“You get what you pay for” has long been an adage, but in health care, this concept has been elusive for decades due to a lack of health care price transparency. Historically, health care prices have been kept as trade secrets, and federal regulations under the Sherman Act prohibited access to prices; however, a shift began when the Centers for Medicare and Medicaid Services required health plans to disclose negotiated rates — a major step toward health care price transparency.
Health care price transparency has the potential to revolutionize the health care industry, providing an opportunity for employers to get the most value for their health care spending.
The Disparity in Health Care Pricing
Commercial health insurers pay higher prices for hospital and physician services compared to public health insurance programs. KFF found that from 2010–2017, private insurers paid nearly double the Medicare rates for hospital services, ranging from 141–259% of Medicare rates.
A common misconception is that higher priced services are better quality than lower cost services. The truth is there is no consistent correlation between the cost of a health care service and the quality of the service provided. In fact, some providers offer higher quality services at lower prices. The Alliance contracts with these preferred-value providers to improve access to care for employees and reduce health care costs for their self-funded employers. Learn more about our customizable Smarter Networks.
Improve Value with Price Transparency Data
As health care costs continue to increase, employers are facing the largest annual increase in health care costs in a decade. With two-thirds of employers being self-funded, meaning they take on the financial responsibility for their plan members’ healthcare expenses, it is crucial for employers to manage health care costs for the health of their employees and their businesses.
Health care price transparency offers an opportunity for employers to be smarter health care purchasers. When employers have price information, they can analyze the disparities in price between providers for the same services. This knowledge gives The Alliance leverage to negotiate fair prices, ultimately driving down costs and achieving high-value health care. We use transparency data and our collective bargaining power to negotiate contracts based on Medicare prices. Learn more about referenced-based contracting by The Alliance.
Price Transparency Enables Steering
Health care price transparency enables employers to manage their health care spend by encouraging their employees and covered family members to use providers who offer good care at lower costs — a benefit design strategy called steering.
Essentially, steering involves motivating employees to seek care from providers offering quality services at more affordable prices. While employees are free to seek care wherever they are most comfortable, steering incentivizes employees to use providers that save themselves, their families, and their employers money.
One example of steering is tiered networks. With tiered networks, employers can designate certain providers as preferable over others through the benefit plan design. Tiers can range from best value to greatest choice and can include various care settings, including hospitals, health systems, standalone facilities, virtual platforms, and in-home settings. Generally, Tier 0 or Tier 1 options come with no or lower costs to plan participants, which encourages their utilization.
Employers looking to manage their health care spend effectively through a tiered network can take advantage of The Alliance’s premier networks. These customizable network options empower employers to maximize their plan savings by guiding employees toward preferred-value providers while still offering a broad range of choice.
The Alliance: Health Policy Advocacy
The Alliance advocates for health care policy that benefits employers and their employees and families, including health care price transparency. We work closely with state and federal legislators, providing the education and insights they need to make informed decisions about health care topics that matter to businesses. You can learn more about our health policy work here.
The Alliance also partners with various health policy organizations, including Advancing Free Market Healthcare, to amplify the collective voice of employers on health policy matters that impact health care consumers.
To learn how The Alliance can help you leverage health care price transparency to manage your health plan costs, reach out to us.
