Smart Benefits: The Naked Truth About Healthcare Costs
Wednesday, April 25, 2012
For many years, consumers were only responsible for copays. While this approach kept things simple and predictable (i.e. a $10 office visit), consumers only saw a fraction of what healthcare really cost. What they didn’t know was that providers were charging more than the copays to insurers, who passed the costs along to employers in the form of insurance premiums. And despite healthcare costs rising every year, copays didn’t keep up with inflation, so consumers were left believing their coverage wasn’t so pricey after all.
Enter Consumer Directed Healthcare
Along came consumer directed health plans, which exchanged lower insurance premiums for higher deductibles (out-of-pocket expenses). This shift transferred more responsibility to the consumers along with pressure for them to be more accountable with their healthcare dollars – the hope being that they would be more selective and not “overuse” services. What was missing, however, was available price information from insurers and the providers.
Some insurers experimented with online price estimators, but these programs were limited:
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they offered broad ranges of costs or averages based on geographic areas
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actual costs could vary once the individual had services
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only some services could be priced
Since the price estimators were not based on an individual’s actual claims and only pieces of the total costs were revealed, they made it difficult for consumers to compare and shop. When these programs failed to deliver the needed information, market forces like the pressure of healthcare reform, the push for improved quality, and advanced technologies prompted insurance carriers to improve price transparency for the consumer.
Improved Price Transparency
Transparency means exposing information about costs, quality and settings of care for services, for example, the variations between having an MRI performed in an outpatient center versus a hospital. The result? Consumers can make better, more informed decisions.
Insurance carriers like Cigna and UnitedHealthcare are responding to the push for transparency.
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Cigna. In March, Cigna launched a new, online service that provides accurate pricing and quality information for more than 200 common medical procedures (which represent 80% of all claims). Through myCigna.com, consumers can assess medical costs and related fees by specialists and facilities according to the real-time status of their deductibles and out-of-pocket costs. When consumers are “shopping,” they can get a price estimate that includes the physician costs plus associated fees like anesthesia and facility charges based on actual claims payments. Cigna claims they can get within 10% accuracy of real costs 90% of the time.
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UnitedHealthcare. United has introduced similar technology in select markets that integrates personal plan design and out-of-pocket costs with the cost of services. In addition to providing personalized cost estimates, United reveals marketplace averages and presents several treatment options with their cost comparisons. The program also adds a Care Path functionality that allows an individual to set appointments, tests and follow-up care for the health services that need to be delivered over a period of time.
The Bottom Line
Information is power. And in this case, it could mean mighty savings. According to a study by Thomson Reuters, there could be as much $36 billion in savings off the cost of employer-provided health insurance plans if consumers engage and use these powerful pricing tools. That could go a long way toward revealing more affordable health care.
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