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Cost Transparency in the Medical Field

By Sarah Johnson

Consumers are smart and savvy, especially when making big outlays such as a car, or a home. They take time to research the product they want, and identify which perks are necessary. They take into account their budget, and what their monthly payment will be once their purchase has materialized. Then they make a decision.


Price Matching Medical Care

In the medical industry, shopping around for the best priced service is almost nonexistent. Can you image hearing, “Can you call around and get three quotes for the least expensive ambulance ride before I decide who will save my son’s life?” Heavens no, and yet, there are stories of medical experts providing a needed service and charging astronomical prices.

One Utah family experienced the devastation of an automobile accident. After calling 911 an ambulance came to scene and took their small boy to the hospital. When they received the bill, it was noted that that particular ambulance provider was out of coverage for their plan, and so it was their responsibility to cover the entire amount of the life saving medical transportation, which ended up costing thousands of dollars.

Most medical providers live in a vacuum, where exorbitant prices are revealed only after services are rendered. Insurance companies discount the provider fees and pay their portion. Then consumers, end up paying the rest, either through insurance rate hikes or out of pocket expenditures.

In this article, we are going to make the argument for encouraging transparency in the medical industry in terms of the cost of services rendered. We will discuss the benefits of auditing medical expenses, and trends with MBA’s CostPlus and OpenSolutions Platform that can help save hundreds of thousands of dollars in treatments every year.

Fully Insured Plans Feed Rising Costs in the Insurance Industry

Traditionally, mid to large sized companies purchase fully funded health insurance plans for their workforce using the option of a P.P.O., (Preferred Provider Organization.) Monthly premiums are paid primarily by the employer, and the balance is paid for by the employee. When claims are made, the insurance company pays a percentage, and the insured pays the remaining cost, up to their plan’s declared out of pocket maximum. Then the insurance company pays the rest of the medical bills for that individual or family for remainder of the fiscal year.

This model entitles employees to have health care coverage, such as doctor appointments, treatments, and trips to the hospital for care or surgery. However, it can also be very costly both to the insured and to the employers, for two reasons.

Premiums rise annually.

For some companies, they have seen annual premium costs grow as much as 85% per year. This number is determined by a number of factors, including the use of insurance, changes in policy mandates, and more. Yearly increases in employee health care costs can stand alone as the cause for some companies’ profits to plunge from black to red.

Prices are negotiated down from an inflated cost.

Fully insured plans typically take the inflated price given by the medical provider and offer their members a 50-60% discount on the service. That seems like a great deal. However if, for example, a 60% discount is given on a $200 item, and that item only costs $13, the enthusiasm for the “discount” quickly wanes.

Routine expense audits are not being run.

Employers, and their employees assume that the insurance company is verifying the government mandate that the costs associated with medical treatments are, “reasonable and customary.” Provider rates are rarely questioned. With hospital goods and services being marked up an average of 300-2,000%, failure to audit claims is one of the reasons why prices continue to rise. Hospitals, doctors, durable medical equipment (DME) and other providers can charge astronomical amounts for common treatments, procedures and supplies, if there are no checks and balances.

Administration of Insured/Self Funded Plans Help Control Costs

Insured/Self Funded Plans, like those managed by MBA, are designed for companies with 50 or more employees. The employer self pays all medical costs up to a certain amount and then purchases a Stop-Loss insurance policy that kicks in after that.

A New York Times article, written by Tina Rosenberg, chronicles one Texas based company who made the switch from a traditional fully insured plan to an insured/self funded plan. Not only were they able to lower their premiums by 3% the first year, their overall costs dropped dramatically. For example, because their TPA negotiated and planned medical care, the cost of dialysis for one patient dropped from $10,000 per treatment to only $975. They saved so much money on medical costs overall that they were able to provide vision, dental and life insurance to all their employees, and a free primary care physician clinic in their office for their staff and their dependents.

Rosenberg describes the transformation, “What Texas811 did was become part of a nascent movement ……one that negotiates prices up from the hospital’s cost or the lower Medicare price, rather than down from the hospital’s higher one.”

With CostPlus, included in MBA’s insurance/self funded plans, members have the advantage of having access to physicians and facilities through out the nation, Co-fiduciary protection if balance billing occurs, fair claims pricing with auditing for unfair markups and Stop-loss coverage that results in significant premium reductions.

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