Comments on: Small & Large Business Health Insurance Costs

By: Barry Carol

Barry Carol — Sat, 22 Mar 2008 23:40:12 +0000

“In the end, if you want to know what’s driving up health care costs, you have to start with the 88-90 cents on the dollar that are driven by provider and drug costs. That’s what isn’t in the public domain today - and needs to get there. The sooner the better.”

Charlie – What will it take to get it there – regulation, state legislation, federal legislation, or providers and insurers agreeing to waive confidentiality agreements? I also think it would be helpful if hospitals move toward episode or package pricing for expensive surgical procedures. At he very least, just knowing what Medicare pays for various procedures and DRG’s would provide a benchmark to assess the reasonableness of hospital and doctor list prices. Actual insurer reimbursement rates by CPT-4, ICD-9 and DRG code would be enormously helpful, and I just don’t buy that it would drive prices higher. I don’t think the healthcare world is immune to competition if robust price and quality transparency tools existed that both patients and referring doctors could easily access.

By: Charlie Baker

Charlie Baker — Fri, 21 Mar 2008 13:56:28 +0000

Jon - I didn’t say “no, because…” I said, “yes, but…” I’m all for transparency. In fact, I’ve been talking about it for three years. But I think our prices are already transparent. No one has to buy insurance from HPHC or any other carrier without knowing the price in advance - and they can shop from carrier to carrier - adjusting benefit designs as they go - to get the best price that’s out there. That’s pretty transparent - and consistent with the price transparency you discuss above.

That said, no one knows how anyone who sells anything in a global market builds their pricebook - or whether they make more on CDs than they make on books or toys. And frankly, I don’t think anybody cares. What they care about is knowing what they’re paying for up front, and what they’re getting for their money.

Your approach would require Amazon.com, ToysRUs, and every other retailer to tell you not just what the price of the product is - but how much they make on it - and how it relates to what they make on other products. In places where we know about different prices for the same product or service (airline tickets, for example - buy ‘em six months in advance and you usually pay a lot less than the person who buys one on the day of the flight), we don’t begrudge the differential - only that we know about it in advance of making our purchasing decision.

Health plan prices are in the public domain. No one buys a product from a health plan without knowing what it costs - and we work every day to make that price as low as we can.

Provider prices, however, are not in the public domain. In addition, plans are not allowed - under the terms of their provider agreements - to share price information with anyone. It’s a jealously guarded secret. This is inherently inflationary, and completely archaic. That’s why we argued for having the state of MA collect this data from the carriers and make it publicly available to everyone. And since provider and pharmacy costs make up about 88-90% of the cost of health insurance in Massachusetts, this is where the action is in rising health care costs.

Plan pricing methodologies, etc. - at least in this market - feel to me like crumbs on the margin. Going forward, however, I do worry about the point you raise about the Connector - but you should view that as a good thing. If the Connector ends up serving as a price ceiling regulator for all small group business, your members would benefit, right? It would be the rest of the market - those employers with more than 50 employees - who would pay to make up for the deficits created by the Connector’s price fixing policies.

But I digress…In the end, if you want to know what’s driving up health care costs, you have to start with the 88-90 cents on the dollar that are driven by provider and drug costs. That’s what isn’t in the public domain today - and needs to get there. The sooner the better.

By: Jon Hurst

Jon Hurst — Fri, 21 Mar 2008 13:10:14 +0000

Thanks Charlie,
I hear ya on the broker issue, yet in the retail world all prices–in stores, on the Internet, etc.–are all transparent which forces lower prices, not higher. I am also concerned given front page of the Globe today that if we aren’t careful; if we aren’t transparent, certain small purchasers could also be asked to subsidize the state’s Commonwealth Care products. The Connector also needs clear transparency and yard sticks to compare the pricing of their taxpayer subsidized products versus small group fully insured products. In a period in which family plans are now hitting $20k per year, everything must be on the table–from full transparency, to hospital rate setting, to repealing certain mandates, to easing Minimum Credible Coverage, to even discussing whether community rating should be scrapped to force more competition. The payers are struggling.
Jon

By: Charlie Baker

Charlie Baker — Fri, 21 Mar 2008 00:28:24 +0000

Hi — Sorry, I posted above as anonymous. Oops. So Lyss - are you sure we’re twice as expensive? Seems unlikely. And Jon, I’m all for more transparency, so my answer to you is mostly “yes,” but it would depend on whether or not sharing too much of this information might look like and act like price fixing - and actually drive prices higher and not lower. Remember - the broker who represents your members uses the fact that we don’t know what the other guy’s quoting to create competition. If we know everything about what the other guy’s up to, that might lead to higher prices, not lower ones.

And I’m not sure I know how to calculate the percentage of compliance with state benefits mandates. I’ll have to ask someone at HPHC who’s smarter than me about how to do that.

By: Anonymous

Anonymous — Fri, 21 Mar 2008 00:04:47 +0000

Lyss - to be honest with you, I find it hard to believe that TAHP and HPHC - offering the same plan design you get from your current carrier - would be double the price. We might be higher - but I’ve never heard of us being that much higher for the same plan design. Are you sure your people got a quote on the same plan design from us and from TAHP?

By: Jon Hurst

Jon Hurst — Thu, 20 Mar 2008 19:44:39 +0000

Hi Charlie,
This is both surprising and good news. But just to make sure that trend continues, would you be opposed to making public on an average, aggregated basis that information on pricing by group size? I believe this would be important information for small businesses to have going forward, and would be helpful to make sure all insurers are pricing in a similar way as you. As you know, currently large group rates are not filed; neither are self-insured rates. Having that information be public on an average basis would be helpful and would make the industry far more transparent. I believe it is also very important for insurers to disclose the percentage of compliance on state mandates by their self-insured, ERISA-exempt employer clients. As you know, state mandates are costly, and may not be fair if everyone is not complying. Thanks for running the numbers Charlie.

Jon Hurst
Retailers Association of Massachusetts

By: Lyss

Lyss — Thu, 20 Mar 2008 01:56:30 +0000

My employer (a small business with like 20 employees), choose to stay with their health insurance company (despite that company raising rates) because they were still the cheapest option. Our finance/HR person said that she looked into other health insurance companies and both Tufts and Harvard Pilgrim would cost like twice what we pay now.