3 Radical Ideas Changing the Medical Insurance Market Today
Posted by Lowdermilk & Associates on
There are some interesting changes happening in the medical insurance market place today. These changes are hidden under all of the noise around rolling back ACA also known as Obama Care. In many ways these emerging changes may have more impact on both Employee Benefit cost reduction and the delivery of medical services.
What Do These Changes Mean to Group Benefit Plan Design
In this article I want to share with you three changes that will have major impact on the healthcare market as we know it today: 1. Transparency in Hospital Prices, 2. Reference Based Pricing, and 3. The Free Market Health Care Revolution.
1. Medical Consumers Can Now Compare Hospital Prices via New Websites
The lack of information about hospital pricing is changing. Do you know what your hospital will charge when you are admitted for a procedure? For most Americans the answer is no. Not only no, but it’s something we don’t even expect to know.
On May 8, 2013, the Centers for Medicare and Medicaid made public data that showed the amount that 3000+ U.S. Hospitals billed Medicare for the top 100 Diagnosis Related Groups. For the first time hospital prices were no longer a secret and the data provided a clear window into why patients and employers feel bewildered when confronting hospital bills.
The data exposed staggering cost differences from one hospital to another for the same procedure. In reviewing bills for the same procedure the details were more confusing than helpful to explain the vast variance in cost. This raised the question about how hospitals determine price and why they differ so widely.
A number of businesses have emerged that use this data to provide information to empower both employers and individuals to become informed medical consumers. The information is shared via websites that make it easy for you to compare hospital and medical costs.
Following are a few of the websites. Click on the link and check it out for yourself…I think you will be surprised at what you learn:
Safety and Quality of Care Comparison Websites
In addition to cost, another measurement of importance is safety and quality of care. LeapFrog, a 20 year old non-profit reports data on almost 2,000 hospital with an emphasis on safety and quality. Hospital Safety Grade provides a single grade for overall safety. You can also drill down and do a procedure comparison at the LeapFrog website. Click on one of the links below, again I think you will be surprised at what you learn.
2. LeapFrog Hospital Quality of Care Comparison – Detailed procedure Safety Comparisons by Hospital
Having this data at the fingertips of both employers and consumers will have a significant impact on the future of both Plan Design and choosing healthcare services.
Information empowers us to make better decisions. In this case your decisions impact your health and wallet in powerful ways.
If you live in Colorado State Bill 65 was passed and went into effect January 1, 2018. This bill requires health care providers (hospitals and physicians) to disclose the charges they impose for common health care services when payment is made directly rather than by a third party. So this is a trend that is gaining momentum.
2. Reference Based Pricing
Reference Based Pricing (RBP) is an emerging approach to control escalating costs of hospital benefits. It is an effort by Employers to stop the escalating and confusing hospital costs as noted in number one above. Reference Based Pricing is possible because of the data made available by the Centers for Medicare and Medicaid, as noted above.
It works like this: hospitals are paid based on a standardized method that uses Medicare as the starting reference point. Prices are adjusted as a percentage of Medicare based on location. This cost model informs the maximum price that an employer health plan will pay for certain medical procedures.
Because of the transparency of the cost model, both the hospital and employer know their costs. The element of surprise and confusion is eliminated.
As it becomes more apparent that hospitals and carriers are more interested in their bottom line, employers are using this method to significantly lower their costs.
3. Free Market Health Care Revolution
The free market movement is a disruptive force and is gaining momentum. Two Associations are helping to unify the effort and impact. Following is a snapshot of each.
The Free Medical Market Association
An association called The Free Market Medical Association (FMMA) was founded in 2014 by Jay Kempton and Dr. Keith Smith based on their mutual desire to change the face of healthcare. While this market place is in its infancy the FMMA is working to amplify their message. Their mission is to to unite all of the “islands of excellence” in healthcare and accelerate the speed and growth of the free market healthcare revolution.
The way they propose to do that is with ShopHealth, their online search tool that is like the ‘grocery store’ for healthcare pricing. FMMA members post their free market, bundled cash prices. Then medical consumers can search their database to find service providers, pricing, and comparison shop.
To see this in action please review the website of The Surgery Center in Oklahoma.
This approach is also primarily utilized by self-funded health plans as a method to direct services to specific service providers that are in essence centers of excellence. The outcome is value driven healthcare that also delivers significant savings to their employee health plans.
Medical Tourism Association
The Medical Tourism Association® (MTA), is the first membership based international non-profit trade association for the medical tourism and global healthcare industry. Members include top international hospitals, healthcare providers, medical travel facilitators, insurance companies, and other affiliated companies. The MTA seeks to provide transparency in both quality of care and pricing.
In addition to hospital costs, the MTA works with providers to deliver transparent costs on all components of medical and dental procedures.
While the majority of the MTA emphasis has been on international travel, there is a slow emergence of Domestic Medical Travel. Similar to the FMMA, employer members with self-funded health plans can direct services for certain medical procedures to specific service providers that may be domestic or international.
Because of cost and quality transparency, many patients can receive medical treatment and experience a quick recovery in another county or city for less than using a local facility.
What’s the Impact on Group Benefit Plan Design?
A. Major Mindset Shift
Some of these trends may feel radical because they represent a massive mindset change from the current healthcare experience. Starting with knowing what your hospital charges will be, the ability to compare hospital quality on your procedure, to the more radical concept of traveling to a center of excellence for treatment that is located in another city or even country.
As more and more employers design these practices into their Group Benefit Programs a major variable of success will be a shift in thinking. This requires an increased effort on education, and then social proof as employees begin to share their experience.
B. Lower Direct Costs
Incorporating Reference Based Pricing into your Group Medical Plans will impact your direct costs in a positive way.
C. Lower Indirect Costs
Making procedure choices based on quality plus cost will impact employee recovery time and their ability to get back to work faster.
Are These Ideas Right for Your Business and Group Benefits Plan?
The answer to this question depends on what’s right for your business. And the answer to that question is different for every business owner and executive I work with.
That’s why the first step in our plan design process is to understand your business culture, business goals, and any other aspects of your business that influence plan design. We can then incorporate any combination of these cost saving procedures into your partially self-funded plan.
Bottom line, many of these emerging approaches give you greater choice and control over the second largest expense on your P&L. That is always a good thing.
This article was written by Lowdermilk & Associates Partner Dave McFerrin and first published on LinkedIn.