Have you ever wondered if large employers (>1,000 employees) get a better deal on health care costs? The answer is a resounding yes. That doesn’t seem quite fair for most credit union employers does it? Well, what if I told you that you could buy health care the same way that they do through a direct contract?

A direct contract is simply an agreement between a facility or a group of facilities and an employer to deliver care for a previously agreed upon price; and in turn, the hospital or facility will be paid in a timely manner. Large employers and a few special third-party administrators that help self-funded employers manage their plans use these contracts to control the cost of health care, both in the short-term and over the long term. This helps employers to better budget the cost of care and plan for the types and quality of care. High quality care is the most important element of any plan. Not only is it the right thing to do, but it is the best way to control your costs because high quality care is usually less expensive and in the long run there will be less side effects and better outcomes with high quality care, ensuring that your employee returns to work more quickly and can get back to doing their job and helping you run your credit union.

There are a few components to direct contracts, including what services are covered, what the reimbursement level is, and how quickly the provider needs to be paid. Ultimately, this is no different from equipment leasing agreements or other long-term contracts your credit union may have. In these cases, you know what the cost is going to be, and direct contracting is the same concept.

Payment terms are key in direct contracts because hospitals need revenue to run their operations and one of the largest revenue cycle problems that hospitals have is the patient responsibility often goes unpaid, which is the initial deductible amount of $1500, $2500, $3000, or $5,000. This makes it very difficult for hospitals and facilities to manage their budgets. However, if your credit union can negotiate a fair price with a facility based on the number of employees you have, you will find that they will be quite receptive to your offer. Plus, if they are already providing high quality services, then they will have a set price list and you can easily negotiate a fair price.

As a single credit union with fewer than 1,000 employees, you may not be large enough to negotiate a direct contract; however, some third-party administrators and benefit advisors can negotiate a direct contract on behalf of multiple groups that you can join. You owe it to your credit union and your employees to explore the opportunity.  You may be able to take advantage of some less expensive pricing and access to higher quality healthcare.