We know the lack of price transparency in health care is a significant problem. Health care isn’t purchased like any other product. In most cases, patients outsource consumer power to insurance companies and rely on them to obtain enough in-network providers, handle billing claims, and pay for the cost of the care. Not many people, including those who are involved in the care delivery process, know the final prices.
But some self-insured plans are taking it a step further in by demanding that claims data, and therefore transparent pricing, be available to them. A recent article in Health Affairs article looks at how Indiana business leaders have attempted to tackle this problem:
In 2016, the Employers’ Forum of Indiana (hereafter Forum), an employer-led multistakeholder coalition aiming to improve the value employers and patients receive for their health care expenditures, initiated a collaboration with the RAND Corporation to create a hospital price transparency study using claims data from self-insured employers in Indiana. This study, published in September 2017, was the first to publicly report relative hospital prices by hospital name. It found that, across 120 Indiana hospitals, prices negotiated for employers in Indiana averaged 272 percent of what Medicare would have paid for the exact same services at the same hospitals over the period 2013–16. The Forum used these results to educate employers, build consensus, and demand better value from insurance carriers and hospitals.
Self-insured employers are the owner of their claims data. They pay an insurance company to complete claims, but all of the data should belong to the employer to monitor cost variation and tie overall costs to health outcomes. The authors go on to describe how more price transparency among providers can help employers take back control of their plans:
The pricing information generated from these studies gave self-insured employers unprecedented insight into the actual contracting outcomes between their carriers and hospitals. Since Medicare prices have already been adjusted for geographic variations in the standard of living, employers can compare the relative prices with local, regional, and national relative price benchmarks and monitor the trends over time. These insights allow employers to assess whether their negotiated prices are reasonable and how effectively their insurance carriers negotiated with providers, which further empower employers to apply downward pressure on their insurance carriers to negotiate more effectively.
This example from Indiana shows how employers can and should demand more price transparency when paying claims. It also shows how employers can use claims data to better direct patients to low cost, high-quality providers. The crucial part of the Employers’ Forum is these employers took control to lower costs themselves without any government regulations or mandates. Private actors have much more power than they think.
John Locke Foundation’s readers may be familiar with some of these concepts from the battle over the State Health Plan between State Treasurer Dale Folwell and the state’s hospital lobby. Given that hospitals are charging private employers 2.7 times more than Medicare, it’s no surprise that Folwell struggled to get claims data from the state’s hospitals. The issues described above are precisely the issues that the Folwell attempted to work out with the hospitals before changing to reference-based pricing.
The North Carolina State Health Plan is a taxpayer-funded, self-insured plan. That means that the taxpayers of North Carolina are providing the majority of funding for health plan claims. Folwell asked for claims data to evaluate price variation across the state to get a better idea of what claims actually cost, rather than what the third-party administrator told the state it cost. The reason for this was because the State Health Plan was paying out substantially more each year than what it was taking in. This is not a sustainable path.
When employers take back control of their employer plans, several options can be used to save money and still provide the same care that employees are used to. Consider direct primary care, for example. Large self-funded plans have started to realize the benefits of utilizing a direct primary care physician, such as Union County, in North Carolina. Traditionally, there was only a consumer-driven health plan. However, Union County offered a new direct primary care plan to employees. The county contracted with a DPC doctor who set up a clinic near the government offices. The results speak for themselves.
Similarly, telemedicine could be incorporated into employer plans. Telemedicine visits or other forms of care at a distance over telecommunications could be easy ways to cut down on unnecessary visits or help better catch symptoms of illnesses earlier. Compared to an average of $114 for an in-office visit, a patient can connect with a physician through telemedicine for $38.
Employers are facing tough decisions on how to rein in costs. Yearly premiums for a family plan in 2019 rose 5 percent from the previous year, topping $20,000. This is a problem because not only are the costs of plans rising for employees, but employers also have fewer dollars to allocate to wage raises. The majority of Americans have health insurance and receive coverage as part of a benefits package from their employer. As of 2018, 55.1 percent of Americans had employer-sponsored coverage. Yet, these employers and employees have had to grapple with rising health care costs year after year.
In the wake of this, employers are taking back control of their employer plans and looking for any way to cut costs while also providing similar levels of benefits. Sixty-one percent of individuals with employer-sponsored coverage are enrolled in a self-insured plan. Self-insured plans are well suited to use different tools to cut costs. Price transparency is going to be crucial, and as we saw in Indiana, private businesses have the power to make changes on their own. There are also tools such as direct primary care and telemedicine, which employers can use to lower costs.
Employers, specifically those who offer a self-funded plan, have the power and several tools to make meaningful cost reductions in employer plans while not sacrificing any of the quality employees expect.