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Cross-Border Healthcare: A Creative Option for Texas Self-Insured Employers

José Aroeste

A map with a pin placed in El Paso, Mexico.

One of the advantages of self-funding for employers in Texas is the ability to include cross-border healthcare.   What this means is that self-insured employers are able to include medical providers from Mexico.  This obviously begs the question, why would any employer choose to include medical providers from Mexico?  The three major reasons are:

  1. Employers may have Latino workers who may prefer their healthcare from Mexican medical providers;
  2. Cost of Care in Mexico is significantly less expensive than in the US, so any Health Plan utilization that can be rendered in Mexico versus in the US will have a lower expense; and,
  3. In some rural US communities along the border, there is a long wait for access to some medical specialties.

The case for cross-border healthcare is not a new phenomenon.  Take for instance California’s experience with cross-border healthcare. Because of the consumer demand, laws were enacted and regulations were developed to allow for cross-border healthcare coverage.  The Department of Managed Health Care, the regulatory agency for HMOs in California, approved several plans that allow for cross-border healthcare, including Blue Shield of California, Health Net, CIGNA, Aetna, Delta Dental as well as a Mexican Health Plan.  Some of these health plans have been operating for over 10 years.  Needless to say, the concern for quality has been adequately addressed to the point that cross-border health care is now an established option with consumer appeal for its affordability.

The cost of healthcare coverage is largely a function of the unit cost for hospital services, physician services and medications.  Since the unit cost of healthcare in Mexico is significantly less than in the US, the cost of healthcare coverage for similar benefit plans would also be significantly less.  The cost differential can be seen in the Aetna health plan offerings.  Aetna is one of the approved carriers in California that offers cross-border health coverage plans.   Take the Aetna small group HMO Plan offering for San Diego employers with a standard 1.0 Rate Adjustment Factor based on October 2010 Rates.  For this illustration, an employee is 38 years old with a spouse and two children. The Aetna HMO offering for care delivery in San Diego County is $1,311 per month.  The Aetna HMO Plan offering for care delivery in Baja California, Mexico is $465 per month, or just over one-third of the cost of a similar Aetna offering in the US.   Under this comparative illustration, the co-payments are slightly more favorable for care delivery in Baja California than in San Diego.

Unlike California, Texas law does not allow its insurance carriers to contract with Mexican providers.  Several studies in the early 2000’s were conducted by the University of Texas to look into the merits of cross-border healthcare for Texas after California had allowed cross-border healthcare plans.

Unfortunately for insurers, employers and consumers, Texas legislators in dramatic public hearings were convinced by the Texas medical community that patients could be seriously harmed if insurance carriers were allowed to contract with Mexican providers.  So for the millions of workers from El Paso to Brownsville who may have potentially preferred to receive their employer-sponsored healthcare benefit services in Mexico, such a product is not available, at least not through a Texas Department of Insurance fully insured health plan.

For those Texas employers who might be considering the merits of going self-insured, access to cross-border health care might be a positive tipping point factor.   Under ERISA and federal law, a self-insured Texas employer is not prohibited from establishing benefit plan services that would allow participants to access healthcare services in Mexico.  Such a plan could be developed to offer much more healthcare benefit bang for the employer’s allocation buck.

There are several well-known examples in California where some agriculture employers and some union trusts have formed ERISA self-funded plans that included cross-border healthcare benefits.  The Western Growers Association, United Agriculture Benefit Trust and the United Farm Workers RFK Trust are but a few ERISA programs with cross-border health care benefits.

Yet, interestingly, the Texas market has been largely void of any self-funded employer benefit program with integrated cross-border healthcare benefit services.  This is not entirely surprising given the Texas market and the relative complexity of an employer going self-insured versus the easier fully-insured health plan model.

A Work in Progress

One such pioneering effort is underway in Laredo, Texas with a large self-insured employer association.  Although the name of this association will not be disclosed, we will share salient points that could be of interest to other employers, associations, TPAs and consultants who may contemplate self-insurance and cross-border healthcare benefits.

Our firm was contacted a year ago by a regional TPA.  This TPA had heard of our expertise in developing cross-border medical networks for limited benefit insurance carriers.  The TPA was prospecting new business clients and knew that a particular employer association offering self-insured health coverage had several employer members with a large Hispanic workforce along the Texas-Mexico border.  The TPA Account Executive looking for a new business opportunity shared the notion of cross-border healthcare coverage with the Employer Association and it struck a powerful chord.   What started as a cold call with an innovative notion quickly bloomed into serious client interest.

The client, as it happened, had a good number of employees who were already accessing care in Mexico, since some of them actually lived there and worked in the US, while others were attracted by the much more affordable price tags for their care than those they could find locally in the United States.  Everybody agreed that the standards of care that they found across the southern border were excellent, and that they could find high quality doctors and medical providers, if they knew where to look.

After many meetings with staff, actuaries, benefit consultants, steering committees, claims processing centers, medical directors, legal counsel, reinsurance carriers and countless other entities, the green light was finally given to proceed.  It seems that cross-border health care is going to be a new win-win initiative that provides relevancy to the employer association in demonstrating innovations in the form of out of the box thinking to achieve healthcare cost savings to its Employer Members, while expanding consumer choice for the workers.  Now both the TPA and the Employer Association have important differentiations that provide value in today’s competitive environment.

More to Follow

Since self-funding has more moving parts than fully insured coverage, introducing cross-border healthcare benefits into the self-funding coverage offering increases the level of complexity.  The biggest challenge by far is the lack of credible information and basic knowledge related to cross-border healthcare expenses, utilization frequencies, medical management processes, quality of care standards, provider networks credentialing and operations, the legal framework and the operating environment.

It just so happens that our company has been focusing on this kind of question for over 6 years now.  Cross border healthcare is an idea whose time has come, as the cost of care continues to increase in the United States, notwithstanding the good intentions of the Healthcare Reform Act and of other such initiatives.   For those who live close to the border with Mexico, it is no news that the price differential for the same procedures is very significant and continues to widen between the two countries.

The same model can be applied to companies that are not located directly across the border with Mexico, but that are willing to give their members access to Mexican healthcare providers for non-emergency high cost procedures.   These would be procedures such as hip or knee repairs or replacements, heart function repairs, kidney or gall bladder stone removal, etc.  These procedures can be very costly for the self funded group in the US, while they become manageable in Mexico.  After all, the function of any health insurance plan is to mitigate risk, and access to a qualified pool of medical care providers in Mexico turns out to be a superb risk mitigation tool for these groups.

About The Authors

About Sekure Healthcare

Sekure Healthcare is a California-based company that provides healthcare solutions to US employers with special emphasis on Latino and cross-border healthcare services.   For more information, contact Jim Arriola, CEO, 619.210.4836, [email protected], or José Aroeste, CFO 619.318.1734, [email protected], or visit the company website at: www.MySekure.com.

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