By Marilyn Bartlett and Christin Deacon
Employer health plan costs continue to spiral out of control, threatening profitability, competitiveness, and employee wages. The Kaiser Family Foundation recently announced the average annual employer-sponsored family health plan premium reached $24,000. This cost, generally split between employer and employee, has increased by 50% over the last decade.
Employers need not passively accept these health plan cost overruns. They can draw on three pillars of federal healthcare price transparency policy to reverse these runaway costs and protect their employees and bottom lines.
The first two pillars – the Hospital Price Transparency rule that took effect in January 2021 and the Transparency in Coverage rule that took effect in July 2022 — require hospitals, group health plans, and health insurers to publish their actual prices, including all their negotiated rates with insurance carriers. The third pillar is the Consolidated Appropriations Act of 2021, which requires third-party administrators, insurers, and provider networks to share claims information with employer and union group health plans.
This information can empower employers, who provide health coverage for nearly 160 million Americans, to choose affordable healthcare and benefit from competition. Armed with actual prices, employers can compare their health claims with hospital and health insurance prices to ensure they get the best pricing and care for their employees, and they can ensure they get what they are paying for.
For example, they can identify well-documented wide price variations for the same treatments and choose the best value. A forthcoming report by PatientRightsAdvocate.org draws on employers’ claims data that reveal the price of a CT scan of the abdomen or pelvis ranges from $215 to $10,000, the price of a colonoscopy varies from $1,000 to $31,000, and the price of a vaginal delivery fluctuates from $1,800 to $24,000, depending on the employer and treatment location. By comparing their claims against actual posted prices, employers can avoid egregious billing, spread pricing, and other payment schemes responsible for runaway costs.
We’ve seen how access to all health plan prices and claims data is needed to dramatically reduce healthcare costs. In 2014, Marilyn was hired to direct Montana’s insolvent State Health Plan, which covers approximately 30,000 state employees, retirees, and their families. An analysis of the plan’s medical claims data revealed Montana hospitals were charging up to six times the Medicare rate for services, with significant price variation between providers.
To overcome this egregious and highly variable hospital pricing, the plan contracted with hospitals in the state to pay rates slightly more than twice Medicare rates. This move increased plan reserves from a projected deficit of $9 million to a surplus of $112 million in three years, saving $121 million without cost-shifting or decreasing benefit levels.
Chris ran New Jersey’s 800,000 life public sector health plan and likewise identified wide price variation and discrepancies in the state’s claims data which has led to ongoing investigations into the practices of some of the state’s largest vendors. The state launched a payment integrity program in 2020 that provided enhanced oversight of hospital billing and carrier payment practices to safeguard the plan and protect taxpayer dollars, saving more than $150 million in its first 20 months.
Unfortunately, these transformative pillars haven’t become a reality for American healthcare consumers. A recent PatientRightsAdvocate.org report finds that only 36% of American hospitals are fully complying with the price transparency rule, including posting all negotiated rates by health plan. A new JAMA study concludes even posted hospital prices are usually very different than the prices hospitals offer over the phone.
A recent Health Affairs paper reveals most employer health claims don’t match the prices in the insurance price disclosure files. This inaccuracy in pricing data makes it impossible to reconcile claims, identify overbilling, or shop for higher-value care. The study’s authors note, “the intent of the regulations that govern the body of price transparency policies cannot be accomplished with the current level of inaccuracies in the files.”
In addition, major employers and unions nationwide, including Kraft Heinz, Owens & Minor Inc., and Bricklayers and Sheet Metal Workers unions, have recently been forced to sue their own health insurance companies to access claims data for their own health plan. They’ve paid billions to their carriers over the years and have alleged substantial overpayments and spread pricing facilitated by the opaque status quo.
Even though these three pillars need reinforcement, employers can still follow our lead and others like us who have stood firm on them to reduce health plan costs. They can draw on their claims data, actual prices from hospitals, and the prices negotiated by carriers on employers’ behalf to make smart purchasing decisions and demand accountability. For now, they need to fight for this information. But the more employers who do so, the stronger the three pillars will become and the easier it will be to finally reduce outrageous health plan costs.
Marilyn Bartlett, CPA, CMA, CFM, CGMA, is the former administrator of the State of Montana Employee Health Plan. Christin Deacon is the former Director of Health Benefits Operations and Policy and Planning for New Jersey.