For patients with health insurance, what they actually pay out of their pocket depends not only on the price of the services they use, but also on the structure of their insurance plan. — TNS
When the idea of price transparency first took hold outside purely academic circles, the pitch was simple: people of the American state of Colorado would save themselves and the system money by shopping for healthcare the way they do for TVs or cars.
But shopping for healthcare has proven more difficult than buying consumer goods.
A poll released in August (2024) found about 69% of surveyed Coloradans who needed hospital care attempted to find out what it would cost them in advance, but only about 43% succeeded.
And while healthcare costs might be higher if the American federal and state governments had never required hospitals and insurance companies to post prices, the cost of covering a family with commercial insurance has gone up 24% nationwide since 2019, according to the US non-profit healthcare research group KFF.
Colorado state agencies and others have pivoted their approach in the last few years.
New tools, while available for individuals, focus on employers and communities to drive costs down, and insurers are giving patients more direct incentives to shop around.
While not enough time has passed to know whether the next iteration of price transparency will be more successful than the one that proceeded it, a few examples suggest new tactics could work, at least under some circumstances.
New tools
Colorado has made major strides in ensuring residents have transparent information, such as allowing patients to sue if a hospital that didn’t post its prices pursues them aggressively for medical debt, and making it a “deceptive trade practice” not to publish that information, said Colorado Lieutenant Governor Dianne Primavera, whose office includes a division focused on healthcare costs.
But those measures alone won’t solve the problem of unfair variation in prices between hospitals, or even within the same hospital, she said.
Insurance “carriers and employers can use this information to negotiate fairer prices,” she said.
“If you can save an employer money on healthcare costs, you ultimately save employees.”
The hopeful view of price transparency is that employers and third parties will be more successful in bringing down rates than individuals have been, either through negotiations or by steering patients toward the best value, said KFF senior vice-president Gary Claxton.
But the data may not be clear enough to allow them to make informed decisions, and in some markets, cutting the most expensive hospitals out of an insurance network may not be feasible, he said.
“There’s always the question of whether any of this stuff works,” he said.
“How good is this information?”
Earlier last autumn (2024), the Colorado Department of Health Care Policy and Financing unveiled a transparency tool that allows the public to search for rates by county, hospital, insurance company, plan type and procedure.
In late October (2024), Colorado Governor Jared Polis announced a different tool, developed by the non-profit group Patient Rights Advocate, which allows searching by hospital and procedure.
Transparency is the first step toward a functioning healthcare market, he said.
As it is, people can pay significantly different amounts for the same procedure with the same doctors in the same hospital.
“Before our legislature passed the law to require transparency, nobody knew this,” he said.
The new tools haven’t been around long enough to know if people will use them.
A dashboard drawing from Colorado’s All-Payer Claims Database gets about 2,000 views per month.
However, officials don’t know how many individuals that represents or how they use the information, according to the Center for Improving Value in Health Care, which runs it.
While the new Department of Health Care Policy tool can be useful to consumers, the bigger impact may come from employers, chambers of commerce, or even entire communities banding together to demand better rates if they see they’re over-paying, said the department’s executive director Kim Bimestefer.
“These tools are the next generation,” she said.
“For a family alone to change the whole infrastructure of healthcare, that is an unfair ask of a family.”
Complicated calculations
Generally, patients get the most accurate results by calling their hospital and their insurance company, rather than trying to figure it out on their own, said Colorado Hospital Association spokeswoman Cara Welch.
Tools focused on employers and insurance companies could be more useful, however, in partnering with hospitals to find the right prices, she said.
“Colorado hospitals recognise that healthcare affordability and transparency can be confusing for consumers, which is why all hospitals not only comply with state and federal regulations, but also offer consumer-friendly tools to help patients understand their specific financial impact based on their insurance and the procedure or care they need,” she said in a statement.
Price transparency tools show significant differences in what health plans pay to hospitals for common procedures, but those differences may not be meaningful for patients.
What patients pay depends not only on the price of the services they use, but also on the structure of their insurance plan.
For hospital-based care, a patient with commercial insurance will typically owe a percentage of the cost of their stay until they hit their out-of-pocket maximum.
Under US federal law, the maximum couldn’t exceed US$9,450 (about RM42,238) for an individual and US$18,900 (about RM84,475) for a family in 2024.
Say a hypothetical patient living in the Denver area needs a hip replacement and owes 20% of their hospital costs until they reach their out-of-pocket maximum.
According to a price transparency tool recently unveiled by the state, the price of that surgery and the services that come with it range from about US$12,000 (about RM53,636) to US$51,000 (about RM227,955), depending on what type of insurance the patient has and what hospital they choose.
If the patient has used very little care during the year, that gap makes a significant difference in what they pay: about US$2,500 (about RM11,174) versus more than US$10,000 (about RM44,694).
If they’ve already had a difficult year and racked up enough medical bills to come within a few thousand dollars of their out-of-pocket maximum though, they would pay the same amount, even if their care cost their insurance almost US$40,000 (about RM178,781) more.
A similar disconnect can also appear when the patient is responsible for a flat co-pay, rather than a percentage of their care costs.
Giving rebates
Colorado’s employee health plan has tried to make the connection between prices and patients’ finances more direct.
In 2022, the American state started giving employees financial incentives, i.e. partial rebates on their care, if they chose providers that had above-average results at offering what the US Health Care Blue Book, which ranks hospitals on a variety of services, deemed a “fair price”.
The state’s Department of Personnel and Administration said at the time that it hoped to save about US$1.50 (about RM6.70) for every US$1 (about RM4.47) in incentives it paid out.
In the first year, the state’s employee health insurance programme saved about US$990,000 (about RM4,424,989), or roughly US$2 (about RM8.94) for every dollar it spent on incentives, said department spokesman Doug Platt.
In the second year, it saved more than US$1.8mil (about RM8mil), or US$3.50 (about RM15.64) for every dollar spent, he said.
The department hasn’t compiled numbers about outcomes, but anecdotally, employees appear to be missing fewer work days when they need medical care, Platt said.
The state hasn’t surveyed its workers, but participation increased in the second year, which suggests people were satisfied and recommended it to their co-workers, he said.
“The first year we rolled it out, it was successful,” he said.
“The second year, it was even more successful.”
Colorado Worker for Innovative and New Solutions, the state employee union, has gotten generally positive feedback about the programme, executive director Hilary Glasgow said.
In general, workers are in favour of reducing healthcare costs in any way that doesn’t decrease care quality, she said.
“People have found it helpful,” she said. “It’s helped them save money or get a rebate.”
Higher co-pay
While the state employee plan has only offered carrots so far, other insurers have been less hesitant to pull out the sticks.
American health insurance company UnitedHealthcare now has a set of plans, called Surest, that adjust patients’ out-of-pocket costs based on an algorithm that factors in their provider’s prices and quality scores.
UnitedHealthcare Colorado vice-president Mark Olson declined to share the number of people using the plans, but said about one in five of the insurer’s large multi-state customers will offer Surest as an option in 2025.
Essentially, the Surest plan eliminates co-insurance and deductibles, so patients only pay a co-pay upfront.
The co-pay is higher if the provider charges higher prices or has worse outcomes.
Unlike typical insurance, where people pay a higher percentage of their healthcare costs before meeting their deductibles, the patient’s share stays the same until they hit their out-of-pocket maximum.
Employers saved about 11%, or US$412 (about RM1,842) for each employee each month, Olson said.
The average worker’s out-of-pocket costs were roughly half what they had been under the old model, he said, and annual premium increases were smaller than in traditional plans.
UnitedHealthcare has posted the prices it pays to doctors and hospitals for years, but customers rarely used it, either because they didn’t know how to, or didn’t see how it made a difference, Olson said.
In some cases, people seemed to choose the expensive providers because they assumed the care would be better, he said.
“With this, it’s baked in,” he said. – By Meg Wingerter/The Denver Post/Tribune News Service
