Employers are Helping to Clarify Real Health Costs
In Nashville, going to the Vanderbilt University Hospital emergency room for a moderate problem could be costly, according to detailed cost information compiled by a company called Healthcare Bluebook.
The cost for the visit would be $1,584 – the highest among 30 area hospitals and nearly four times higher than the region’s lowest-cost provider. Further, the quality of care at the hospital ranked in the bottom 5 percent of the more than 4,400 U.S. hospitals with comparable emergency care.
Until recently, such detailed health care pricing information was simply unavailable. Consumers with health insurance might not have cared anyway. Their insurers would have paid most of the costs, leaving them with modest out-of-pocket expenses.
Their employers, however, care a lot. Employer balance sheets are getting eaten alive by rising health expenses. They paid about 20 percent of the nation’s $3.6 trillion health expenses in 2018, or roughly $700 billion. That percentage has held steady in recent years but total costs are rising sharply.
Roughly 155 million workers in the U.S. have employer-sponsored insurance, more than are covered by Medicare and Medicaid combined, and dwarfing the 11 million or so covered by a marketplace plan under the Affordable Care Act.
The average family premium was nearly $20,000 per year in 2018, according to a comprehensive study. Individual premiums averaged $6,715 and coverage for two persons was $13,425. Also, nearly half of those insured were in high-deductible plans, and often had to pay several thousand dollars before their health insurance took effect.
For these reasons, employers have become the most powerful force today driving health-care reforms. They’re fighting back against high medical costs, in part by harnessing increasingly powerful databases to identify who the bad actors are in health care – hospitals, doctors, medical equipment companies and others who charge high prices and deliver substandard care.
To better control costs, large employers began years ago to self-insure their health plans. They call the shots, using private health insurers to administer the plans. This also permits them to see all of the information about their employees’ insured health care spending, including the prices they are billed and the ultimate costs paid after their insurance-company administrators have negotiated final payment terms.
Employer claim information has been pooled by both public and private organizations. When it’s possible to see millions of insurance claims, troubling and powerful trends appear. Prices for the same procedures vary wildly, often in the same ZIP codes.
Healthcare Bluebook, based in Nashville, Tenn., has become one of the largest health insurance claims aggregators. Jeff Rice and Bill Kampine founded the company in 2008 and now roll their eyes at how the steep national recession quickly derailed their development plans. However, they now track the health claims for more than 5,000 employers and say they have enjoyed six consecutive years of triple-digit gains in their business revenues.
By looking at prices charged around the country for thousands of health services, the company has developed a free tool that consumers can use to see how much health procedures cost where they live. The growth of high-deductible employer plans, the two men say, is turning more health care consumers into cost-conscious shoppers.
The growth of high-deductible employer plans is turning more health care consumers into cost-conscious shoppers.
By entering a ZIP code in the tool, users can access the range of local costs that doctors, hospitals, and other health providers accepted as payment for thousands of medical procedures, including dental, hearing, and vision care (items not covered by Part B of Medicare). The range of lowest to highest prices is shown, along with what Healthcare Bluebook has defined as a “fair” price for a procedure.
The procedures are accessible from pull-down menus and are extensive – roughly 30 different entries for different MRIs, for example. The company also provides quality ratings for hospital procedures, based on multiple indicators.
Employer access to the huge variations in health prices has been a wake-up call to them, Kampine said.
Employers are encouraging employees to use lower-cost, high-quality providers because it saves employers money as well. Increasingly, employers are redesigning their health plans to exclude high-cost providers in favor of lower-cost care that still yields high-quality results.
Some employers have gone further by identifying low-cost, high-quality health care providers around the country and sending employees directly to these providers, even if it means putting them on an airplane and paying for their temporary living expenses. The pricing variations are so great that creating what are known as “centers of excellence” programs can save a lot of money, produce superior care, and enhance employee appreciation.
Too many health insurers focus their consumer pricing tools only on a person’s out-of-pocket costs, Rice says. Doing so is “really a disservice to employers” because it does not help identify and weed out high-cost providers. Even if out-of-pocket costs are low, high total costs translate to higher premiums.
The big question is whether consumers use this information to change how they make their health care purchase decisions. Earlier research concluded that consumers did not pay much attention to these new tools and skepticism still exists. But Rice says that Healthcare Bluebook has plenty of consumer data to counter this view, and that the availability of more price information will inevitably lead to greater consumer engagement.
Thirty years ago, consumers did not know what cars cost and were at the mercy of auto companies and showroom salesmen. Today, best-available auto prices can be displayed on smartphones in a few seconds. Rice and other price-transparency advocates think a similar wave of consumer empowerment is happening in health care.