One of the big drivers of health insurance rate increases is the unchecked inflation of health care costs. For health care services that are not covered by a set copayment, and are subject to any applicable deductible for the health plan, it can be nearly impossible for people seeking care to get accurate estimates for necessary health care services. Hence, consumers can not shop for the lowest cost. Kaiser Permanente publishes a list of many health care services and their costs. This fee schedule should be a model that all health insurance companies should be mandated to emulate.
Fee Schedules Promote Price Transparency
One of initial drafts of the Republican American Health Care Act (AHCA) had a provision for price transparency.
SEC. 502. PUBLISHING OF CASH PRICE FOR CARE PAID THROUGH HEALTH SAVINGS ACCOUNTS.
- a) HEALTH SAVINGS ACCOUNTS.—Section 223(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
‘‘(9) CASH PRICE TRANSPARENCY REQUIRED FOR PAYMENTS TO HEALTH CARE PROVIDERS.—
‘‘(A) IN GENERAL.—A payment to a health care provider with respect to the furnishing of health care items and services by such provider shall not be treated as a qualified medical expense unless health care provider provides for continuing disclosure (such as through posting on a publicly accessible website) of the cash price the health care provider charges for the furnishing of such items and services.
One of the pillars of logic behind promoting Health Savings Accounts (HSA) within the AHCA is the notion of consumer directed health care whereby individuals will seek the lowest prices/highest quality health care services since he or she will mostly be paying for most of the procedures out-of-pocket because of the high deductible nature of HSAs. The theory is that if consumers shop for health care services they will make buying decisions within a competitive market place and that will keep prices stable and possibly reduce the cost of health care. This in turn would limit insurance premium inflation to more normal levels.
The singular problem is that most members of EPO and PPO plans can’t get the actual costs of most health care services from the doctor, hospital, or out-patient facility. Consequently, the AHAC initially included a provision for price transparency. However, I have not been able to find the cash price transparency provision in the lastest version of the AHAC so I think it may have been deleted from the final bill passed by the House of Representative. But the Senate could add it back in.
Price transparency should be applied to all health plans regardless of whether they are a HSA, EPO, HMO, or PPO. Consumers should be able to easily reference a schedule of routine health care costs if for no other purpose than to know how much they will need to withdraw from savings or finance on a credit card. Kaiser Permanente has an easier job of compiling a fee schedule because only Kaiser hospitals and Kaiser doctors are in-network for most of their health plans. But other regional HMO plans such Chinese Community Health Plan, Sharp Health Plan, Valley Health Plan and Western Health Advantage could easily do the same.
|Date:||May 5, 2017|
But for EPO and PPO plans that encompass a variety of hospitals and medical groups within their network the task is more complicate, but not insurmountable. The difficulty is that the health plans contract with a variety of providers. Within a health plan’s network there can be independent doctors, medium and large size medical groups, outpatient surgery centers, and a variety of different hospitals. The contract reimbursement or negotiated rates per health care service may be slightly different between similar providers. A health plan may negotiate a price for a colonoscopy of $800 with one provider, but agree to pay a similar provider right down the street $850.
Negotiated Rate Becomes The Out-of-Pocket Cost
The negotiated rate is very important for consumers with high deductible health plans. If a person has a $6,000 deductible for outpatient procedures such arthroscopic knee surgery, even if the health plan member has to pay the full amount because they have not met their deductible, the negotiated rate is usually still lower than the over-the-counter or retail price of the procedure. That is one benefit of having health insurance, even a plan with a high deductible, because the member is only responsible for the negotiated rate. The member is getting the buying or negotiating power of the health plan. Unfortunately, these negotiated rates are kept secret by confidentiality agreements between the health plan and the provider.
The next level of difficulty for the health plans and providers is that different types of health plans may have different negotiated rates. For example, some doctors have told me that they won’t participate in a health insurance company’s individual and family network because the specific health plan pays more for office visits with small and large group plans. In other words, they are reimbursed more if they see a person who is enrolled in an employer sponsored health plan than if that person had an individual and family plan, which may or may not have been purchased through Covered California.
The problem is that if the health insurance companies had to produce fee schedules or if the providers had to produce them, people would quickly find out that the negotiated rates are different depending on the type of health plan: individual and family, small group, large group, or Medicare.
But you know what? – that should not be the consumer’s problem. The consumer should be able to get a list of routine services and how much each service costs. A consumer should be able to compare the cost of Kaiser’s Northern California fee of $711 for a CT scan of sinus and nasal passages to another health plans provider costs. I seriously doubt that consumer shopping for the best price will have much of an impact to drive down prices. After all, when most people get an order from their doctor for a lab test, imaging, or outpatient procedure, they go where the doctor tells them to go. They rarely do comparative price shopping.
What will have an impact, in my estimation, is that all the providers and health plans will be able to see each other’s negotiated rates. How would you feel if you were a hospital administrator and you learned that a big health plan paid you 10% less for the exact same procedure another hospital was doing across town? Unless there is some serious collusion going on, one would hope that during the next round of contract negotiations, the hospitals or doctors would demand equal reimbursement.
The downside of more price transparency or fee schedules is the possibility of short term price inflation as health plans increase negotiated rates to keep providers happy. The flip side is hospitals or medical groups could leverage the lower published fees as a way to gain patients. Every year during open enrollment we see hospitals and medical groups marketing how good they are and patient satisfaction numbers. But they never tell potential consumers how much, or less, there services will cost if they have a high deductible plan.
Health plans that offer set copayment benefits for health care services such as labs, x-rays, office visits, and generic drugs with in-network providers is akin to a fee schedule. But as more people shift to high deductible health plans with few or no set copayments, knowing the negotiated rate for services can be vital. For instance, a really healthy person signs up for a Bronze plan with a $6,300 deductible then he or she has a small accident. All of a sudden, the small accident that resulted in a broken leg also necessitates repeated office visits, x-rays, and several weeks of physical therapy. If this person can save $10 or $15 per provider visit because they can compare the fee schedule of different providers, they might be able save a couple hundred dollars.
The added benefit of the fee schedule is that it will help consumers choose a health plan. If two health plans have virtually the same health insurance rate, but one plan has providers with lower negotiated rates posted on a fee schedule, then the consumer may chose the plan with the lower fee schedules. We want health insurance to help protect our income and assets from a major accident or illness. But we should also expect to benefit from the buying and negotiating power of the health plans. What good is a low cost health plan if when you need health care services you are paying inflated rates for care versus another company that may have negotiated lower rates?
Forcing either the health plans or the providers to post a list of costs for routine services is a very low impact way of adding consumer information to the health care market. The government is not telling the providers what they should charge. The government is not telling the health insurance companies what they should pay the providers. A law mandating a simple fee schedule like Kaiser Permanente has published will create price transparency and allow consumers to compare valuable health care cost information across a variety of health plans and providers. This will ultimately slow down the rate increases as providers compete not only on patient satisfaction, but on price as well.