Cost-plus and Cost-based Reimbursement System

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1. Why was the cost-plus or cost-based system not an effective reimbursement system?
Cost Plus Reimbursement is an insured funding option which provides the employer the
opportunity to accept risk for the claims costs of the plan. Prior to the beginning of each month, the employer pays fixed costs. Fixed costs include administrative fees and premium for specific and aggregate reinsurance coverage. Following the end of each month, the employer pays claims costs and network access fees for that month. The aggregate reinsurance coverage includes a rolling monthly cap arrangement to protect against unexpectedly high claims expenses in any given month, while the specific reinsurance protects against shock claims on each member. (http://64.233.187.104/search?q=cache:nuk-5JXikicJ:https://www.bcbskc.com/eprise/main/Public/Uploads/Need_Insurance/BCP-1293_Blue_Portfolio_web.pdf+cost-plus+reimbursement+healthcare&hl=en).

Some argue that this is an effective cost control mechanism, while others don't agree. For example, the Blue Cross argues that it is an effective cost control. "Cost-plus option helps you control healthcare administration costs while getting the most for your benefit dollars. With Blue Cross and Blue Shield of Kansas City handling the administration of your health plan, your administrative paperwork is virtually eliminated, and your staff's administrative time is kept to a minimum. Employees can check their claims, update personal information and obtain provider information themselves via a secure website. They can even enroll online via BluesEnroll. You'll have regular strategic meetings with your dedicated ASO representative, and you'll receive regular electronic reports on utilization, claims accounting, network savings and more. (http://64.233.187.104/search?q=cache:nuk-5JXikicJ:https://www.bcbskc.com/eprise/main/Public/Uploads/Need_Insurance/BCP-1293_Blue_Portfolio_web.pdf+cost-plus+reimbursement+healthcare&hl=en).
Cost-based ...