Employer-sponsored health plans and health insurers are expected to be more compliant with rules requiring them to make their price data public than hospitals were in 2021.
But employers will now have to step up and start using the information to ensure their employees are getting the best deals when they seek medical care.
The Consolidated Appropriations Act of 2021, enacted in 2020, raises the bar for employer-sponsored health plans, which as fiduciaries are required to pay fair prices for services provided. The law—along with the transparency in coverage rule issued in November 2020—requires health plans to make their negotiated rates public starting July 1, 2022, and hospitals were required to do the same in 2021.
That means employers won’t have any excuses for not knowing whether they’re paying reasonable prices.
Employers and health insurers paid hospitals more than double what Medicare would have paid in 2020, according to a Rand Corp. report.
Most hospitals failed to comply with a similar requirement for hospital prices that took effect in 2021, according to Patient Rights Advocate, which works on health-care price transparency. That group reported that only 14.3% of 1,000 sampled hospitals complied with the transparency rule a year after it took effect.
“Employers want health-care to be transparent,” said James Gelfand, president of the ERISA Industry Committee (ERIC). “We expect mass compliance with the transparency in coverage rule,” he said.
Fines against health plans and insurers of $100 per day per member for noncompliance are much larger than fines initially were for hospitals, which were raised from $300 per day initially to a maximum of just over $2 million annually for hospitals with more than 30 beds.
It’s likely to take some time before employers can digest the new information and make use of it.
“It could take several years for major changes in the markets to start,” Gelfand said. “But we do think that over time, making this information transparent will lead to better prices, because patients and employers are going to demand better prices, and the insurance companies then are going to negotiate better prices,” he said.
Data Useful for Analysts
For now, the data is expected to be most useful for analysts and app developers that can organize it and make sense of it, Chris Deacon, health-care leader of VerSan Consulting LLC, said in an interview.
“This is huge loads of data that is intended to be picked up by third-party app developers, data-crunching companies, that can take the data and do something with it,” she said. VerSan Consulting, in Moorestown N.J., works with self-funded employer groups that cover more than 1 million people to provide health-care strategy and cost containment.
However, employers that sponsor health plans covering about 160 million people in the US are legally liable to comply with transparency requirements and only pay reasonable plan expenses, Deacon said. To do that, employers and analysts they employ must familiarize themselves with the data, she said.
“They have to know about it to use it,” Deacon said.
“It’s no longer going to be excusable to say, ‘My carrier wouldn’t give me my data’,” she said. “Not only do you have a legal right to have this data, you now have a legal obligation to have the data. And once you have that obligation, as a fiduciary your ability to become a prudent purchaser of health care—you can now fulfill that,” she said.
That means employers inevitably will face class suits, Deacon said. Lawsuits against health insurers haven’t been successful because employers are the ones responsible for buying health care on behalf of their employees, she said.
Even employers who have become adept at using data from Rand comparing hospital prices paid by Medicare to prices paid by employers and private health insurers doubt the new data will be useful to them in the short term.
Using data collected specifically for Turner Industries LLC by Rand, that Baton Rouge, La.-based petrochemical industry maintenance contractor recently discovered that it paid a major Houston-area hospital it contracts with directly about 840% of Medicare rates in 2020 compared with about 220% of Medicare rates in 2019, Dan Burke, Turner’s director of corporate benefits, said. He declined to identify the hospital. Turner provides health coverage to nearly 20,000 employees and family members.
It isn’t clear why the hospital’s charges jumped so dramatically, Burke said. “That number could be one gigantic claim that really threw those numbers off,” he said. The company has a health coaching program that steers plan members to high-value providers which he said could have steered employers to more expensive providers. “Given the nature of the steerage that happens there, it would not be doing anyone any favors to continue that steerage,” he said.
Data Leads to Cash Incentives
Turner is posting its price data on its website for its employees to access, along with a cost-estimator price-comparison tool, and detailed explanation-of-benefit documents describing what is covered. The information is also posted on the website of its health insurance administrator, Highmark Blue Cross Blue Shield, Burke said.
However, few lay people will likely see much value from most of that information, and for health plans sponsors, “when you look at that and make comparisons to other carriers and other plans, it’s not always an apples-to-apples comparison,” Burke said. While Blue Cross Blue Shield plans have large networks throughout the US and often have the best discounts from hospital list prices, “that doesn’t go for every procedure,” he said. “United Healthcare or Aetna or Humana may have better discounts on a certain procedure,” he said.
Burke says he trusts the internal information he gets from Rand and data tools developed by the Employers’ Forum of Indiana and the National Academy for State Health Policy (NASHP) that use public and proprietary data to compare hospital prices and quality as the best measurement of whether he is getting fair prices from hospitals. Turner Industries plans to simplify that information to make it easy for employees to use, and it currently uses its data to provide cash incentives for employees to use high-value, lower-cost providers for services such as imaging and colonoscopies, he said.
Employers are combining the Rand data with data from Sage Transparency and the National Academy for State Health Policy showing health outcomes, Ashley Bacot, president of health-care consulting company ProvInsure, said in an interview. That could result in a company being willing to pay more for providers that have lower hospital readmissions, he said. ProvInsure is the consulting arm of Rosen Hotels & Resorts Inc. in Orlando, Fla.
But if companies discover that others in the same area are paying lower prices for the same services, especially at the same hospitals, changes will result, Bacot said.
“Ultimately what will happen is once that employer feels that fiduciary responsibility, and reads in the newspaper that X company is paying $18,000 and they are paying $36,000 for the knee, they will, I think, feel violated, and maybe there will be this, ‘Hell no, we’re not going to take it any longer,’” reaction.
Joe Wisniewski, head of platform growth for San Diego-based health-care data company Turquoise Health, said the easiest way for employers to begin analyzing the data is for simple procedures such as preventive care blood tests and magnetic resonance imaging, which don’t depend on age or other factors. Prices for knee replacements are more variable because they depend on age and health status, he said.
“The simpler the procedure, I think the more wins an employer can get by shopping around for health care,” he said.