Cutting Costs Through the Medical Loss Ratio & Independent Review Organizations
Healthcare spending is on the rise. The federal government has begun several initiatives to control costs, increase efficiency, and increase quality. A couple of these initiatives as outlined in the ACA are the Medical Loss Ratio and the increased prominence of Independent Review Organizations.
Healthcare spending is on the rise. The federal government has begun several initiatives to control costs, increase efficiency, and increase quality. A couple of these initiatives as outlined in the ACA are the Medical Loss Ratio and the increased prominence of Independent Review Organizations.
As we all know, healthcare costs are skyrocketing. The US government is trying to look at healthcare spending from all angles in an effort to control costs while increasing quality. It has become a balancing act. One such measure, be drastic as it may, is the Affordable Care Act (ACA), a.k.a. Obamacare. This monumental legislation was enacted in 2010 with provisions becoming effective through 2015 and beyond. The provisions of the ACA were designed with these 2 goals in mind: reduce costs and increase quality. Two provisions of particular interest are: the Medical Loss Ratio and the enhanced presence of Independent Review Organizations (IROs). Both are designed to add efficiency, reduce waste, and control administrative costs for a currently broken healthcare system.
Cutting Costs Through MLRs
One such initiative is to reduce the percentage of premiums collected as they relate to the administrative portion of costs, which includes marketing and profits. This is referred to as the Medical Loss Ratio (MLR). The basic concept is to set a threshold percentage to insurance companies for their proportion of expenses applied to administrative duties. If these percentages are exceeded, the insurance company is required to issue rebates to its members/employers for the amount which was exceeded. The amount designated to each individual is in direct proportion to the amount of premiums paid as they relate to the total premiums received by the insurance company. The old saying “check is in the mail” certainly rings true. You have probably been one of these recipients. You may have even received a refund that was less than the postage to mail. It is interesting to note, that the total premium received includes premiums from grand-fathered plans which are exempted from many provisions of the ACA. The total also includes both individual and group plans. Insurers are required to notify enrollees generally in June that a rebate will be issued with an issue deadline of August. The MLR may or may not be taxable depending upon many factors. The current MLRs are 85% for large plans and 80% for small plans meaning the administrative costs cannot exceed 15% or 20% respectively. Currently, plans have MLRs as high as 70% or 75%, so there is a lot of rebating occurring. MLRs began being issued in 2012 and we would expect the ratios to be adjusted over the next several years based upon national averages and amounts being rebated.
Cutting Costs Through IROs
IROs are designed to provide unbiased physician reviews to insurance companies for claim appeals basing decisions on medical necessity criteria. Companies spend a considerable amount of money on claim appeals annually. Many companies try to save money by performing these reviews in-house. The reality is that cost savings can be gained by outsourcing the IRO function. IROs are intermediaries that serve to benefit both insurance payers and patients – a delicate balancing act to be sure.
The Benefits of External an IRO
- Can handle large volumes of claims in a timely manner
- Decisions are based upon a standard set of medical necessity criteria
- Access to a larger array of physician specialties, especially for complex cases
- Reviews are provided by a neutral 3rd party with no affiliation or bias
- Access to a reviewers covering most or all of the United States
- Reduced cost due to standardization and quick turn-around times
- Medical Directors and Physicians can concentrate on patient care rather than claim reviews
- Medical necessity as it relates to new procedures such as cancer treatments, spine surgeries, and ICD implementations
- Deeming procedures which used to be considered cosmetic surgery and therefore not medically necessary as perhaps medically necessary in certain circumstances. One such example is bariatric surgery for obesity. Can be deemed medically necessary as it threatens patient’s health, shortens lifespan, and can cause additional health issues such as high blood pressure and heart problems.
- Access to experts who are on the cutting edge of new information/research/findings as it relates to their specialty
- Peace of mind in regard to compliance at both federal and state levels
- Peace of mind in regard to URAC accreditation
- Documentation from and IRO can be admitted into the medical record
The benefits of IROs are becoming more prominent. Why not outsource to the experts and concentrate on providing excellent customer service and clinical patient care? The efficiency which can be gained will severely reduce the administrative costs attributed to healthcare, which lends itself to the MLR as indicated above. These 2 provisions go hand in hand. When used in conjunction, you can start to see a dramatic increase in your bottom line.
Are you in need of an IRO?
BHM Healthcare Solutions is a URAC-accredited IRO, with designations for both internal and external IRO services. BHM has a state of the art physician portal which automates the process to provide efficient, accurate decisions based upon medical necessity criteria. BHM has licensed physicians in just about all specialties as well as licensed in every state. Contact us today for a free consultation to see how our IRO services can benefit you or download our free white paper to explore the benefits of external IRO services for the provision of Peer Reviews.
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