The Illusion of Choice in Health Coverage Negotiations Part 1
| February 13, 2019
In Part 1 of a three-part series, we delve into how the major insurance carriers build their broad provider networks, how those agreements mislead buyers, health coverage negotiations and the impact they have on premiums, quality of care, out-of-pocket costs, and what you can do to protect your bottom line.
You weren’t invited to your health coverage negotiations. Here’s why.
When insurance carriers engage in health coverage negotiations with providers (hospitals, health systems, and independent practices) the focus is on how much they are going to pay providers for any given service, also called “unit price.” These negotiations have nothing to do with managing the number of units expended, known as utilization. If you’re a self-insured employer, know this: while companies might get a discount on unit costs, if the insurance carrier isn’t insisting its network of providers manage utilization, the net costs could be even more.
In other words, if the insurance carrier cuts the price of units by 50 percent, but the number of units purchased doubles, the costs for employers stays the same. It’s also important to note employers have zero visibility into these arrangements, nor their impact until it’s too late, leaving benefits managers wondering: “How did this happen?”
In much the same way that four major insurance carriers represent the bulk of the healthcare market, consolidation of hospitals and health systems over the past decade has created fewer, larger physician groups, their negotiating leverage sometimes rising far more quickly than their level of care. Physician groups push for higher reimbursement rates. Insurance carriers concede by marking down units but applying no limits on utilization or increases in the chargemaster.
Ironically, the initial approach to negotiations suggests both parties have members at the center of their focus: insurers want to be able to offer their members access to the broadest network of providers and those large groups of healthcare physicians want to be the preferred provider to the largest group of potential patients. If you’re covered by one of the insurance carriers’ networks — probably a choice you made because of its access to a broad provider network — your costs may be negatively impacted.
In addition to the cost structure being relatively the same across the major insurance carriers, their broad networks are equally similar, if not identical in some areas. This raises a few questions. When weighing the value between two health plan options, both backed by major insurance carriers:
A health plan is only as good as its providers and only as cost-effective as it’s negotiated to be.
Equally important is the question of quality care. A concession on price has nothing to do with helping members have a better patient experience. Consider the following questions:
What variances are you examining?
Is cost the most critical? If so, can you predict how that perceived discount will translate to your total cost of care at any given point in the year?
Is this a sustainable health plan for you or your business?
In Part 2 of this series, I’ll discuss coverage options (perceived or otherwise) focused on high-quality care.
MARC PINNEY | Chief Operations Officer, Healthcare Highways Mr. Pinney’s extensive career began as a sales representative and later Vice President of Sales for Gallagher Benefit Administrators. A Senior Benefits Consultant at Holmes Murphy & Associates after that, he then brought his deep expertise to Healthcare Highways, now serving as Chief Operating Officer and Executive Vice President of Business Development.