One County Combed Hospital Data to Slash Health Plan Costs 43%

Federal health-care price transparency rules will help a Pennsylvania county save as much as $13 million on its $30 million a year health plan, pointing a way forward to savings for employers.

Lehigh County, which provides self-insured coverage for about 2,400 employees, family members, and retirees, has so far shaved $3 million from its health-care expenses, and Controller Mark Pinsley (D) says he is trying to get the county to negotiate another $4 million in savings based on analyses of the county’s spending.

The county expects to get another $6 million in savings in total for 2023 and 2024 as a result of renegotiating drug contracts after the audit, Pinsley said.

What Lehigh County, which has a $500 million a year budget, is doing shows how employers could harness the price data hospitals, health plans, and health insurers are required to make public under the transparency in coverage rule and the hospital price transparency rule, as well as the Consolidated Appropriations Act of 2021 (Public Law 116-260). Moreover, increasingly employers will be held responsible as plan fiduciaries for using the data to get the lowest prices for their health plans’ beneficiaries.

The two regulations require that hospitals and health plans disclose their negotiated rates.

Audits Conducted

Pinsley’s office conducted two audits of the county’s health plan spending, one for its $7 million in prescription drug costs for 2019 and another for its $22 million in medical claim payments for 2021. Based on those audits, the county has so far saved $3 million in drug spending, and it has recovered $213,000 from medical claims, Pinsley said in an interview.

The pharmacy audit found that the health plan wasn’t receiving rebates it was due, Pinsley said. The audit also found it would be less expensive in many cases to compensate employees for buying drugs through GoodRx, a service that identifies the best price for drugs without using insurance. Through renegotiating its plan, the county saved $3 million in drug costs, he said.

“I believe we’re going to go after another $261,000" for 2022 medical expenditures, Pinsley said. He hopes the county administration will renegotiate its contract with its health plan administrator, Highmark Blue Shield, “because I believe we can save an additional $4 million.”

The audit recommended that potential medical savings could come from paying employee claims the same price that people pay without insurance, which is often lower than the price paid through commercial insurance, Pinsley said.

Of the two major hospitals in Lehigh County, “Lehigh Valley Health Network on average was over three times what St. Luke’s was” for that type of self-pay pricing, Pinsley said. Employees could be given incentives to use the lower-priced hospital, he said. The Lehigh Valley hospital didn’t return a request for comment.

Saving substantial amounts of money on the county’s health plan could benefit taxpayers and it could save employees money as well, Pinsley said. “I’m not going to allow $4 million not to be looked at,” he said.

‘Plenty of Money to Be Saved’

“There’s plenty of money to be saved” if employer health plans use data now available to compare prices, Lauren Vela, owner and principal of health-care consultant Lauren Vela Consulting LLC, said in an interview.

“More than ever I am seeing employers tune in” to using price data to compare what they’re paying with other health plans, said Vela, who formerly worked on Walmart’s health plan team. “What are hospitals charging us? Many of them don’t know that,” because historically health insurers were prohibited from revealing the prices employers paid under “gag clauses” in their contracts with hospitals, she said. That practice was prohibited under the Consolidated Appropriations Act.

New sources of data are now available to employers that are helping them understand how groups such as brokers “were making money based on their benefit spend,” Vela said.

She pointed to data compiled by Sage Transparency and the Rand Corp. that compares prices paid by commercial plans with Medicare’s prices, which she said is helping employers gauge whether they are paying fair rates. Commercial plans typically pay more than Medicare pays. “We’re paying probably much more than our fair share, even if our fair share should be more than what Medicare’s paying,” she said.

According to Rand’s May 2022 report, in 2020, private health plans paid hospitals an average of 224% of what Medicare would pay for the same services. Sage Transparency, a free site that compared price and quality data for about 4,000 hospitals, announced Feb. 1 it is including the latest Rand data and data from more than 2,000 outpatient surgery centers, as well as updated price and quality data.

Employers increasingly will face legal demands that they use the data to ensure they are not overpaying for their employees’ health care, Tony Sorrentino, president of health plan consulting company HPfid LLC, said in an interview.

“In a perfect world, they would be doing exactly what Lehigh County did,” Sorrentino said. However, “some employers will try to get by with the bare essentials” by not fully analyzing data that is now available to them, he said.

Sorrentino compares the current situation for employer health plans with requirements employer retirement plans faced in the 2000s to provide better investments at lower costs for plan participants. That led to lower fees, he said.

Employer health plans could face lawsuits from plan participants if they don’t use the data that’s available to them to ensure they are getting reasonable prices from hospitals, Sorrentino said. The Consolidated Appropriations Act is intended “to create a situation where the plan sponsor is accountable to the plan participants,” he said.

The Bricklayers and Sheet Metal Workers unions filed a class action in December in the US District Court for the District of Connecticut against health insurer Elevance, formerly Anthem, for allegedly denying them access to plan claims and overcharging their health plan. The suit alleges Elevance violated the Employee Retirement Income Security Act, which was modified by the Consolidated Appropriations Act.

In addition, another suit filed in late December against UnitedHealth Group Inc. by beneficiaries of two employer-sponsored health plans, including one sponsored by investment firm Morgan Stanley, alleges that the funds that UnitedHealth collected for claims payment were not used properly and that they underpaid plan providers, Sorrentino said.

It’s mandatory that employer plans get pricing data from hospitals, Sorrentino said. “The next step, and the most important step, is what the plan sponsor does with it.”