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Price Transparency and Health Plan Participants

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What You Need to Know

  • New federal regulations are supposed to give patients more information about health care prices.
  • Veteran plan participant reps say one challenge is that few patients really shop for care.
  • The reps make the case that negotiating help can help patients shop for high-quality, affordable care without discouraging the patients from getting necessary care.

Compared to the new federal transparency and the advance explanation of benefit requirements, reference-based pricing, combined with expert participant representation, is much more likely to succeed at managing employer and participant medical spend.

If you field questions and concerns from plan administrators on excessive medical costs, you know that a common issue facing health plans today is price transparency.

Plan sponsors and their participants currently lack access to information about fees and quality.

That can increase financial fragility as a barrier to obtaining the best care at the best price.

Thus, even minimal improvements in transparency may improve clinical and cost outcomes.

A quality health plan should provide easy, direct access and understanding of pricing, benefits and out-of-pocket expense information so plan participants can make informed and cost-effective decisions.

New federal laws mandate the provision of information that can make this a reality for all.

By taking advantage of this legislation, plan sponsors can empower participants to become effective healthcare consumers, enabling them to proactively manage their care, compare provider fees, obtain an estimate of the benefits and their out-of-pocket costs so as to make cost-conscious decisions and achieve savings — if the sponsors can motivate the participants to shop for care.

Price Transparency Rules

Transparency in Coverage, final rules, a set of regulations released by the U.S. Department of Health and Human Services, is intended to improving price and quality transparency in health care.

The requirements provide pricing information directly from providers through their health plans.

Starting Jan. 1, 2021, the Centers for Medicare and Medicaid Services mandated that hospitals, health systems and other medical providers provide clear, accessible pricing information online about the items and services they provide.

Under CMS guidance and final rules, pricing information must be available in machine-readable format.

This includes a list of shoppable services typically non-emergency treatment that is scheduled in advance.

Advanced Explanation of Benefits

The No Surprises Act also requires health plans and insurers to provide an “advanced explanation of benefits,” or AEOB, to the covered participant member for all scheduled services prior to services being rendered, regardless of whether the services are in or out-of-network.

The AEOB must be issued within certain timeframes after the provider submits to the plan or insurer a “good faith estimate,” or GFE, of charges for each service.

AEOB is the only document that would give participants sufficient information so that they can identify the actual costs they will incur for non-emergency treatment.

What It Means: Promise vs. Reality

The inherent promise in price transparency and the advance explanation of benefits requirement is better health outcomes and moderation of the ever-increasing cost of care.

This can be achieved through improved patient-consumer decision-making, care coordination, and customer experience.

The reality of price transparency is that patient-consumers alone cannot lead efforts for change using nebulous estimates of potential savings.

However, greater price transparency will have little value unless participants actually shop for medical care.

That would require a dramatic change in patient behavior.

Transparency, therefore, in the form of pricing data alone won’t prompt a change in patient behavior, particularly when plan design follows traditional forms of point of purchase cost sharing — deductibles and coinsurance.

Plan participants will likely be more confused than informed by a list of prices that do not reflect what they will pay out of pocket.

The only transparency that really counts — one that will prompt genuine behavior change — is a clear demonstration of the impact on the patient’s out-of-pocket costs.

Numerous studies show that high costs will prompt unprepared participants to delay or forego care.

So, cost avoidance is the one factor that will prompt participant behavior change.

A plan sponsor’s education process should include both repeated prompts regarding ongoing education, and notices incorporated in AEOBs that participants may be able to lower their costs by shopping.

The best claims administrators will include a side-by-side comparison in their AEOB process that shows actual claims processing fees and cost sharing differences and will also incorporate this process in their AEOBs.

Reference-Based Pricing

Even with greater transparency, significant price variations can still exist across hospitals and providers for standard procedures.

To mitigate this, many health plans have found value in adopting reference-based pricing strategies.

Designed to moderate excessive hospital costs, reference-based pricing establishes a benchmark fee schedule and payment ceiling instead of negotiating fees with a provider network.

Plan administrators can benefit from the consistent application across all providers and health networks.

Reference-based pricing is one of the fastest growing solutions in health benefits cost management.

It brings stability to health care prices and point of purchase cost sharing by using Medicare reimbursement rates and other provider cost data to provide an objective cost baseline.

This offers disciplined pricing — fair and rational reimbursement for providers.

Plans that use a reference-based pricing strategy often achieve a competitive financial advantage, because only a minority of plans have adopted reference-based pricing to date.

Deploying reference-based pricing may avoid unreasonable or excessive provider charges — potentially lowering both the cost of coverage (employer and employee contributions, over time) and employee point of purchase cost sharing (deductibles, copayment, coinsurance).

However, to be certain reference-based pricing lowers participant-paid expenses, reference-based pricing should be combined with participant representation services to avoid or moderate any balance billing.

How Tech Can Help

Today, plan sponsors, administrators and participants can get help from health price data and data analysis solutions, combined with participant representation services.

Those tech-driven systems empower plan participants to make the best possible cost-benefit decisions and do their part to lower health care costs.

Fountain pen (Image: iStock)Christine Cooper is the CEO of aequum and the co-managing member of Koehler Fitzgerald, a law firm. She leads the firm’s health care practice. Jack Towarnicky is a member of aequum and an employee benefits compliance and planning attorney.



(Photo: Shutterstock)


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