Transcribed from the recording and lightly corrected. It may contain errors; the recording is the record.
00:01Welcome to The Business of Benefits. The Business of Benefits is your no-BS, no-sales guide to real solutions. No gimmicks, just the truth about how to take control, transform your benefits, and care for your most valuable asset: your people. If you're tired of the same old sales pitch and you're ready to rethink your benefits, this podcast is for you. The truth is out there. Are you ready to hear it?
00:01Chelsea Ryckis: Hey everybody, welcome to The Business of Benefits. I'm your host, Chelsea Ryckis. Today we've got part one of a two-part series with Danielle Young from ClaimDoc. And the reason this turned in, it was unintentional, by the way, that this was a two-part series, but you'll see why once you start listening. These girls can talk. And by these girls, I mean Danielle and I. The first episode, which you're about to hear now, is going to be mostly what is reference-based pricing, what is it, how does it work, some of the misconceptions, and maybe some of the fear-mongering around it. And then stick around, and in two weeks you'll hear part two, which is all about the employee experience. So those fear tactics that maybe you've been hearing, what are they actually like in real life? So check it out. Let us know what you think.
00:54Chelsea Ryckis: All right guys, welcome back. We are here at The Business of Benefits. I, your host, Chelsea Ryckis, and today I am joined by someone that I'm really excited to chat with, actually, Danielle Young of ClaimDoc and also the host of Claim Talk. Danielle, how are you?
01:22Danielle Young: Good. How are you?
01:22Chelsea Ryckis: I'm good. I'm so glad that you're on the show. I know we were talking about doing this for a couple months, so I'm glad the day has finally arrived where our schedules align.
01:22No kidding.
01:22Chelsea Ryckis: How long have you been running the Claim Talk podcast?
01:22Danielle Young: Oh gosh. Well, that whole story is kind of funny. I came to ClaimDoc after being a broker for 15 years. I was selling ClaimDoc as a broker. Came over, and the first time I actually went to our headquarters in Iowa, I saw the operation and just absolutely fell in love with it and all the people around it and what was going on, and the energy was just infectious. And so I went to Ben and Bruce. Ben is our founder, and Bruce is his co-part executive, and he and I said, "Guys, we should have a podcast. People should see how incredible this is, how incredible the operation is." And they were like, "Yeah, sure. And you should host it." And I was like, "Okay." I didn't say that, though.
02:18Chelsea Ryckis: You're like, whoa, whoa, whoa. That went a little further than I expected. Well, let's back up for... So, our listeners, I think I shared this with you before. This podcast is exclusively for employers. So most of our listeners are HR managers, HR directors, chief people officers, CFOs, CEOs, and then I'm sure we've got brokers listening, too. But that's really not the intention. We're really trying to educate employers. The whole point of this is it's no sales, no frills, no... It's real talk, real solutions, and just kind of cutting, I know you'd like that, right? Cutting through the noise and talking about the business behind what's actually happening in healthcare, and that you too as an employer can run it as a business and be successful and not get screwed by the system. So that's the whole point of... And I thought that would align really, really well with you. Do you mind telling our listeners what ClaimDoc is, what the company does, and then we'll get more into the strategy?
03:13Danielle Young: Yeah, absolutely. So I think the best... So I'll tell you, ClaimDoc, we are a reference-based pricing operation. We partner with self-funded employers to help manage the assets of the plan and make sure that you are in compliance with ERISA, right, which is the Employee Retirement Income and Securities Act, 1974. And that act requires employers to be judicious and responsible for how plan assets are spent.
03:41Chelsea Ryckis: Yes.
03:41Danielle Young: And so we are a very close partner with our employer clients in making sure that the claims that they are paying are reasonable, fair, and aligned with the Medicare benchmark, which is what we use to reference-base price our plans. And I'll tell you too, from the employer perspective, I really fell in love with this business as a teenager, which is weird to say.
04:10Chelsea Ryckis: That is odd.
04:10Danielle Young: It is odd. Yeah. I fell in love with the business as a teenager because my mom is a benefits broker, and so I kind of grew up in the space. And when I was early in my career, one of the first cases I ever worked on was with an employer. It was a parts sorting company out of Indianapolis, 3,000 or so employees. They'd been with Anthem, fully insured, for many, many years. And when we wrote them as a client, we looked at their Anthem renewal. And this employer had experienced 80% loss.
04:38Pretty good.
04:38Danielle Young: And got a 20% increase on their fully insured Anthem plan.
04:38Chelsea Ryckis: And we need to pause, employers that are listening that don't realize: that's really, really bad.
04:38Danielle Young: That is not good.
04:38Chelsea Ryckis: Okay. Just wanted to make sure, 'cause we know that, right? We know an 80% MLR, medical loss ratio, should not warrant an increase. But nonetheless,
05:06But nonetheless, Anthem, Anthem do an Anthem, you know?
05:06Danielle Young: Yeah. So, so yeah. And when we're talking about medical loss ratio, just to back up: when you have a 100% medical loss ratio as an employer, that means you spent exactly every dime that the employee, or that the insurance company, thought that you would, right? So 100% loss ratio means you did exactly what they thought. If you run at 80%, you did better, because you spent 80% of the money that they allotted for your claims, right? But then for Anthem to turn around and give a 20% increase, especially on a case of that size, on a 3,000-life employer, I mean, egregious isn't the right word. Are we allowed to swear? Am I allowed to swear on this?
05:35Chelsea Ryckis: Oh, yes.
05:35Danielle Young: Okay. Yeah, that's [bleep], right? 20% is just crazy. And so what we did, it was just this incredibly formative moment for me, is my mom is showing me this reporting. And she's like, "How do you justify that?" I said, "I don't know." Right? I'm like 22 years old. I have no idea how you justify that. And she said, "You don't. You fire Anthem, you self-fund it, and you put on reference-based pricing. That's how you solve for this type of problem." And it's not exclusive to large cases, right? Obviously, we can self-fund an RBP. The smallest case that I've ever reference-base priced on a self-funded basis was 35 people. I actually used a little TPA out of Florida to do that. It was called Anchor TPA. So for the employers listening out there, there isn't a size requirement really for it. You can also level fund it. There's lots of ways to go about it. But that sparked my passion for what we do in this industry. What you do, what you and Donovan do, and then what I do now at ClaimDoc is really sparked by that initial sort of confrontation with what the industry has done to employers, and then specifically what they've done to your average middle-class American, right? How can we justify that? $25,000 a year for a family premium. What?
06:59Chelsea Ryckis: So, I actually just had a conversation earlier where an HR was telling me, I asked her what was her pivotal moment. She's been running a reference-based pricing plan for 5 years. I found that really intriguing, because you don't see that a lot. So, my question to her was, what was that pivotal moment for you? And kind of just like the story that you told, it was when she had her claims repriced with reference-based pricing, and she saw, holy crap, I'm overpaying hundreds and hundreds of percentages, and not only me but my employees. And that's what got her, was the fact that her 300 employees, they may feel more comfortable in a Blue Cross Blue Shield plan, but they're getting screwed financially, and so is the company. And for her to actually see those numbers, that's when she said, okay, I'm willing to learn about this. Because she said that people had come to her prior and said, "Hey, there's these solutions out there," and it was absolutely not, not a chance in hell I'm going to look at it. But to actually see the financial impact, and it's interesting to me that that's also your experience.
07:54Danielle Young: Yeah, it is. I mean, the financials are huge. The other part of it too, when we're talking about looking at doing reference-based pricing from an employer perspective, there's the savings, right? There's the cost component. But the other component, which at ClaimDoc we take very seriously, is the member component, right? If they can't see the doctors they're already seeing, if they can't go have their baby at whatever hospital they want, if they can't have access, that's a big problem too, right? So that's something that we really take into account, is that we want to make sure our members have access where they want to go. They save money for sure, right? But then also they have the client experience that makes them feel much more cared for
08:49Chelsea Ryckis: Yes.
08:49Danielle Young: than they would with a major carrier. So that's why we put all the time and energy, as you know, into our member advocacy. We have seven attorneys on staff at ClaimDoc that exclusively deal with member issues. I shouldn't say exclusively: that deal with member issues as well as provider access issues and other things. So yeah, I mean, the cost component is the moving part of the story for most people. For us, it's in tandem with the employee experience and how seriously we take that too.
09:17Chelsea Ryckis: 100%. And that's why ClaimDoc has been as successful as they've been, because reference-based pricing has been around a long time. The problem in the decade that I've been doing it is the member, with certain vendors in the industry that don't have the operational infrastructure to really handle some of these more advanced member issues. So, but before we dive into member issues, and I really want to do that, because I think a lot of traditional brokers will scare employers by saying reference-based pricing is disruptive, reference-based pricing is X, enter in whatever fear-mongering statement of the day, right? I want to get into that deeply, but I want to back up a little bit, because I think that you and I might have jumped a little bit into assuming that everybody really understands reference-based pricing. If an employer's listening for the very first time and they have no freaking clue what we're talking about, can you walk them through very simply exactly what reference-based pricing is? And I will not interrupt you.
10:17Danielle Young: You can if you want.
10:43Chelsea Ryckis: No, you're gonna do better than me.
10:43Danielle Young: It's... So, historically, how health insurance has worked on the employer basis is you contract with a health insurance company: Anthem, Cigna, UnitedHealthcare, Blue Cross, wherever you are. It's very geographic, right? But you contract with a health insurance company, and what they do is they take your billed charge and they take a percentage off of the billed charge.
11:12Discount. And for those of you in the car, yeah, air quotes. Discount, discount off what? But
11:12Danielle Young: Discount off of whatever the hospital bills, right? They'll take a discount off of it, and then that's what gets paid. So let's use a knee replacement, for example. In Indianapolis, it costs about $50,000 to get your knee replaced at St. Vincent's off of 86th and Greenbriar, right? So, if you have a Blue Cross plan, you walk into this hospital in Indianapolis that you're going to get your knee replacement. Hopefully, it goes well. Everything's great. You're at home with a little machine that does the thing, moves your knee, you have ice, it's great. And then the hospital is going to bill your insurance policy, and that insurance company is going to discount a certain percentage off of that. There's another approach too, which is per diem, which means per day, per procedure. There's a couple ways that insurance companies will do it, but essentially what they do is they discount a certain percentage or they take a per diem for that procedure, and that's what gets billed to the employer, to you as a self-funded employer. So let's say in this situation it's 50%. You as the employer are going to pay $40,000 off that 80,000. You got a 50% discount. There you go. How reference-based pricing works is we use Medicare as a benchmark, because Medicare is approximately 90% of what it costs for any hospital system to administer a service. So we take that Medicare rate, which is also self-reported by hospital systems every year to CMS. Hospitals are required to report what it costs for them to do any type of procedure. So, we use Medicare as a basis. We mark it up. At ClaimDoc, we start at 25% of a markup, which, by the way, is fairly generous. The average small business in America only yields about a 5% margin on anything that they do. But we give a 25% margin to hospital systems, and we send them a check for 25%, five times the average margin of any small business, for that procedure. The delta between those two numbers is incredible. So we see on average, between what an insurance company discount would land at, say it's 40 grand, and say in that knee replacement example, the knee replacement actually costs the hospital 20. We give them a 25% markup. So we send them 25. Just on that one procedure, we're looking at $15,000 of a difference in what it would cost you, the employer, as a self-funded employer, completely removing network contracts from your employee benefits strategy, and instead using Medicare as a reference to pay providers. As you mentioned, there's tons of contention around this. There's been a little bit of grit in the rub, if you will, about how that's actually worked in practice. But for employers, we're talking about saving 25 to 30%, that delta, year one. We're not talking
14:03Chelsea Ryckis: Yes. Yes. And something I want to add: Medicare is the largest insurer, largest payer in the world. It's not like using that as a reference is shady or BS. It's the number one payer in this country, second to commercial health. But if you look at what Medicare pays versus what employers pay, to Danielle's point, it's hundreds of times difference. And why should you, as an employer, have to pay more? It just doesn't make any sense. So, number one, Medicare is the largest insurer. That means that benchmark is adequate at least, right? The very least. The other thing that I find interesting, you kept saying self-funded employers would pay that 40,000. Something I, and I'm interested to hear if you agree with me: fully insured employers are getting screwed too, because here's what happens. It would be the 80,000 or the 40, 50,000, whatever it ends up being with your discount, right? And then next year, when you get your double-digit renewal increase and you ask why, well, you had a lot of claims, so thank god you had insurance. Thank god you have us. That 80,000 compounds. Your employees are essentially using a credit card every time that they're going to the hospital, and then that's impacting your renewal rates the following year. So you are paying for it whether you're fully insured, level funded, self-funded. The difference is the amount of data that you can see. How often are you getting screwed is really what you can see, and then from that, can you actually do something about it? That's when you get into these self-funded plan designs, right? When a carrier, and this isn't for you, this is for employers, because I know you know this, but when you get into self-funded plan designs, guys, you have control where you can pull different levers, like reference-based pricing or international pharmacy, insert X solution, based on the claims data to impact cost.
15:54Danielle Young: Yeah. Sorry to cut you off. I was going to add to that too. So if you are an employer plan and you're thinking about what does self-funding mean versus fully insuring: fully insuring, the way I explain it, is always going to be an exchange of money for risk, and that's it. That's where it stops: money for risk. If you are going to self-insure and you are curious about that, you as the employer become the insurance company, right? So you get to pick, you get to design your plans, you get to decide what pharmacy you're going to implement, how you're going to pay your claims, who's going to be judicious about those claims. ClaimDoc would be great. How you're doing that is all under your purview. When you go self-funded, you have a ton of control. And as a personal control freak, I mean, I'm a very control-freaky person. I like to be in control.
16:50CEOs are, right? Most people who own businesses would rather bet on themselves and be in control of the outcome than transfer the risk.
16:50Chelsea Ryckis: So you, I absolutely love the way you said it, and I drum rolled on my knees with excitement, because I have never heard anybody else talk about it that way. But at Ethos we say the same thing. So essentially there's four things you can do with risk, right? And what's really interesting, the one that most employers use is transfer. You're literally selling, or you're being sold, your own risk, but nonetheless you're transferring the risk completely to an insurance carrier. Interestingly enough, that is the only way that brokers, traditional brokers, are paid. They're paid to transfer. They aren't paid to reduce. They aren't paid to make sure, scrutinize. So, the other things you can do with risk: you can avoid, you can retain, and you can reduce. And there's really powerful things that you can do in each of those categories. It's just that brokers aren't incentivized to bring those solutions to employers. They're only incentivized to completely transfer the risk. In a self-funded plan, there's a healthy amount of risk that you can retain. Right. Right. And then you can start pulling different levers, to use that term again, under avoid and reducing risk, that will have massive financial impacts on the plan. Anything that you want to add on what reference-based pricing is before we keep going with member stuff?
18:16Danielle Young: Well, yeah, I do want to kind of circle back, because there's a little bit of a stigma around reference-based pricing that I think we're still fighting. And that's because, I'm going to be a historian here for a second. My gray hair is coming out. But 15 years ago, when reference-based pricing as a collective started to hit the market as a group, a full group solution... Sorry, I hit the mic. Did I mess that up? Okay. When reference-based pricing hit the market as a full collective solution, meaning that we were reference-based pricing every claim in a health care plan, there was a lot of resistance from hospital systems, and subsequently there was a lot of litigation. There were a lot of member impact stories that happened. And I don't want to tell them, because I think repeating them means they have more value, and I don't want to do that. But I do think that in terms of reference-based pricing, if you hear that term and you get the yuck or the ick or whatever, as an employer, I encourage you to do a little more research around the different ways you can do it and how it's modernized in the last five or six years. To be clear, things like balance billing occur on network plans all the time. That's not exclusive to a reference-based pricing plan. Anything that's out of network on your network plan right now is already being reference-base priced. That's how typically we repay out-of-network claims, is on a reference base. If you're a self-funded plan and you have high-dollar procedures being performed that are insured by your plan, those are likely being reference-base priced. Self-funded plans have been carving out large-dollar procedures to reference-base price them for decades. So it's not novel, new, and scary. What it is is a tried, true, tested mechanism that the broker community still has to put their arms around in the appropriate way to make employers feel like it's
20:38Chelsea Ryckis: And the hospital community, I would say too, right? I'm actually speaking at a conference next week with a client of ClaimDoc, a mutual client that we have, that they've been billed for hospital charges, I wish I had the numbers in front of me, but somewhere around 12 million, and they've paid 1.9.
21:06Danielle Young: Sounds right.
21:06Chelsea Ryckis: Yeah, that's only in less than a year, which is pretty impressive. But the interesting thing is, at this conference there is a local hospital system. So we're going to be speaking with this employer, sharing his success story. He's dramatically lowered costs, saved millions of dollars, even given dividends to employees for being a part of the change in the process. By the way, this is a company that is in the top 1% of workplaces nationwide from a culture perspective, leadership. It does not get better than this.
21:34Danielle Young: That's so powerful. Thank you for sharing that.
21:34Chelsea Ryckis: Yeah. And I'll actually send you the entire recording, because I think it would be so cool for the ClaimDoc team to see the impact, the real-life downstream impact further than what you do, but the employees that are being impacted. But nonetheless, there's a hospital system that attends these same events, and they went up on stage a couple months ago and said, "We do not accept these types of plans."
22:02And I open up my laptop. I'm like, "We paid you today, bro. We have 6,000 transactions. Is our money still green?"
22:02Yeah. So, but that's to your point of the antiquated sort of fear-mongering model of, "Oh, well, it doesn't work in this area." I can't tell you how many times I've heard that from employers. Now, I will caveat that with: there are absolutely places in the country that suck. Been there. West Virginia sucks. Pennsylvania sucks. Sucks. So, there's places that suck. And guess what? You create other solutions around it. You have a dual option. Right. You have direct contracts. You figure stuff out when you're working with the right adviser that knows how to handle those things.
22:57Chelsea Ryckis: We were recently engaged by actually multiple employers specifically for RBP feasibility and how to bridge the gap between choosing the solution, right, implementing the solution. I'm a firm believer that if you're going to implement reference-based pricing, you need a six-month communication plan prior to open enrollment. We need to be building out our, quote unquote, network. We need to be doing a pave-the-way type process that ClaimDoc has. If we're not working with ClaimDoc for whatever reason, we're doing that process internally. It needs to happen.
23:26I trust you. It's a high calorie burn, sis, as you know.
23:26Chelsea Ryckis: Yeah. So, yeah, 100%. So, there's a very strategic way to go about doing this. And I think if there is an employer listening that's like, I did this and it sucked, it's likely because you didn't have the right partners, which is really unfortunate. But I think most employers that haven't done it, they haven't done it because either, to your point, the broker community isn't embracing it. And I think it's because, and actually I know it's because, it's more work. You know how much more work it is for somebody like me? Not even the employer. I mean, at least if you're working with Ethos, it's not substantially more work on the employer. Initially, yes, a little bit. I'm never going to lie and sugarcoat. The first couple months it's definitely more work, and just helping us communicate this message effectively, but it's a smaller problem than double-digit increases every single year. You know what I mean?
24:21Danielle Young: Totally. And well, and also too, don't sell yourself short, right? It's more work for you, Chelsea and Donovan, and it's more work for your account staff, right? Your account people, your team has to know how to manage and problem solve. They have to know who to call. They have to know how to quiet some of the things that come up that are maybe not necessarily as big of a problem as an employee might make it feel like it is. Or let me rephrase that. When an employee is having an emotional response, right, to a situation, your team has to be able to deescalate that and reframe it in a very digestible way, so that there is a way to get to the end of that problem solving. And so it is more work. It's a lot more work.
25:17Chelsea Ryckis: The skill set that's required from an account management perspective to operate the types of plans that we design is completely different than most brokerages. I can't hire. I've tried and I've failed. So, I no longer do this. Five years ago, I started protecting myself from myself in my hiring process, and really figuring out how to hire the right people that are able and willing to be up to the type of stuff we're talking about today. Because if you are an account manager for 20 years at somewhere where you came from, a large, kind of publicly traded type brokerage, you will suffer greatly in this model, because it totally, the level of detail, the amount of phone calls that you make. We don't have employees call 1-800 numbers. It's not like, "Oh yeah, call this." No, you fix problems and you fix them now. There's a sense of urgency that's involved. So to your point, it's a completely different business model, which is why you have to work with the right partner, right? And also why ClaimDoc's successful, because your business model is built around the same thing that Ethos is, which is that client experience. So I think we're probably good. I think we talked enough about reference-based pricing, how it works. Guys, I think the big takeaway is the financial impact is always going to be there. No questions asked. It's really a, where are you in the country geographically? Do we need multiple options? Should we... A dual option, by the way, for employers listening, would be: we have one network plan and we have a reference-based pricing plan. So the regions of the country where RBP is friendly, those employees can enroll in that plan, and then there's a network option if somebody doesn't want to be in the RBP plan or they happen to be in a region of the country where it's not going to work.
26:40Danielle Young: Well, can I piggyback off that too? Just a little more detail for the employers. So, if you're looking at reference-based pricing and you see the savings, you see the power in that solution. To Chelsea's point, you can offer a dual option, which means at open enrollment, the employees are given a very clear option. Either they can go on the reference-based pricing plan option, which means they have no network. They can go wherever they want. Especially with ClaimDoc, in most parts of the country they can truly go wherever they want. Yes. We actually just sealed up a contract with Mayo Clinic. We're really good in the big populated parts of the country. Or at open enrollment they can choose to go the network option. And the way I would suggest designing that, if you were going to do it, would be to make the network option at least 30%, 30% more expensive, because it's more expensive for you as the employer, right? You're paying that network discount or per diem, as opposed to using that government benchmark to come to the bottom of the claims. But it's not a case-by, or a claim-by-claim choice, I should say. It's not that. It is at open enrollment. You choose one or the other. And historically, I've seen, and I've written over three dozen ClaimDoc, I've written over three dozen reference-based pricing cases when I was a broker. And more often than not, when you do that dual option, the vast majority of the group will end up going reference-based pricing. We're all Amazon shoppers at the end of the day, you know.
28:05Chelsea Ryckis: Well, and I think if it's explained correctly, which is, it's not that you have no network, right, because that sounds scary. Networks give people comfort. It's that you have an open network. You can go anywhere that will pay our healthcare plan. And the cool part about it is that's most places. It just sometimes might require a phone call. That's literally it.
28:34And by the way, yeah, exactly. Somebody, either us or you, are going to do it. You or us. Someone else will do it for you. Not the HR director. No. Yeah. It's never going to be the HR director.
28:34Chelsea Ryckis: I would say too, from the member experience, with reference-based pricing specifically, having text message capabilities in our office has such a game changer, because when people, if they inevitably, and by the way, this is inevitable, there will be a provider that says, "We don't take this plan," or, "We don't know what this is." Okay, call the number on the card, or the employee texts us, and then we call the employer and we explain, "Hey, this is what this is. This is how it works. You bill us the same way you bill anything else." And then they're like, "Okay, no problem," most of the time. But that text message piece, versus them canceling their appointment, going back to work the next day, complaining to the HR, the HR is upset, now the owner's upset, now the CFO is upset. Now we get a call. Now they got to wait two more weeks. No, we take care of it in the moment. And I think that is a huge part of it being successful.
29:28Danielle Young: Well, and you're lucky if they only complain to HR.
29:28Chelsea Ryckis: Yeah, that's true.
29:54Danielle Young: They're complaining to the people, everyone in hearing distance in a nearby cube, now is experiencing the same thing the way the employee did, right? And furthermore, the employee is probably embellishing what happened, because that's what we do, right? When we have an emotional response to something, we're like, "Oh my gosh, this has totally ruined my life, and here's what happened." Yeah. And the texting component is huge. We also implement that with our member
30:22Yeah, I know. It works really
