Isn’t Everyone Entitled to Know the Cost of Care?

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The President’s Executive Order Demands Healthcare Cost Transparency

We have long chronicled the huge price swings that often exist among healthcare providers in the same locales. To combat this situation and help patients find low cost, high-quality care, the President recently signed an executive order directing HHS to develop rules requiring hospitals to publish clear and understandable pricing that reflects what people will actually pay for tests, surgeries and other procedures. HHS also wants the rules to ensure that providers and insurers give patients information about their potential out-of-pocket costs before receiving care.

While lobbyists argue that this requirement will only drive prices higher, the administration sees enabling patients to know how much hospitals charge as a relatively simple idea – one that will promote greater competition for health services and reduce costs for consumers.

When the Administration required hospitals to post prices online earlier this year, the step had little impact. Data included billing codes that few people could decipher and list prices which few people ever pay. While the rules for this order must be developed, it is intended to require that hospitals disclose what patients and insurers actually pay in a format that patients can understand.

We’re certain that the rules will not be written overnight and not without loads of input. But if an executive order can lead to an environment where patients can understand what costs lie ahead and how to find more affordable, high-quality options, then let’s give it a shot.

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Hospitals charge employers 240% more than Medicare

Researchers hope the study will give private payors a better grasp of what health care costs are, and allow them to compare prices within a state and across states. (Photo: Shutterstock)

This article was published on May 13, 2019 on BenefitsPro written by Scott Wooldridge.

Prices range from 150 percent of Medicare prices at the low end to 400 percent at the high end.

A new study by RAND and the Employers’ Forum of Indiana (EFI) finds that hospital prices are much higher for employer-based health plans than for Medicare.

The study gathered data from hospitals in 25 states, finding a wide variation in what hospitals charged health plans. The researchers looked at claims data for more than 4 million people, with information coming from self-insured employers, state databases and records from participating health insurance plans.

Depending on the state, prices rose and fell in the period between 2015 and 2017, the data showed, but on average, private insurers were charged 240 percent more than Medicare. Prices also varied widely among hospital systems, ranging from 150 percent of Medicare prices at the low end to 400 percent of Medicare prices at the high end. The cost of outpatient care from hospitals was higher than the average inpatient costs, averaging 293 percent of what Medicare would pay.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Chapin White, the study’s lead author and an adjunct senior policy researcher at RAND, a nonprofit research organization. “Employers can exert pressure on their health plans and hospitals to shift from current pricing system to one that is based on a multiple of Medicare or another similar benchmark.”

The American Hospital Association has put out a statement taking issue with the report, in part because of its sample size–utilizing data from 1,598 hospitals in 25 states. In addition, wrote AHA in a statement, “Medicare payment rates, which reimburse below the cost of care, should not be held as a standard benchmark for hospital prices. Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care.”

Different payors, different rules

EFI officials noted that private health insurance contracting for hospitals is done on a discounted-charge basis, negotiated between insurance carriers and hospitals. Medicare, on the other hand, issues a fee schedule that determines the price it will pay for each service, with adjustments for inflation, hospital location, the severity of a patient’s illness, and other factors.

According to Gloria Sachdev, president and CEO of EFI, the new study will give private payors—such as employer-based plans—a better grasp of what health care costs are, and allow them to compare prices within a state and across states.

“The purpose of this hospital price transparency study is to enable employers to be better shoppers of health care on behalf of their employees,” Sachdev said. “We all want to know which hospitals provide the best value (best quality at best cost). Numerous studies have found that rising health care costs are due to high prices, not because we are using more health care services.”

RAND recommendations

The research group issued a list of recommendations with the study. Some of the recommendations are in line with the recent movement toward direct contracting, as employers seek to negotiate directly with high-quality, lower-cost facilities.

The study’s recommendations included:

  • Employers can exert pressure on their health plans and hospitals to shift from discounted charge contracts to contracts based on a multiple of Medicare or some other prospective case rates.
  • Employers can use networks and benefit designs to move patient volume away from high-priced, low-value hospitals and hospital systems.
  • Employers can encourage expanded price transparency by participating in existing state-based all-payer claims databases and promoting development of new ones.

Transparency by itself is likely insufficient to reduce hospital prices; employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans.

More Value-Based Payments

According to a public-private partnership launched by HHS, the percentage of U.S. healthcare payments tied to value-based care rose to 34% in 2017, a 23% increase since 2015. Fee-for-service Medicare data and data from 61 health plans and 3 fee-for-service Medicaid states with spending tied to shared savings, shared risk, population-based payments and bundled payments were examined in the analysis.

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How Much Are “Ineligibles” Costing Your Health Plan?

Employees

If your plan isn’t managing eligibility at enrollment, you’re probably throwing money away!

Managing eligibility in a self-funded environment can place a big burden on HR Directors, not only at enrollment, but throughout the year. Employee benefit elections, dependents and beneficiaries must be monitored consistently and then there are new hires and terminations to deal with.

Not all TPAs are alike when it comes to managing enrollment and eligibility. While some accept existing data in an effort to save time, Diversified Group goes to extremes when onboarding a new self-funded group or helping an existing client with open enrollment. Some HR Directors find our detailed approach annoying but thank us later when their plans avoid the huge costs associated with an eligibility audit. Click on the following link to read about a local example.

http://www.courant.com/community/hartford/hc-news-hartford-internal-audit-commission-report-20190116-vdbxtfiganahnat3sa7szn3l2u-story.html

Diversified Group uses BenefitReady® technology to help employers and members facilitate many enrollment and eligibility functions. To ensure that benefits are available only to those employees and dependents who are eligible, we back this technology with knowledge and expertise.

Managing enrollment and eligibility may sound like a little thing. But little things add up, especially when they lead to costly claims your health plan should have avoided. Get the help you need to take control. Talk to Diversified Group today.

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UnitedHealth will begin passing drug discounts to plan participants

This article was published on March 13, 2019 on BenefitsPro written by Max Nisen.

The health-care policy environment is shifting in a dangerous way for insurance giants. A seemingly small change in how drugs are paid for could be the beginning of a response.

UnitedHealth Group Inc., the largest U.S. health insurer, announced Tuesday that its pharmacy-benefit management arm OptumRX will mandate that all new employer health-plan clients pass the drug discounts it obtains for them directly to plan participants. That’s a big shift from the current system, under which OptumRX and other PBMs negotiate prices with drugmakers and hand the resulting rebate checks to clients to use as they wish. PBMs profit from this arrangement, and have an incentive to favor heavily rebated drugs. That pushes drugmakers to hike prices, and patients are exposed to artificially inflated costs.

UnitedHealth’s new policy means lower drug costs for more people. But it has broader implications. It smartly preempts Trump administration efforts to reform rebates, and shows that the industry can make needed changes ahead of pushes for an even bigger government-led overhaul of the way they do business.

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Increasing costs and unhappiness with the status quo are motivating the administration’s regulatory effort to end rebates in Medicare. It is also thinking about forcing insurers to reveal the hidden prices they negotiate with hospitals, which would wreak havoc on their ability to negotiate. Consumer dissatisfaction also behind broader reform efforts championed by Democrats, such as Medicare for All. Such plans are distant threats, but they are present and existential enough to weigh on shares.

Making the switch to so-called point-of-sale rebates for new clients is a big and unique step for UnitedHealth, and it builds on its January transition of a different subset of its business. While the impact will be small at first as existing clients can stick to the old system, the new model could eventually impact as many as 18 million Americans, according to a research note from Royal Bank of Canada analyst Frank Morgan.

UnitedHealth says people already on its point-of-sale plans save an average of $130 per eligible prescription and that medication adherence is up by as much as 16 percent. People are happier and healthier when they can afford to take their medicine, and are more likely to avoid larger medical costs down the line.

If the administration’s efforts on rebates succeed, UnitedHealth will face less disruption and have more experience in making a new business model work. Slower rivals such as CVS Health Inc. and Cigna Inc’s Express Scripts – which offer point-of-sale rebates as an option but don’t mandate it – may suffer. Already in February, CVS attributed part of its weak 2019 guidance to the impact of shifting drug-pricing trends on its PBM as drugmakers held back on price hikes under political scrutiny.

Plans that offer point-of-sale rebates have a chance to focus more on reducing overall costs for both patients and payers, especially when integrated with an insurance plan. This isn’t going to make insurers and PBMs beloved overnight, or produce instant systemic cost-savings. But UnitedHealth is taking a needed and bigger step toward a better and more patient-friendly system.

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Transparency in healthcare: The case for an employer bill of rights

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This article was published on January 31, 2019 on Employee Benefit News, written by Steve Kelly.

Today more than ever before, benefits and human resources professionals are struggling to provide their teams with quality coverage at affordable rates. Costs have skyrocketed for the more than 150 million Americans who receive healthcare coverage through their workplace — more than doubling since 2008, according to the Kaiser Family Foundation.

Private health spending by businesses has steadily grown year after year and accounts for 20% of the $3.3 trillion of total health spending in the U.S. Businesses are finding that they can’t afford to wait any longer. They need to take control of their healthcare costs and seek resources to make changes to the plans they currently offer.

With the complexities surrounding the decision-making process for benefits programs, businesses often feel unaware, or worse yet, misled when it comes to their foundational rights regarding health plans.

Enter the Employer Bill of Rights — an initiative to help business owners empower themselves to learn and exercise the basic rights often overlooked in today’s healthcare system and take an activist role as they investigate and select healthcare options.

Knowledge is power

The employer bill of rights is rooted in the mission that every business owner needs to take responsibility for providing the best possible benefits program to their employees. Businesses can utilize the employer bill of rights as a tool and learn how to pay for healthcare like any other business expense.

With the employer bill of rights, employers are empowered to:

1. Pay a fair amount for healthcare.
Healthcare costs are often the second largest operating expense after employee wages. Employers do not have to accept the status quo for their health plan and pay significantly inflated medical expenses.

2. Know what healthcare services actually cost.
A traditional PPO health plan typically leaves the employer in the dark about how plan parameters were set by the insurer and medical provider. Businesses have a right to know the cost of medical services.

3. Audit medical bills.
Billing mistakes and inflation of medical charges are common. Businesses and individuals have a right to carefully evaluate healthcare expenses. A line-by-line auditing of medical bills helps ensure the charges are accurate and fair.

4. Explore your health plan options.
By partnering with an informed and experienced healthcare consultant, employers can discover health plan options beyond the traditional PPO model. A self-funded health plan, where employers pay for medical claims as services are rendered instead of providing ongoing and advanced payments to an insurance company, can take employers on the path toward more control over healthcare spending.

Self-funding is on the rise, with the number of businesses deciding to self-insure increasing by nearly $37 between 1996 and 2015, according to the Employee Benefit Research Institute.

5. Offer your employees a comprehensive and affordable benefits program.
Employees count on their employer-sponsored health plans to be reliable and financially feasible. Employers have a right to offer healthcare solutions that minimize the financial burden on the plan member.

6. Design a health plan to meet your unique needs.
The best health plans are well-rounded and flexible. Employers have the right to customize their health plan to determine the approach that best suits the needs of their business and team. Unlike traditional health plans, self-funded plans are customizable.

7. Defend the best interests of your business and your employees when paying for healthcare.
Surprise medical bills and inflated prices are common, but healthcare finances do not have to be handled alone. Employers and individuals have the right to access advocacy services that support fair and reasonable healthcare payments and help employers meet their fiduciary responsibility.

8. Make direct connections with providers and health systems.
Fair outcomes can be achieved when people work together. By creating direct partnerships with providers and health systems in their communities, employers can become good stewards of healthcare by building bridges and driving quality healthcare experiences for all.

The path to activism

Change in healthcare is possible when businesses take charge and challenge the status quo. As we continue to see the rise of self-funded health plans, the growth of reference-based, or metric-based, pricing is following suit.

The reference-based pricing approach starts at the bottom with an actual cost amount, then adds a fair profit margin to calculate a total cost of service. Simply stated, it allows employers to utilize rational limits of payment to medical providers instead of relying on the traditional PPO model.

Businesses can be activists for change by standing up against out-of-control healthcare costs, and they can start by adopting the employer bill of rights and investigating reference-based pricing. By innovating their healthcare solutions and turning away from insurance plans which have failed to adapt to the changing healthcare landscape, business owners have the opportunity to improve the health plans they offer their employees, transform their bottom line and help spark reform for businesses across the country.

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Who says your health plan has to cost 5% more every year?

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Done right, self-funding provides the flexibility needed to control costs.

A 2018 Kaiser Employer Survey showed that the cost of employer-based, family coverage rose to $19,616, an increase of 5 percent from the prior year. While this increase may be considered moderate or acceptable by many employers, we work hard to help our self-funded clients raise the bar (or in this case lower the bar).

In contrast to fully-insured plans, partial self-funding gives employers the freedom to write their own plan document. This enables our clients to adopt a totally different mindset – a “take charge” attitude that not only allows a plan to meet employees’ needs but encourages members to do what they can to keep costs in check.

After focusing on plan design and cost management, we turn our attention to claims data. While others may be quick to pay claims, we help clients look closely at claim costs each month. We use the data to identify trends, treatment patterns or chronic conditions that have the potential to result in a high dollar claim. When we see something that raises a red flag, we go to work on it immediately, looking for ways to minimize costs while striving to achieve the best possible outcome.

The bottom line is that sitting back and hoping that healthcare costs won’t increase next year will not accomplish a thing. Managing the rising cost of healthcare takes know-how, expert administration and the ability to act when cost saving opportunities surface. These are the things we do for our clients each and every day. To raise the bar for your health plan, give us a call at your convenience.

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