Ami, here is what you may be referring to:
Some client will trade lower admin costs for a reduced discount. It doesn't happen often. But this would also make your statement about costs wrong too. You said you had thousands of examples. Give me a few names and I will find it when the website is back up.
keep drinking the Cool aid, junior.
go to www.freeerisa.com, open an account and download any 5500 filing you desire where the administrator also owns the network under an ASO contract (e.g., Blue, UHC, etc.)
Black & white, "retention reserve". Give me your email, I'll flood you with thousands of samples
Well, I checked with my contacts at UNH and CIGNA and they both verified that:
- don't pfice based off of claims
- ASO admin costs are in the 10% - 15% range
- they DO NOT hold any discounts back from clients (what broker or client would let them do this unless it was an out or network program that negotiated a lower rate)
- there is no such line on the 5500s that read retention reserve
Therefore Ami, you are the fool. Please do us all a favor and shut up!
Put me that room with those executives. After all, you did agree that they were stupid. They may be too stupid to be educated on the ways of the world, though.
Hey stupid, we are talking about ASO contracts. No large customer is going to pay the ridiculous fees you say. What do you do, anyway? If you use the small case premium structure as a guideline (because they have the highest fixed costs) you should be able to correlate this to an ASO contract.
You must be in management. You are too stupid to survive in the real world!
More fools heard from. There is not ... repeat NOT ... a single ASO carrier (Blue, Cigna, Aetna, United Healthcare) that doesn't take a percentage of claim saving off the top.
If they secure a 50% savings, the client may see 35-40% max.
Carriers do NOT pass the full discount to the client, ever! The customer does not enjoy the full discount. And the extra money take from (it's called) "provider revenue" or "Provider access sharing" is found in the 5500 filing of the customer under the line "retention reserve".
Don't ever find yourself in a room of healthcare executives at the provider contracting level or higher, you'll be laughed out of the waiting room before you ever make it back to the conference table.
Dude, no one is making 52% profit in managed care. Your logic of splitting the premium equivalent vs. fees is correct. But the margin is actually <10% of the fees. Not 52% of the fees. Do you really think that market share would be so hard to come by if all the carriers were awash in margins approaching google? Of course not.
Your comments about pre-negotiation of discounts is similiarly flawed. For an ASO customer, the carrier is paid a fee to have a good network for access and cost (in addition to wellness programs, administering the claims, reporting, etc.). If they negotiate a better contract with a hospital, the savings for subsequent bills is enjoyed by the customer. The benefit to the carrier is that they are managing costs appropriately and thus likely to retain the client.