Controlling Healthcare Costs: Informed Employee Decisions

This past week I had the opportunity to be included in a group of savvy human resources professionals who were discussing healthcare reform options. As they discussed various new policies and procedures, each agreed that regardless of one’s political stance on the Affordable Care Act, a key to lowering healthcare costs was making individuals more consumer-minded when making healthcare decisions. Each of us in the room could point to a healthcare decision we had made either about ourselves or someone in our families without having any idea of the actual cost of the procedure. Frankly, on a personal level, I’d like everyone to be able to make informed decisions about healthcare without having to worry about whether they can afford it. I don’t want a child going without a necessary surgery or a retired person going without medication due to the cost. But, considering cost as a factor in making a healthcare decision is dramatically different than foregoing healthcare due to its extreme cost. In today’s current healthcare market because we don’t know what our healthcare costs, we don’t even consider cost as a factor. Can you imagine buying a computer, a car, or a house without cost even being a factor? In our current healthcare market, we aren’t comparing cost and quality and choosing the more expensive option because it is better for us – we are simply choosing what is available without making a conscious decision about the cost.

As a result of the ACA, the health insurance market continues to change for employers and thus employees: high deductible plans, health savings accounts, self-insured plans and the new exchanges mean controlling the actual costs of our healthcare is going to be more important than ever. Currently, I pay a copay for healthcare services everywhere I go – the pediatrician, the dentist, the specialist, the pharmacy – and not until I glance over my EOB do I have any idea of the actual cost of the services or what my insurance company is actually paying. To confuse matters even further, the EOB has a “listed” price for the service and then the negotiated rate that my insurance company pays, which is often a mere fraction of the “listed” price. In these circumstances, the “listed” price really has no meaning – is that what I would pay if I had no insurance? Is that an inflated cost of the service the provider lists for the insurance companies so a realistic price can be negotiated? In this environment, telling employees to make informed healthcare decisions with the price of the service as a factor is difficult when the employee often doesn’t see a price until after the service and then the actual price is anything but clear.

North Carolina has taken a step to change this system. Late last month, Governor McCrory signed House Bill 834 into law which, among other things, will require every hospital in the state to report certain information regarding common inpatient care services and outpatient surgical and imaging services to the Department of Health and Human Services. Specifically, beginning June 30, 2014, and quarterly thereafter, every hospital and ambulatory surgical facility will be required to report to DHHS the following information about the 100 most frequently reported admission services for inpatients: (1) the amount charged to a patient if all charges are paid in full by the patient (without insurance or government aid); (2) the average negotiated settlement on the amount that will be charged to the patient who pays out of pocket; (3) the amount of Medicaid reimbursement for each service; (4) the amount of Medicare reimbursement for each service; and (5) the range and average of the amount of payment for each service for the five largest health insurers providing payment to the hospital on behalf of insured patients. Beginning with the quarter ending September 30, 2014, and quarterly thereafter, the report must also contain the same information on the total costs for the 20 most common surgical procedures and the 20 most common imaging procedures, by volume, performed in hospital outpatient settings or in ambulatory surgical facilities.

According to the new law, DHHS will then report this information on its website so that patients can make decisions knowing the cost of common procedures prior to having them performed. In support of the law, the Governor’s office cited data showing that in 2011, for a majority of the procedures covered by the law, the highest cost in the state was triple the lowest cost for the same procedure. For example, the price of implanting a pacemaker in North Carolina ranged from $22,000 to $75,000. Putting this information in the hands of your employees can only aid your employees in making informed healthcare decisions. I am by no means advocating employers requiring employees to travel long distances or consider cost ahead of experience or quality in choosing healthcare providers, but having this information available can only help. Further, the law doesn’t require similar reporting for doctors, dentists, or pharmacies, but it is an important step for what are often high cost procedures. More rules and regulations will be developed regarding the exact reporting requirements and mechanisms, but assuming no delays, by late next year, we could all be more informed healthcare consumers.

Employers should be aware of this law and the information available on the DHHS website as a result and make your employees aware. Reducing healthcare costs in the new marketplace will be an effort of employers and employees making informed rational decisions about healthcare with cost as a relevant factor.

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