What You Need to Know About The Transparency Age in Health Care Costs

“For most employees, true cost transparency isn’t about what a hospital will charge for an X-ray. Instead, it’s all about what people have to pay out of pocket for their health care.”

True cost transparency is key to reining in healthcare costs. But when it comes to the complexities involved in managing an individual’s health, the cost of care is only one component in the decision-making process.

Transparency effects on insurance companies and providers

Insurance companies generally negotiate prices and reimbursement rates between themselves and healthcare providers. However, this information is currently not public, as prices and rates vary among the insurance companies. Public disclosure of prices could impact markets very differently depending on the local market dynamics, shifting the fine balance of pricing that currently exists between insurers and healthcare providers toward one party.

“Hospital estimates in particular are often inaccurate and, unlike many other industries, there is no legal obligation that they be correct, or even issued in good faith.”

Barriers to true transparency

“It’s still very hard to get a real idea of what health care will cost,” says Allison Page, Director of Product Optimization at Harvard Pilgrim Health Care. “The true cost depends on how the health care provider bills and, in some cases, where the provider bills. It’s still so complicated.”

Currently, there are no set prices for specific medical services, such as a knee or hip replacement. And because the price of such procedures varies greatly from hospital to hospital, patients never know what to expect. Many insurers, and some provider groups, now offer tools to help the consumer estimate the cost of certain services and procedures, but these tools can provide just that–an estimate. Hospital estimates in particular are often inaccurate and, unlike many other industries, there is no legal obligation that they be correct, or even issued in good faith.

However, far more variability exists when receiving health care services. If a patient goes to the hospital for one procedure anticipating one cost, but unexpected problems occur, additional necessary services could result in a bill that may be much higher than expected. And even in situations where no complications are encountered, there’s still the risk of variance from estimated cost with different attending physicians and whether they are in-network versus out-of-network for the consumer.

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How does this happen?

Take, for example, an individual who is going in for a hernia procedure. The hospital/ambulatory center where they are receiving care and the provider that is performing the procedure may both be in-network, but the anesthesiologist could be an out-of-network physician, and will bill as such, driving up the estimated cost.

Doctor checking patients blood pressure

Insurance company support for employers

For insurance companies, a significant part of the solution boils down to providing increased education about specific benefits, and ongoing member support when it comes to comparing care options and costs. And as you work with your broker or consultant on choosing health insurance coverage for your organization, place emphasis on carriers that focus on:

Early member education

A robust, positive onboarding experience not only helps to create better understanding into how to manage the costs of care, but it is also extremely impactful on how employees feel towards their new organizations. This is especially true when it comes to the ease and confidence of understanding new health insurance plans and how best to use them.

In fact , 75% of employees who report having an “excellent” onboarding and insurance experience and feel “highly confident” in their choice of health insurance, also report that they want to stay at their companies for at least five years. However, only 53% of employees who had a “poor, fair, or good” experience choosing plans wanted to stay at least five years.

Tools to help support decision making on where to receive care

With the prevalence of high-deductible plans in today’s health insurance market, having an understanding of what the out-of-pocket cost will be for services can help drive engagement in the decision-making process for your employees. Ask carriers if they offer medical cost transparency tools that can provide estimates for providers and hospitals in the plan’s network.

Incentives for choosing high-value health care options

Some health insurance carriers offer programs that will reward your employees for their efforts to shop around for certain health services. Programs such as Harvard Pilgrim’s Reduce My Costs offer members a service that provides transparency through cost information about various health procedures and tests, and financial incentives to encourage them to make informed health care decisions about where to receive these services.

While there are still barriers to true health care cost transparency, progress is being made. Stakeholders like you, working together with your broker and your health insurance provider, will continue to advance efforts promoting greater health care cost transparency, helping to save money for your employees–and your business.