September In-The-Know

Why Transparency Matters

Too often, contracts are presented in ways that emphasize fixed administrative costs but minimize or obscure other important variables. This can create the illusion of savings where none exist. For example, a plan may tout lower administrative fees, but those savings may be offset by higher network access fees, higher capitations, or weaker discounts on claims. Without a transparent view of all expenses, employers may choose a contract that costs more in the long run.

Beyond the Math: Understanding Hidden Cost Drivers

A transparent approach means going beyond surface-level math and percentage discounts. For example:

• Provider Discounts: A plan claiming a 42% discount vs. another with 37% may sound superior—but not if the 42% is applied to a $1,000 charge while the 37% applies to a $500 charge. The actual allowed amount matters more than the discount percentage.
• Value-Based Contracting: While value-based models can improve outcomes, fees for performance-based arrangements must be clearly disclosed and weighed against savings.
• Pharmacy Rebates: Rebates may offset pharmacy spend or medical administrative fees, be passed to an employer in the form of a credit, or be retained by a PBM, carrier, or administrator. Due to the significant impact on net cost, the methodology needs to be clearly accounted for during the quoting process.
• Integrity and Fraud Programs: Programs that flag fraud, waste, and abuse can generate savings, but consultants should make clear whether these savings are net of program fees.
• Member Engagement Tools: Programs like care navigation or condition management may increase fixed costs but reduce long-term risk by driving members to lower-cost, higher-quality care.

The key is to show clients how one cost can offset another—and model both short- and long-term impact.

Best Practices for Transparent Benefit Quoting

To build trust and deliver strategic value, consultants should:

• Itemize All Fees – Break out fixed administrative fees, PEPM charges, performance-based fees, network, rebates, commissions, service fees, incentives, and any other costs.
• Clarify Variable Costs – Map out how claims are projected and how cost-sharing or capitation structures apply.
• Highlight Net Impact of Discounts and Programs – Present savings in terms of actual dollars, not just percentages and highlight cost management programs and available tools to reduce expenses.
• Explain any risk transfer that may be part of the contract.
• Integrate Claims Data – Use historical data to contextualize projections, identify chronic conditions, and evaluate high-cost claimants.

With visual comparative pricing illustrations (side-by-side grids or dashboards) your clients will be able to see total financial impact clearly. Bringing transparency to the table will help build trust and add value to your client relationships.