The United States spends more on health care than any other country, with costs growing at a faster rate than inflation. Rising costs are not only hitting consumers hard but also affecting employers, requiring them to pay higher and higher premiums every year.
As a result, HR leaders have to make a difficult decision: Either they eat these costs and cut into profits or they pass them on to their employees by cutting benefits or reducing employer healthcare contributions. Historically, many might have gone with the latter choice, making the calculation that a bump in healthcare costs wouldn’t be enough to make most employees quit their jobs. But that calculation has changed.
The current pandemic-induced talent shortage has created a jobseeker’s market. Employees increasingly expect their employers to demonstrate why they should stay on board and not go find better opportunities elsewhere—and a big part of this is benefits. High-quality benefits have been shown to improve employee loyalty, and as such, savvy employers have zeroed in on ensuring the benefits they offer are high quality and competitive.
One specific benefit they’re focusing on is employer-sponsored health insurance.Businesses across industries are working to offer the best health coverage possiblewithout substantially increasing costs, requiring them to negotiate with insurance companies.
In the past, this would have felt like too tall an order. Today, that’s no longer the case.
What Price Transparency Means for Employers
How? Price transparency. A recent push for price transparency, which requires hospitals to detail how they price their services, allows employers to find out which insurance companies should be providing them with the best premiums and whether they’re getting the best deals possible.
Rather than relying on whatever the insurance companies say and trusting it without question, HR and benefits managers can now do their own pricing research and come to the table with more negotiating power than ever before.
Price transparency gives employers the ability to understand the medical costs that are being incurred by the payer and how those costs compare with others. This enables them to shop and negotiate premiums and coverage more intelligently. In areas where hospital choices are limited, price transparency can also put a spotlight on inequities that might have previously been hidden.
And the benefits of price transparency don’t stop there. For larger companies, transparency also makes it easier to create in-house insurance policies that are self-funded, cutting out insurance carriers from pricing discussions altogether. With hospital pricing data accessible to anyone, employers can negotiate directly with hospitals for better prices. And even if they don’t go this direct route, they still have more leverage when negotiating with insurers.
Price Transparency Helps Employers and Employees
As the price of health care continues to increase, the portion employees pay has become more and more noticeable in their paycheck. Hospital pricing data helps employers ease that burden by giving them a tool to negotiate better prices and, as a result, provide better health benefits that don’t hurt employees’ pocketbooks.
This, in turn, tangibly helps to improve retention. That said, just knowing hospital pricing data isn’t enough. Employers also need to know how to use it. The following three things will allow you to harness price transparency to create a better, lower-cost employer-sponsored health insurance plan.
1. Find out where your employees are receiving care.
Ask your insurance company for a report that shows the distribution of employee health visits and procedures, as well as the total spending across all the major hospitals in the area. If possible, ask for spending to be broken down by procedure. With this information, you’ll have a better idea of where you need to focus your cost-saving efforts.
2. Gather price transparency data for those locations.
Once you have the hospital pricing data in your hands, examine the pricing of each hospital, insurance carrier, and procedure. Look at whether your carrier is the lowest-priced payer for each procedure. Figure out which hospitals have the lowest prices and where your payer has the best rate, and then look at which other carriers have better prices or rates at those same hospitals.
You might see there’s an insurer getting better rates across the board, in which case it might make sense to switch insurers. Even if the picture proves to be more complicated than that, you’ve still put yourself in a significantly stronger negotiating position.
3. Drill down further into the numbers.
While figuring out how much your carrier is paying compared with others is important, it’s not the only thing you can learn from hospital pricing data. If it looks like your payer is getting the best prices it can, for example, it’s worth asking whether your premiums match those prices. Beyond insurance carriers, pricing data will also give you more information about specific hospitals and their pricing.
How are prices distributed across the hospital locations your employees use? Are most of your employees going to the most expensive facility? Why? If it’s because of location, you might need to switch to a carrier that has better prices at that specific hospital or consider creating an incentive for employees to use a different facility. You could partner with the target facility for certain types of standard care and do things like building an in-office clinic or bringing a mammography truck to your office regularly.
Price transparency gives you the opportunity to consider where your company should be buying insurance and how you can get the best-possible deals, both for your business and for your employees. Knowing that retention is everything in today’s marketplace, ensure that you maximize price transparency as a way to identify and offer your employees the best benefits possible—and the ones most likely to prompt them to stay.
Paul Boal is the vice president of innovation at Amitech Solutions. He has two decades of experience in information management, analytics, and operational solutions. He’s also an adjunct professor of healthcare data and analytics at St. Louis University and Washington University.
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