Transparent pricing can help tackle health care costs
While policymakers debate the best way to fix the country’s broken health care , some employers can wait no longer. We are quietly taking matters into our own hands by forgoing the expensive and opaque traditional insurance model. Insteadwe are contracting directly with health providers that offer services at transparent and far lower prices.
Take my staffing company, Employee Solutions, based in Plano. Like many companies, we struggled to absorb annual health care cost increases of 10 to 20 percent. The Kaiser Family Foundation recently reported that the average cost of employer-provided family health care coverage exceeded $20,000 this year. Because of these high costs, the number of businesses with fewer than 50 employees that offer health coverage has fallen by 15 percent since 2012.
Unlike many businesses, we did something about it. After surveying our employees and conducting market analysis, we determined that a major source of inflated health care costs was our traditional insurer. Its hidden pricing mechanisms and contract arrangements with hospital provider networks were confusing, limited and very expensive.
So we joined a small but growing movement of businesses that have traded the traditional insurance model for direct contracting with primary and surgical care centers whose prices are clear. We offer our employees free access to telemedicine and onsite primary care access with no copays, deductibles or paperwork. For surgeries, we provide employees a share of the savings we enjoy through cash bonuses. Even without insurance picking up part of the tab, the costs these health centers charge are orders of magnitude less than those from traditional providers.
For instance, one of our partners, the Surgical Center of Oklahoma, an early adopter of transparent pricing, charges $15,500 for knee replacement surgery. Prices for the same procedure at Dallas hospitals, for example, vary from as low as nearly $17,000 to as much as $61,500.
The total savings are striking. We’ve been able to cut our health care costs by nearly 50 percent over the past several years from about $800 a month per employee to roughly $450. Because our employees pay a small portion of their coverage costs, they’ve seen their costs fall by nearly half as well.
Perhaps the best part — for both the business and our employees — is no more surprise bills. We know exactly what we are paying before care is provided. This allows us to budget our health care costs more easily and gives our employees peace of mind.
Under the previous structure, our employees would often put off going to the doctor because they were blindfolded from the cost. A common procedure could cost $100 or $1,000, depending on the provider and the insurer’s negotiated rate. This avoidance could often lead to more severe (and expensive) health issues down the line.
I frequently hear from other employers pursuing this health care model. But for it to go mainstream, health care prices throughout the system must be made transparent. That means shining a light on the secretive negotiated contracts among providers, insurers and thirdparty administrators. This would allow employers to create an accurate costbenefit analysis of potential plans. Armed with this information, employers can shop among insurance plans. If pricing reveals that insurers pay less in negotiated rates than they charge the business, employers can follow our lead and do away with them entirely.
Such pricing information would control costs just like it does in nearly every other area of the economy. Patients would gravitate to health care options with the most bang for the buck, and providers would be forced to compete on price.
President Trump recently announced an executive order to require such transparency, but hospitals and providers are lobbying against it. While it might not generate headlines like the latest comprehensive health care reform efforts in Washington, transparent prices are generating real results. That’s more than we can say about Congress.