Not yet a Member?
HR Magazine is highlighting the next generation of HR leaders.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
30+ HR education programs, including 4 NEW programs on hot topics, are available for registration.
Join us in Chicago for the latest trends and technology in talent management, and what to expect in the future.
Communication, coaching and incentives can help transparency tools pay off
Employees are better able to shop among health care providers when they can compare cost and quality data, say supporters of consumer-driven health care. But
a May 2016 study published in the
Journal of the American Medical Association (JAMA) found that only 1 in 10 employees actually use price transparency tools when they’re made available.
The researchers, who are affiliated with Harvard Medical School and Boston’s Beth Israel Deaconess Medical Center, looked at two large employers that offered an
online health care price transparency tool to their employees. The tool gave users information about what they would pay out of pocket for services from different physicians, hospitals and other clinical sites.
But instead of the availability of a price transparency tool translating into lower health care spending per employee, the researchers found that health care spending from the control group—whose members lacked access to a price transparency tool—was actually less. Those who were offered the price transparency tool experienced a mean $212 increase in combined outpatient spending (out-of-pocket and insurer-paid), which rose from $2,021 in the year before the tool was introduced to $2,233 in the year after—larger than the increase among the control group, for which mean outpatient spending rose $153.
Among those offered the tool, mean outpatient out-of-pocket spending rose $48, from $507 in the year before introduction of the tool to $555 in the year after. Among the comparison group without access to such a tool, mean outpatient out-of-pocket spending rose $30.
“As someone who sees the potential for pricing transparency to drive down health costs while improving health outcomes, the JAMA study was disappointing,” said Marcia Otto, vice president of pricing and transparency applications at
West’s Health Advocate, a Plymouth Meeting, Pa.-based firm that helps employees and their families navigate the health care system.
“Research indicates people are confused about the lack of correlation between cost and quality,” said Otto, who has nine years of experience building pricing transparency tools. “Often, even when paying out of pocket, they’ll choose a more expensive health provider because they think that cost signifies quality.” But “research has shown there is no correlation; there are high-quality, low-cost providers out there.”
David Schleifer, a senior research associate at Public Agenda, a New York City-based nonprofit, shared a different view. His organization’s
nationally representative survey, published in the April 2016 issue of
Health Affairs, found that “most Americans
do not think high-priced care is higher quality, nor do they think low-priced care is lower quality.”
Schleifer suggested that “the price information tool analyzed in the JAMA study displayed both a clinician's price for a service or episode of care, as well as an average price in the user's region for that service or episode. But users of the tool may not have understood that to mean that they could get lower-priced care. In Public Agenda's survey, we found that 33 percent of U.S. adults had checked a provider’s price. A smaller group (21 percent) had actually compared prices. But people who had compared prices were much more likely to say that they had saved money than those who had only checked a price.”
Whether the JAMA study proves to be an outlier or a red flag, making a price transparency tool available should be the first step in an educational process, most benefit specialists agree. Jennifer Benz, founder and CEO of Benz Communications in San Francisco, predicts a shift from a “consumer-directed” to a “directed-consumer” health care model, in which employees will be provided with access to personal guidance for health care shopping—rather than just given access to online tools. That could mean “real progress and perhaps better financial results for individuals and companies,” she noted, adding, “employees want—and need—more guidance in their health care decisions.”
Similarly, Otto said that the JAMA findings highlight the need for approaches such as one-on-one coaching and personalized notifications.
Most U.S. adults are unaware that prices can vary across health care providers, and a significant number of insured adults (57 percent) are not aware that physicians might charge different prices for the same services, a March 2015
Public Agenda report found.
“Every year, 58 percent of employees look for a new physician, and often they’re not equipped to find the highest quality physicians on their own,” said David Kaplan, senior partner and global leader for clinical solutions at Mercer, citing data from the federal Medical Expenditure Panel Survey. “Understandably, these employees often select doctors based on nonmedical aspects of care and patient satisfaction scores—factors which have limited correlation to quality.”
To increase the proper use of price transparency tools, Otto—drawing on the JAMA study findings and other research—advised employers to take the following actions:
Earlier this year, Lyndhurst, N.J.-based Vitals, providing health care transparency and engagement solutions,
announced that employers that made incentive payments to employees who shopped for health care using the firm’s SmartShopper platform saved an average of $625 per procedure.
Adding in Reference-Based Pricing
Transparency tools also can be combined with other plan design features that promote shopping for high-quality, low-cost clinicians. For instance, the JAMA study showed how
reference-based pricing—which sets a ceiling on what the plan will pay for certain common procedures that have
wide cost variations, such as knee and hip replacements—can drive consumers to make smarter purchasing decisions.
The California Public Employees Retirement System (CalPERS), which purchases coverage for 1.3 million state employees and their families, has successfully used reference-based pricing. In the first two years after its adoption, reference pricing saved CalPERS $2.8 million for joint replacement surgery, $1.3 million for cataract surgery, $7 million on colonoscopies and $2.3 million on arthroscopies, according to
a July 2015 report in Health Affairs.
Aon Hewitt study of large and midsize employers showed that 10 percent of U.S. employers were using reference-based pricing in their health plans, but 66 percent were considering it as a cost-controlling strategy for the future.
Especially when combined with transparency tools, “reference-based pricing can encourage consumers to comparison shop for health care, while motivating providers to adopt lower prices without sacrificing quality,” Otto said.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies