Uncovering what you pay for health care
Dear readers, this week I'm happy to welcome guest blogger Kevin Erb, a consulting actuary with Harrisburg-based Conrad Siegel Actuaries —Heather
Unlike other big-ticket expenses, there is a good chance you visit the doctor, order prescriptions, or have medical procedures done with little to no idea of what it will cost you or why. Health care costs and premiums have been steadily rising and people are taking notice, though many are still surprised to learn these costs vary greatly based on where they go for treatment.
With growing medical costs for employers and employees, there is a push for price transparency — the idea that consumers should know what they are paying before being treated and how that cost compares to what other facilities nearby charge.
Price transparency tools
More employees are seeing health care’s increased costs and becoming more price sensitive because they are enrolled in high-deductible health plans. Yet while consumers shop around for the best deal on a new car or tablet computer, they rarely utilize online tools to compare the costs of medications or hospital procedures. Consumers need enough information to make decisions, and that’s often not available.
While Pennsylvania requires health care facilities to submit charge and payment data for the benefit of the public, that information is not considered easily accessible and usable by patients. Pennsylvania, along with 44 other states this year, received an F for its lack of health care price transparency from the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute.
Many major health care providers do offer cost-comparison tools for certain procedures and third-party groups are beginning to put together databases to compare costs. But pairing cost data with information on the quality of a doctor or hospital remains a challenge. Many people assume that the higher the cost, the higher the quality, but that is not always the case.
Where is the momentum for price transparency coming from?
According to the Kaiser Health Benefits Annual Study, health insurance costs have risen 8 percent per year since 1999. Health care is one of the largest budget items for employers today. Health care is also one of the most unknown. When it comes to health care, many employers hire a third-party administrator to negotiate the best deal. Unlike with other big budget expenses where employers are often involved in negotiating the best price, employers rarely participate in meetings with third-party administrators and medical service providers to negotiate the price of medical services. Employers need to ask themselves what their biggest budget items are, if they understand the costs behind them and how well they can control those costs.
We expect to see more insurance carriers offering limited network products that do not include all medical providers, comparable to offerings on public exchanges. Similar to health maintenance organizations (HMOs), these plans will have a lower cost but consumers may not be able to visit doctors or hospitals that charge higher fees. These plans may not enable consumers to visit their preferred doctor or hospital.
As more employees notice their doctor is not on their new plan, insurance companies will have to explain why they cannot use higher-cost providers on lower-cost plans. With more employees aware of the difference in costs, providers will have increased pressure to justify why certain hospitals are more expensive than others.
What's next for uncovering health care costs?
With the ACA, changes are being made to who pays for health care but the bigger concern is the prices all are paying. As costs continue to rise, consumers will need to play a more critical role in choosing their health care and medical providers.
For employers, this means being more involved in the process with their insurance carriers to invest in a healthier, more productive workforce while containing costs. For employees, this means comparing costs at different hospitals and doctor’s offices through online tools to shop more wisely for their best option — and knowing what they will pay before they get the bill.