The overall share of the U.S. economy devoted to healthcare spending reached almost 18%1 in 2015. As a result, methods for cost reduction are getting increased attention. The new administration under President Trump, identified provider price transparency as one of its key healthcare reform goals. Until now, disclosure of provider rates has been very limited due to the confidential nature of this information and concerns with provider collusion. However, rising trends, coupled with the demand for increased consumerism by employer plan sponsors, have started to move the transparency needle a bit. The following provides an overview of price transparency, including the primary drivers in the self-insured market and a short list of employer considerations.
What does price transparency means?
In terms of the self-insured market, price transparency means making information more readily available to consumers. This will allow them to make better-informed decisions based on their current health status. Several carriers and independent companies have created tools to assist employees with “de-mystifying” medical rates in a consumer-centric manner. These tools allow employees to price-shop for a given service by provider, as well as factor in current benefits to estimate their out-of-pocket cost.
What factors are driving the need for transparency in the self-insured market?
The proliferation of High Deductible Health Plans (HDHPs), reference-based pricing, and narrow or custom networks all place a greater burden of cost sharing and decision-making on the employee and employer.
Increased price transparency from healthcare providers may help individuals become better consumers and reduce overall healthcare costs. However, some studies indicate that more price transparency may actually increases costs. In this article, Milliman’s Shyam Kolli explores the forces driving the need for price transparency. He also discusses potential ways to improve transparency.
In their article “CSR subsidies: Intra-year emergence,” Milliman’s Aaron Wright and Shyam Kolli assess the difference between prospective payments from the Centers for Medicare and Medicaid Services (CSM) and actual cost-sharing reduction (CSR) payments. They also discuss the effects that payments may have on quarterly financial statements for some carriers.
To mitigate risks to insurers during the transition to new health insurance rules, the Patient Protection and Affordable Care Act (ACA) includes three premium stabilization programs: the risk adjustment program, the transitional reinsurance program, and risk corridors (the three Rs). The accounting guidance and rules surrounding risk corridors are continually evolving, and there is significant uncertainty in the estimates of the three Rs and their impact on financial statements. Offsetting interactions of the risk adjustment program and risk corridors is key. Milliman consultants Aaron Wright and Shyam Kolli provide perspective in this healthcare reform paper.
Given their not-for-profit nature, it may not seem obvious that the consumer operated and oriented (CO-OP) health plans enabled by the Patient Protection and Affordable Care Act (PPACA) need to market themselves. But, argues Shyam Knolli in the latest issue of CO-OP Point of View, CO-OPs still need to differentiate their products and gain market share. Recommended strategies include using data to drive strategy and creating innovative yet easy-to-understand products.