a broker relationship is a better value than a consulting relationship.

I am very interested in others thoughts with regard to this matter

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6 Responses to “Saving Money by Buillding Fee Transparency in Healthcare”

  1. alewis Says:

    I think Art is onto something here. When prices are “shrouded” (bundled into other prices) they are almost always higher than when they are explicitly charged. I would suggest:

    (1) The health plans should be required to bill the broker fee separately from the adminsitrative services fee or premium

    (2) The broker should be required to charge the buyer directly.

    Both cases shine a bright light on the broker fees, will cause them to melt away, saving employers substantial sums without reducing coverage or benefits for employees.

    Further, with federally qualified health plans (those authorized to insure federal employees), unbundling can be accomplished through federal regulation rather than Act of Congress.

    Therefore, we are One Signature Away from lowered healthcare expenditures.

    By the way, I am a broker myself. My fee for putting a disease management program in place is far lower in percentage terms than what other brokers charge, and yet you don’t see me eating squirrel under a bridge.

  2. MITguywithtoomuchtime Says:

    So as I read your postings and comments, I find several economics themes which are not expressed like an economist would express them but are principles of economics nonetheless:

    –more transparency, like this one or the real estate brokers

    –stop hidden subsidies like the gasoline or the right to die

    –get rid of artificial secondary markets like in the scalping or the income tax refund anticipation loans by making the primary market more efficient

    –get incentives aligned like in both postings about gasoline or real estate brokers or measuring innovation or the philanthropy

    –create options, like the pennies or the real estate brokerage

    Some of these things don’t fit in any category, like the gift card or the immigrants.

    what are you going to do with this stuff? No one can find it on the web, you know. I found it through a friend who lives in Concord and hates pennies.

  3. harvardguywithtoomuchtime Says:

    i hate to agree with an MIT guy, but I am all for transparency in pricing too. One of the requirements for efficient markets is perfect information and in this case there is none. I would bet on a 50%+ decline in broker fees in the scenario describes, where pricing is made explicit. healthcare is a commodity. brokers are a commodity.

  4. Beenaroundforalongtime Says:

    In my dealings with the broker field i found one charging a % of claims as the commission, so where is that logic about controlling costs. these guys love the system and will not want a change to their income levels. there is other low hanging fruit like this throughout healthcare but so many people have gitten rich on these senarios it is unlikely that such changes will reach the federal level, remember all healthcare is regional.

  5. thistimeisthetime Says:

    they aren’t going to have any choice as I read this. The proposed law is only about disclosure. no one is regulating anything. sounds like it will be up to the buyers to negotiate

  6. concordjoe Says:

    this is a GREAT idea. i used to run a small business and I always thought there was a lot of fat in that broker fee but i was too shy to ask. I oringally came to this site for the pennies but I have read every posting and they are mostly great ideas

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