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New trend scares health insurers… getting “cut out” by large employers

Posted Nov 18 2008 12:16am

New trend scares health insurers… getting “cut out” by large employers: "One way to cut costs is to eliminate the middleman. That applies as much for health care as for widgets.

For some big employers — including Waste Management and Sprint Nextel — cutting out the middleman in health insurance has paid off.

Both firms have signed direct-contracting deals with medical groups instead of insurers.

Direct contracting works the way it sounds. Employers pay medical groups directly to provide health care to employees. This eliminates the need to wrangle with insurers over plans and rates.

Employees still have money deducted from their paychecks for care, though the money is used to pay the medical group instead of an insurer.

When employees need care, they pay a co-pay each visit.

“(Direct contracting) cuts out the middleman and extra layers of bureaucracy and cost,” said Don Fisher, a medical doctor and chief executive of the American Medical Group Association."

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