Employers have a stake when health care cost transparency leads to outrage

June 9, 2013

Care episode … bill … outrage – It’s a new pattern emerging in the health care industry that is going to go into overdrive next year as millions more Americans get health insurance.

Case-in-point, here are two recent eye-opening stories on outrageous hospital bills:

These come on the heels of a recent report on wild swings in hospital charges, not to mention Steven Brill’s chargemaster exposé earlier this year. My last blog post on transparency  also came at a time when disparities in care costs for non-care-related reasons, like geography, were in the headlines.

Peeling back the layers of health care pricing certainly gives health care consumers reason to question costs. But it also has some big implications for employer-sponsored health care – especially given the trend toward account-based health plans in the workplace.

Outrageous health care pricing presents a special hurdle for employers in their quest to optimize health benefits for their employees and retirees.

Skin in the game is an important part of the consumerism concept – as employees use more of their own dollars to pay for health care, they tend to economize – leading to cost-savings for them, for their employer and for the health care system.

However, it’s hard to expect consumers to rationalize their health care usage when out of pocket costs can be so irrational and vary so wildly.

So while the trend toward account-based health plans increases, expect to see more of the care episode–bill–outrage pattern as more employees are hit with a larger share of costs through account-based plans.

This sightline is going to be important to rationalizing costs and care because economizing on care can cut both ways: If it’s not done effectively – for example medications are not taken as often as prescribed or chronic conditions are not managed closely – it could end up harming an individual’s health status and  requiring more extensive intervention down the road.

And when such individuals are part of an employer’s overall health benefit population, employers are bound to end up paying more in rising health benefit costs down the road, too.

Offering cost-cutting measures alone doesn’t work without consumerism tools, such as up-front transparent access to the costs of care (i.e., before the bill arrives) and the ability to do apples-to-apples comparisons on health services and products that help employees be responsible health care consumers.

Jeanne Denz, director of Global Benefits for General Mills, said it well at an employee health care conference in New York this March. She shared General Mills’ highly effective health benefits program – one that offers employees innovations and convenience in managing their health along with increasing transparency to the costs of their care. Part of General Mills’ organizational philosophy is that, as it asks employees to take a more active role in managing their care, it should also provide employees with better tools for managing their health and their health care costs.

Exchanges can play a pivotal role in helping support health care consumerism for employees. Exchanges can also help employers optimize their health benefits and give them visibility into how those benefits are working, over time.

Towers Watson has found that consumerism tools are among a host of high-performing health benefit components that have allowed employers to get a handle on costs. These components include self-funding health benefits, high-quality wellness programs, care management for chronic conditions, incentives for positive health behaviors, offering Medicare-eligible retirees plan choice through our Medicare exchange (and other populations as exchanges become viable options for them), and more. Towers Watson’s clients who have performed best on managing health costs have implemented these types of programs.

Health exchanges have a ready-made environment for offering robust data-analysis tools and advice centers. In addition to helping employees and retirees become intelligent purchasers of health care benefits, the most effective exchanges will allow employers to continue to manage employee wellness by providing high-performing health plan features such as coordinated care, chronic disease management, narrow networks and so on, to maximize the value of their health care spend and ensure that they have a healthy and productive workforce.

The move forward into health care’s future is bound to get bumpy and noisy, but that’s not all bad. The bumps and noise may be what’s needed to help bring the rest of the system in line with the new health care consumer’s need for access to data, decision support and fair pricing.

One Response to “Employers have a stake when health care cost transparency leads to outrage”

  1. Thanks for the great article. Your call to offer such toolssuch as up-front transparent access to the costs of care (i.e., before the bill arrives) and the ability to do apples-to-apples comparisons on health services and products that help employees be responsible health care consumers is spot on.

    Healthcare, for consumers, is not a true marketplace – how can it be when most people never know a priori the cost of a treatment, and when, as you note, that cost can vary so irrationally widely that knowing doesn’t improve decision making? The destination healthcare market is interesting because providing an all -inclusive price right up front, with full transparency regarding what is and is not included, is something that, if you fail to offer, you’ll fail to attract patients.

    The lack of familiarity means consumers need more sources of information to make the important decision to go abroad for medical treatment and of course price is one of the, if not the, most important considerations for many people. No one would dream of traveling to, say, India without an agreement on what the cost of the hip replacement surgery will be. So destination hospitals have had to enable this apples-to-apples comparison to consumers* – It’s a case of necessity being the mother of innovation and US providers are already making noises about following suit (e.g. see Healthcare Blue Book).

    *sample here: http://database.nuehealth.com/menu/Default.aspx?category=Cardiology

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