Employers Role in Healthcare Price Transparency Ecosystem

As of 2021, half of the US population has health coverage through employment which is 54.3%. While 35% have coverage from government plans. 

According to Kaiser Family Foundation, the average insurance premium for single and family coverage has increased by 4%, with average annual premiums of $7,470 for single coverage and $21,342 for family coverage in 2020.

The constant rise in premiums makes healthcare access problematic for Americans. 

4 in 10 Americans say they delay seeking care due to exorbitant healthcare costs. At the same time, half of the US population finds it hard to afford healthcare costs. 

A quarter of US adults report cutting pills in half, avoiding filling prescriptions, or skipping drug doses due to elevated costs. The larger share of this quarter includes Black and Hispanic adults and women. 

Almost 30% of Americans cannot afford out-of-pocket (OOP) costs. Additionally, 47% of insured individuals cannot afford OOP costs, and 27% cannot afford to pay for deductibles.

The above points indicate that we need a scenario where healthcare becomes affordable and cost-effective. Healthcare Price Transparency is one such way to help Americans make value-based care decisions. 

Why is the Role of Employers in Healthcare Price Transparency So Important?

Employers offer healthcare insurance and benefits to their employees. The employers negotiate with insurance companies on behalf of their employees. Employees think that employers are well-informed about the negotiated healthcare rates. But in reality, many employers pay a lot through third-party negotiations because the negotiated pricing information on providers blinds them.

To have an efficient and functioning market, you must have price information. So the price transparency mandate legally requires hospitals and insurance companies to post their negotiated prices on their websites.

The transparency in coverage mandate affects the employers directly. 

1. From July 1, 2022, the employers must publish their in-network and out-of-network cost data in machine-readable file formats.
2. From Jan 1, 2023, they must provide members with a consumer-friendly tool to access 500 service costs, and starting on Jan 1, 2024, the employers must provide the cost of all services. The employers must work with their insurance partners to help them provide this information to their employees.

Employees can make better healthcare decisions if they know how much their procedures and services cost and their OOP portion.

Employers must make price transparency tools available to employees and advise them to seek services from low-cost and high-quality providers.

Eliminate Third-Party Administrators

With transparent pricing data of healthcare costs, employers can avoid intermediaries and make direct contracts with providers. With no third-party agents, employers can lower the expenditure on healthcare per employee.

Educate Employees

Employers can help employees choose low-cost care providers. They can organize and conduct one-to-one conversations with employees to help them better understand healthcare costs. They can educate employees about the benefits of healthcare price transparency.

Incentivize Employees

Employers can emphasize the power they get as purchasers or consumers of healthcare services. With pricing data, it is possible to compare the costs of services offered by different service providers. They gain insight into how their contracted hospitals compare prices with other hospitals. Thus, they can drive value-based purchasing. Further, they can also incentivize employees to choose low-cost providers.

Employers can demand the best prices for the highest quality services. They can ask for the best services and pay for the best-performing hospitals and doctors. 

With the price transparency data available from hospitals and insurance companies, employers can use that aggregated pricing data to negotiate directly with providers without third-party administrators (TPA) or insurance. For example, suppose a self-insured employer is based out of Atlanta. In that case, they can verify the pricing data from Emory hospitals, Northside hospitals, Wellstar hospitals, Piedmont hospitals, Grady hospital, and the data from the insurance companies that have negotiated with providers in the Metro Atlanta area. 

The employer who was dependent on TPAs or insurance for negotiation and claims processing can be able to deal directly. They even can demand the providers to bid for their employees’ services and choose the lowest-priced provider with high-quality ratings. They will be able to get the lowest rates and save money for both the employer and also the OOP costs for their employees. 

The employer can incentivize the employee to choose the low-cost provider with shoppable services. Employers can also form a consortium, start demanding the best prices from providers and avoid the insurance and TPA altogether. They can save 15-20% on administrative costs by choosing the lowest-cost provider and the previously unknown costs that the TPAs or insurance overpaid the providers.

When employees know how much healthcare services will cost, they can plan a budget around them. In addition, employees can have that control over their total healthcare spending. So, if an employer is looking to reduce the cost of healthcare for their employees, price transparency data and aggregator tools are essential. 

The employers can move the needle from insurance to the employer’s side and become the dominant payors in the coming years. With the price transparency mandates, transparent data and more government regulations on healthcare services, there will be a massive disruption in how healthcare is purchased.