While it is well known that some American hospitals are more expensive than others, the rates that health insurers actually negotiate with them have been kept secret. in fact, the prices that insurers have negotiated for the same procedure (such as an MRI) at the same hospital vary dramatically. To save money, self-insured employers who are hooked on these prices should find an insurer that has negotiated lower procedural prices. It’s not easy, but if you do your research carefully, the savings can be substantial.
a study stuart craig, amanda starc and I recently conducted using health care claims from commercially insured people in massachusetts examined the variation in prices between insurers for the same procedure at the same hospital. we found that how much prices vary, on average, across insurers is about the same as how much prices vary, on average, across hospitals. (The standard deviation in the average price among insurers is about the same as it is among hospitals.)
Reading: How do insurance companies negotiate rates with hospitals
for example, blue cross blue shield of massachusetts has negotiated prices that are, on average, 15% to 20% higher on all inpatient procedures than the prices of the three major national insurers operating in massachusetts (aetna, unitedhealthcare, and cigna ) at the same hospitals. Choosing an insurer that has negotiated lower prices would save a self-insured employer who bears all of its members’ health care costs between $750 and $1,000 per member per year.
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Furthermore, because insurers get relatively better prices for some types of services than others, if an employer knows the type of services their employees are likely to use, the savings can be even greater. For example, Tufts Health Plan negotiated lower rates for hip and knee replacements than Blue Cross Blue Shield of Massachusetts, but negotiated higher rates for MRIS. younger employees will tend to use different services than older employees, so a tailored analysis of an employer’s enrolled population can be valuable.
Why are these prices negotiated with suppliers so difficult to observe? In part, because there are so many: There is a price for each procedure for each plan in each insurer in each hospital. all these prices may differ.
In addition, the health insurance industry has resisted price disclosure rules, calling these prices “trade secrets.” In fact, because of those concerns, insurers initially objected to our research team’s access to the all-payer claims database for the state of Massachusetts that details these prices.
Pricing information is becoming more available due to federal disclosure rules. Hospitals are already required to post their negotiated rates, and health insurance plans will be required to do so starting in July 2022. Sophisticated employers can save money by taking advantage of this data. Instead of relying on employees to shop around when they’re trying to get health care, employers should do extensive price shopping up front when choosing an insurer. here’s how:
When comparing insurance plans, compare the total costs, not just the premiums and administrative fees, but also the provider’s negotiated prices.
See also: Average Cost of Health Insurance
Add up all of those prices based on the hospitals your members will be going to and the types of procedures they’re likely to have. You’ll likely benefit from a cost simulation analysis that forecasts what you’ll actually pay, although hiring consultants to perform this analysis can be expensive.
pay attention to the network of each plan.
We know that hmo plans can exclude costly providers. But, as we found in our study, because these plans can direct members to cheaper providers, they have more bargaining power and can negotiate even lower procedure prices with in-network providers. These negotiated processing prices vary even from one plan to another offered by the same insurer.
Consider the higher prices of self-insured plans when deciding whether to offer a self-insured health plan or a fully insured health plan, where the insurer bears the risk.
insurers have more incentive to negotiate lower prices for fully insured plans. we estimate that a plan with only self-insured members will be about 8% more expensive than a plan with only fully insured members.
Analyzing these prices for hidden health procedures can take work, but save employers money and offer a better deal for their employees.
See also: This Is How Often You Should Change Your Insurance Plans | News Direct
