Brunell: Montana official saves state’s health plan

Bartlett came with some unique qualifications. She had just spent 13 years on the insurance industry side, first as a controller for Montana’s Blue Cross Blue Shield plan, then as the chief financial officer for a company that administered benefits.

Montana, like many large employers, self-funds its plan. That means it pays the bills and hires an insurance company or other firm to process the claims. More than half of American workers are covered by self-funded plans. Today, many employers are starting to follow Bartlett’s blueprint, which starts with transparency.

As the boss in this arrangement, Bartlett assumed she would have access to detailed information about how much the plan, which was managed by Cigna, paid for procedures at each hospital. When Cigna told her the information was secret and not available, Bartlett demanded all of the information and began examining every detail of the contracts.

Her plan turned the payment system upside down. The state would set its own prices for the hospitals, insurers and drug companies based on rates set by Medicare as a reference point. Montana’s plan now pays hospitals a set percentage above the Medicare amount, a method known as “reference-based pricing,” making it impossible for the hospitals to arbitrarily raise their prices.

From the start, she knew she would have to tackle the staggering bills from the state’s hospitals, which made up the bulk of the plan’s expenses. It wouldn’t be popular because they also made up a significant chunk of hospitals’ profits, National Public Radio’s Marshall Allen reported in October.

Bartlett found a new pharmacy benefit manager that would not take any “spread” and would pass along all rebates in full. The immediate savings was $16 per prescription. “Spread” is the practice where a pharmacy benefit manager, for example, will tell an employer it cost $100 to fill a prescription that actually cost $60, allowing the pharmacy benefit manager to pocket the extra $40. The fine print in the contracts often allows it.

“Most importantly, Bartlett understood something the state officials didn’t: the side deals, kickbacks and lucrative clauses that industry players secretly build into medical costs. Everyone, she had observed, was profiting except the employers and workers paying the tab,” Allen reported.

In Bartlett’s view, employers should be pushing back against the industry and demanding that it justify its costs. They should ask for itemized bills to determine how prices are set. And they should read the fine print in their contracts to weed out secret deals that work against them.