In the employer-funded benefits space, we should all be encouraged at the progression from high out-of-pocket costs for basic health care services to value-based plan designs that emphasize low or no cost primary care, acute injury treatment, and preventive services.


It doesn’t really matter how this progression started. I like to think it’s due to the realization that value-based plan designs are better for employees and are, as a result, better for the company; however, the cynic in me thinks it’s actually from the fact that there really is not as much premium savings between high deductible plans and value-based plans as there once was. As a result, many buyers are taking the all-things-being-equal approach and offering the 1980s style plans.


Inherent in these value-based plans are low co-pays, or even the $0 copay for highly effective services like primary care, generic drugs, and preventive care. I’ve recently observed insurance carriers touting $0 copays as a way to market their plans.


I applaud the effort, but this tactic of $0 “co-pay” offered by a third-party insurance company should give all of us pause. While the $0 co-pay means you’re not paying anything out of your pocket at the time of your visit, it does not make the service free. Of course, it’s free to the beneficiary, but to the “plan”, whether that be the employer in a self-insured arrangement or the fully-insured with a carrier (which for all intents and purposes, is still the employer) it is certainly not without cost.


So, what in the name of Adam Smith could possibly go wrong in a $0 co-pay plan design, where either the beneficiary (the employee) or the payer (the employer) have no say in the actual total cost that the co-pay is based on? Well, based on feedback from physician owners of private practices, the result will either be gross over-payment, or there will be a shortchanging of the servicing entity, which, in most cases, is the physician administering the service. Both results have adverse consequences for the employee who is getting the immediate sugar high of “free” services.


In the scenario of gross over-payment, the obvious ramification is the premium paid by the employer, and subsequently, the employees. Like putting pressure on one side of a balloon, inevitably, something has to give, and that is equal and opposite reaction to the imbalanced pricing and cost structure. Worse is the case of underpayment by the plan related to the actual cost of the visit or service. At minimum, it is insulting to the physician and their office, and worst case, it could lead to additional tests or follow-up visits being ordered to increase the amount of reimbursement to the physician and encourage the practice of “up-coding” in which the office added codes to the actual bill, that will boost their reimbursement. .


I would speculate that these additional services and tests, whether necessary or not, are what erodes people’s satisfaction with their health plan, as these additional services are often not subject to that same $0 copay that was sold. How many times have we heard someone say, “But I thought it was going to be free!”?


So, what is the solution?


If you can, as an employer or HR manager, every attempt should be made to establish a direct relationship with physician practices for the care of employees as part of your group health plan (Direct Primary Care). A fair price is established with mutual input from the payer (the employer) and the physicians office. When the space between payer and payee is reduced, more value is derived from the the exchange of services for care. The “co-pay”, therefore, will not be decided upon by a large remote insurance carrier, but rather by open, local, and direct communication between an employer and a physician’s office where the starting price from which that “co-pay” is derived is transparent. The “co-pay” simply becomes payment for the medical services rendered. How it is split between the employer and employee is up to the employer’s plan design. Often, it means there’s no “co-pay” when an employee needs to be seen by a physician for a routine physical or when he/she is feeling under the weather and needs to be seen in order to receive medications, etc. because the employer has paid a pre-negotiated monthly fee to the DPC provider to make it possible for their valuable employee to be seen when he/she needs to be seen by a physician.


Is this easy to arrange and negotiate? Not always, but the pay off, when you truly care for your employees by providing them with a tangible benefit like Direct Primary Care, is respect and loyalty from those employees, who are always your company’s most valuable asset.