Health Law Pricing and the Exchanges

March 25, 2013June 12, 2015 admin

Implementation of several of the largest changes for Health Care Reform will take place in 2014. One major step is the creation of the Health Care Exchanges that will enable consumers to buy insurance directly, with or without employer sponsorship. As insurers and providers prepare their offerings for the exchanges, one goal is to offering lower cost options for consumers. A manifestation of this drive is the emergence of “Narrow Networks”. Providers are offering discounts to be part of a narrower group of providers that insured members can use to remain in network. Providers are expecting that they will get more volume for the lower price. These narrow networks will limit the choices consumers have and may add to additional out of pocket costs if they choose to go outside of the networks. Read on and Hold on, the changes are just beginning.

Health Law Pricing Begins to Take Shape.

Wall Street Journal – By ANNA WILDE MATHEWS and JON KAMP

Hospitals and health insurers are locking horns over how much health-care providers will get paid under new insurance plans that will be sold as the federal health law is rolled out.

The results will play a major role in determining how much insurers will ultimately charge consumers for these policies, which will be offered to individuals through so-called exchanges in each state.

The upshot: Many plans sold on the exchanges will include smaller choices of health-care providers in an effort to bring down premiums.

To keep costs low, the insurers are pressing for hospitals to grant discounts from the rates hospitals usually get in commercial plans. In return, participating hospitals would be part of smaller networks of providers. Hospitals will be paid less by the insurer, but will likely get more patients because those people will have fewer choices. The bet is that many consumers will be willing to accept these narrower networks because it will help keep premiums down.

Tenet Healthcare Corp., one of the biggest U.S. hospital operators with 49 hospitals, Tuesday said it had signed three contracts for exchange plans that would involve either narrow or “tiered” networks, in which people pay more to go to health-care providers that aren’t in the top tier.

Tenet said that in exchange for favorable status in these plans, it granted discounts of less than 10% to the three insurers, which it said were Blue Cross & Blue Shield plans covering 15 of its hospitals, or around 30%.

“It makes strategic sense for us,” said Trevor Fetter, Tenet’s CEO, in an interview. “There will be a market here, and it’s important for us, we believe, to participate in that market.” He said that insurers around the country have approached Tenet to discuss similar plan designs.

Analysts said Tenet’s disclosures, which came during an earnings call with analysts, are the most explicit from any hospital chain so far about how the negotiations are shaping up. “It’s the clearest statement they’ve gotten about exchange products, pricing and impact,” said Sheryl Skolnick, an analyst with CRT Capital Group LLC.

Exchange plans will take effect in 2014. In that first year, health plans sold on the exchanges could have 11 million to 13 million enrollees and generate $50 billion to $60 billion in premium revenue, according to an estimate from PwC’s Health Research Institute, an arm of PricewaterhouseCoopers LLP.

Stonegate Advisors LLC, a research firm that works for health insurers, has been testing clients’ plans with consumers in a mock-up version of an exchange, which is an online insurance marketplace. Marc Pierce, the firm’s president, says nearly all the products have included limited provider networks.

The tests have found that premiums are the most important factor in consumers’ choices, he said, with more than half typically opting for a narrow-network product if it cost them at least 10% less than an equivalent with broader choice.

Florida Blue, the Blue Cross & Blue Shield plan in the state, will offer plans with a “tighter, more select group of providers” in its exchange, said Chief Executive Patrick J. Geraghty in an interview. “We believe the exchange is going to be driven by price, and therefore we’re looking for a lower-price option.”

The insurer has already struck deals for narrow-network plans and will use those same terms for the exchange versions, it said. Florida Blue said it has been winning discounts of 5% to 10% off typical commercial rates from hospital systems, but getting breaks as high as 20% in some cases.

Plans with smaller choices of health-care providers are a big focus for insurers, partly because many other aspects of exchange plans, including benefits and out-of-pocket charges that consumers pay, are largely prescribed by the law, giving them few levers to push to reduce premiums.

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Increase in health tests, procedures is raising costs in frugal Utah

May 24, 2010 J Roberts

The rising cost of healthcare is everywhere. Even in small town communities, where spending tends to be small or limited, people can’t avoid the increase in healthcare costs. What’s driving the increase? It appears to be over utilization. Essentially, this means that the number of test and procedures is on the rise. This is due to the addition of new surgical and other specialty suites and increased technology at hospitals. These services are all paid for on a fee-for-service type arrangement – meaning the more test one does, the more the doctor or the facility performing the test or service will receive in payment.

By Jordan Rau

Kaiser Health News

PROVO, UTAH — If there is any place that should have medical spending under control, this is it. Residents of Provo, many of them Mormons who don’t smoke or drink, are among the healthiest in the country. The city’s biggest hospital is run by Intermountain Healthcare, which President Obama has lauded for providing high-quality care while restraining costs.

Until recently, Provo seemed to be a model for the nation. But spending on Medicare patients here has accelerated rapidly, as it has in many other areas of the country that are known for cost-efficient care.

The culprit: a swift increase in the number of procedures and tests being performed — a trend that has coincided with the additions of new surgical and cancer treatment suites and diagnostic machines at hospitals and clinics throughout the growing region.

“It’s very discouraging to see costs increasing rapidly in those low-cost areas we believe to have good care,” said Paul B. Ginsburg, president of the Center for Studying Health System Change, a Washington-based research group. “They appear to be succumbing to the same forces that have led to high costs elsewhere.”

This transformation calls into question initiatives — including some in the new health-care law — to encourage more profligate regions to learn from their frugal counterparts.

Medicare spending trends often parallel those in the country’s overall health system, experts say. In 2007, average Medicare spending per person in the greater Provo hospital market was $8,064. That was below the national average of $8,682, but far higher than it had been a few years earlier.

Between 2000 and 2007, Medicare spending in the Provo region rose on average 8.6 percent a year, nearly double the average national rate of 4.7 percent, according to the Dartmouth Atlas of Health Care, which analyzes geographic variations in medical spending. Provo’s growth occurred as Medicare beneficiaries underwent surgeries more frequently and spent more of their dying days in intensive care units.

Provo’s spending increases aren’t an aberration. Annual average spending grew 7 percent or more in other traditionally low-cost areas, including Oxford, Miss.; Wausau, Wis.; and Durham, N.C. Even in Rochester, Minn., home of the highly regarded Mayo Clinic, and Salt Lake City, where Intermountain is headquartered, Medicare costs grew faster than the national average, according to Dartmouth.

The increases are particularly worrisome in places where many providers have made changes to try to reduce costs. These include adopting electronic medical records, focusing on prevention and increasing cooperation between doctors and hospitals.

But Provo’s regional hospital market, which stretches south of Salt Lake City and includes nearly 27,000 Medicare beneficiaries in a population of more than half a million, also has embraced some of the less admired traits of expensive health-care markets.

Many doctors have set up their own large clinics where they share in the profits from diagnostic tests and other services. Physicians in the Provo region performed 17.3 percent more procedures on Medicare patients in 2008 than they did in 2000, outpacing the median national increase of 13.7 percent, according to a Government Accountability Office study.

“The first surgical center in Utah County was built by a physician from the hospital,” said Rulon Barlow, a former county health commissioner who runs the student health center at Brigham Young University in Provo. “So what did the hospital do? It built a surgery center. It wasn’t too much longer that another outfit came in across the street.”

Wendell Gibby, a radiologist who owns an imaging clinic, said he has seen a dramatic change in the area. “The gastroenterologists owning their own CT scanners, the oncologists owning their own radiation machines” are examples, he said. “If you’ve got a $1 million scanner, you end up using it.”

Hospital executives and doctors insist that they guard carefully against performing unneeded procedures. Scott E. Bingham, a cardiologist at the Central Utah Clinic, said: “The only thing that I see increasing in Provo is the number of patients we see.”

And Mike Kennedy, a family doctor and the chief of staff at the Hospital Corporation of America’s Timpanogos Regional Hospital in Orem, just north of Provo, speculates that the higher costs are the result of better care. “You’re probably seeing more aggressive treatment earlier on in disease stages,” he said.

But some treatments were being performed more frequently in Provo while decreasing nationally, according to Dartmouth data covering 2000 through 2005. They included operations to clear leg arteries and replace heart valves.

The number of aortic-aneurism repairs and hospitalizations for hypertension and asthma also rose faster than the national average. Though many procedures are still performed less frequently than elsewhere, a Dartmouth study released in April singled out Provo for having the highest rate of shoulder-replacement surgery in the country.

Commercial insurers say prices in Provo and the rest of Utah still remain lower than the national average. But experts say that could change, too.

“We take some comfort that we have less of a problem in Utah than elsewhere,” said Kim Bateman, vice president for medical affairs at HealthInsight, a Salt Lake City-based nonprofit organization that Medicare has authorized to find ways to improve the quality of care in Utah and Nevada. “But really I think we’re just behind them on the same curve — that we’re going to be subject to the same kinds of cost pressures as everyone else.”

Health Costs Are Crushing Small Businesses

November 3, 2009November 4, 2009 J Roberts

WSJ. – The Magazine from the Wall Street Journal

By MARY LANDRIEU

Read about Senator Landrieu and her commitment to small business owners to make health care more affordable to the 27 million small businesses in this country. As a service provider to many small companies, Medical Cost Advocate is all too familiar with the many challenges faced by small businesses in navigating the health care maze. Small business owners should reach out to consumer directed health care service providers as self service allies for their employees.

After years of struggling with costs that were eating into his bottom line, David White, a small business owner in Maine, recently dropped health insurance for himself and his employees. It was a nerve-wracking decision. “I just hope my people or I don’t get sick,” he told a small business advocacy group.

Louise Hardaway wasn’t willing to take the same risk. Health-care costs forced her to close her small business in Tennessee. Factor 4 Life was, ironically, a business that helped people navigate the health-insurance system!

Unfortunately, these stories are not unique. As chairwoman of the Senate Committee on Small Business and Entrepreneurship, I hear about a lot of business owners hit hard by health-care costs. These costs not only eat into profits, they prevent small businesses from hiring more workers.

Small firms, defined as less than 500 employees, pump almost a trillion dollars into the economy each year, create two-thirds of our nation’s new jobs annually, and account for more than half of America’s work force. But too much of their money is going toward high health premiums that are increasing faster than the prices of the products and services they provide—four times faster than the rate of inflation since 2001, according to the Kaiser Family Foundation.

Nationwide, small firms will spend $156 billion on health premiums this year. In place of those high premiums, small business owners could employ 10 million additional workers—the entire state of Michigan—at minimum wage for a year.

Unless something is done, annual health-care costs for small firms over the next 10 years are expected to more than double to reach $339 billion in 2018. As those costs increase, the burden will get heavier and force many of them to lay off workers. The Small Business Majority, an advocacy group, estimates that over the next decade about 943,000 small business jobs will be lost.

Today, there are already 14.9 million people unemployed in America. We don’t need to add to those ranks, instead we need to help small businesses create more jobs. The path we are on now is unacceptable and unsustainable.

Small businesses want to provide health coverage to their workers, but when faced with cutting employees or cutting insurance, the insurance is the first to go. In 1993, 61% of all small companies offered health coverage. Today that number is less than 38%.

Employers who can afford to provide health coverage are providing it because they are competing with big businesses that offer quality health-care choices for top talent. Businesses not offering coverage are often small, low-wage firms that can’t afford it. There are 27 million small businesses in America, 22 million of which are sole proprietorships. And it is often sole proprietors that have trouble affording health insurance.

Insurance premiums for sole-proprietors are up 74% since 2001. This has made health insurance even harder to afford. And while big firms can deduct health premiums on their federal tax returns, under current tax rules sole proprietors often cannot. This forces them, on average, to pay nearly $2,000 more a year in taxes than they otherwise would have to pay. That is money they could use to buy new computer equipment or other things necessary to keep a business running efficiently.

The additional tax burden that sole proprietors have to pay has not yet been addressed by proposed health-care reforms. To keep our economy healthy we must keep our small businesses healthy, and that begins with stable, affordable health insurance.

I am committed to working with my Senate colleagues and the Obama administration to ensure that the health-care reforms our small businesses desperately need are passed. Small businesses—and all Americans—can’t go another pay check without meaningful reform.

Ms. Landrieu, a Democrat, is a U.S. senator from Louisiana.

How to Curb Health Care Costs

March 2, 2009March 3, 2009 J Roberts

Proposed legislation to measure the effectiveness of treatment for diseases and certain injuries is drawing criticism from conservative circles. The following article provides opinion on why standard treatment and protocols may be too costly. The need for increased clinical trials and evidence based medicine could lead to best practices and a decline in health care costs.

Boston Globe – Globe Editorial

In a stimulus package of $787 billion, it is a mere $1.1 billion item that is facing particular vitriol from conservative ideologues. The money would fund a ramped-up effort to compare the effectiveness of different treatments for injuries and diseases. As inoffensive as this sounds, critics of any government role in healthcare see it as the slippery slope to rationing or Washington-mandated protocols for treatment.

One can imagine reruns of the Harry and Louise ads used by insurers to such good effect against the Clinton health plan in 1993. Except this time Harry and Louise would work for the pharmaceutical companies and medical-device makers. Both industries worry that studies on effectiveness will find that some of their prize – and most profitable – products are no better, or even worse, than cheaper alternatives.

Currently, new drugs can gain approval of the US Food and Drug Administration just by proving they are safe and better than sugar-pill placebos. They need not be better than existing – and often less expensive – drugs. Comparative effectiveness studies could help patients and doctors make better-informed decisions about care.

To allay concerns that clinical studies often include too few women or minority-group patients, the stimulus law calls for including those groups in studies. A report filed with the legislation also says the money should not be used to “mandate coverage, reimbursement or other policies for any public or private payer.” But the law itself is not as clear-cut on uses of the research. AdvaMed, the trade association for medical-device makers, says it supports the program but worries about it leading to cost comparisons, which it views as a way to ration care.

If this research can provide credible evidence of the superiority of one treatment over another, professional organizations, hospitals, and insurers will have to take notice. And if that leads to broad adoption of best practices, patients will get better faster – and healthcare costs will decline. Push will come to shove if, in the face of solid research, physicians persist in recommending drugs, devices, or surgeries that get low marks. Insurers, including Medicare, could then require doctors to explain their decisions.

This isn’t rationing – it’s rational. Research of this kind and the stimulus package’s $19 billion for electronic medical records are two ways to curb costs in the $2.2 trillion healthcare industry. Without such measures, the public is unlikely to support President Obama’s plan to provide nearly universal insurance. Both initiatives offer the promise of improved – and less expensive – healthcare for all.