US health care costs are the highest in the world, driven largely by high unit prices (and not by overutilization). Employers expect their carriers to get the best possible prices for provider services - and have often wondered whether carriers which have more market share are able to obtain better prices.
Hospitals and health plans must now publicly disclose their allowable prices - potentially offering a window into whether health plans with larger market presence can command better prices. Health Affairs published research in May that showed that the health plan with the largest market share in highly concentrated markets got deeper discounts than the largest health plan in less-concentrated markets. The researchers used publicly reported data as assembled by the data science company Turquoise, and looked only at services they regarded as “shoppable.”
This research leaves many questions unanswered. The researchers did their analysis by state even though many states are composed of multiple different markets. They only reported on discounts achieved by the largest carrier in each state, so this research provides no insight into the relative discounts achieved by other health plans in concentrated vs. non-concentrated markets. These are still early days for data transparency reporting, and the data for many hospitals was excluded due to data quality issues. The researchers pointed out this research did not evaluate whether lower provider prices were reflected in lower premiums for fully insured health plans
Source: LoSasso, et al Health Affairs, May, 2023 LINK Note more negative number is a higher discount.
Implications for employers:
- Consolidation of carriers can lead to lower provider prices, but these might not lead to lower overall costs. Some studies show that insurer consolidation actually increases health care spending. Insurer consolidation could also lead to higher administrative fees and poorer service by facing less competition.
- Employers can expect that data transparency can provide us with insight into pricing achieved by different carriers in the future.
- The quality and usefulness of this transparency data is likely to improve over the coming years, although this current research report is not yet mature enough to guide employers in their contracting decisions.
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Next post will be on Friday.