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The opportunity for health insurers is to implement a well-designed cost estimator tool that goes beyond compliance to the new CMS rule and meets member and health insurer market trends by integrating more quality and cost metrics with an easy-to-use member interface.
Do you know how much an MRI would cost you? $500? $1500? It’s a simple question with a complex answer.
Historically, MRI prices depended on the body part scanned, a member’s insurance coverage, the negotiated rate with the health insurer, and possibly the facility location and type. Selecting a medical services provider within budget, within your insurance network, and close to home without a consolidated set of data can be time-consuming and frustrating, potentially leading to unanticipated charges if information is not readily available and/or accurate.
As a first step to make healthcare pricing more transparent for insurance members, CMS has recently finalized rule CMS-9915-F that mandates health insurers to disclose their in-network provider negotiated rates, historical out-of-network allowed amounts, and drug pricing information through machine-readable files for public access. With this rule, members will expect to see the prices of medical services, like MRIs, from different providers and facilities uploaded into a member friendly format on each health insurer’s website.
Health insurance associations have pushed back on the finalized rule citing authority overstep and futility in changing consumer behavior. While pushback lawsuits will likely continue into 2021, CMS administrator Seema Verma stands firm stating: “Price transparency puts patients in control and supports competition on the basis of cost and quality which can rein in the high cost of care.”
Consumer interest reflects Verma’s stance as 80% of Americans believe it is important for the government to provide people with information that allows them to compare prices before receiving care, per the Robert Wood Johnson Foundation. Price transparency adoption is not likely to change with administrations.
With retained membership and changes in consumer behavior, health insurers can leverage the change in behavior brought on by payer incentive programs to negotiate better rates. In recent years, better access to readily available data for decision-making has improved consumer engagement in their healthcare decisions.
In 2018, the Robert Wood Johnson Foundation reported that Americans were 3.5 times more likely to price shop for elective procedures compared to 2012. Incorporating quality metrics will only compound this “shop-ability” of services as Americans can begin to use quality data to choose cost-effective care locations. As members elect low-cost, high-quality service providers, health insurers gain the ability to increase these provider volumes and renegotiate rates with higher cost providers.
Transforming the way members access their estimated costs
A well-designed cost estimator tool provides a single site to disclose negotiated rates across different covered facilities and quality metrics for each health insurer. Payers can help navigate their members to cost estimator tools through incentive programs; driving consumers to make cost-effective decisions about their healthcare and generating incentives through their choices. Many large health insurers already have cost estimators that display this information built into their websites and reap the cost saving and sharing benefits. It is therefore the small and mid-size health insurers that have the most to gain from implementing an effective cost estimator tool, if not already doing so.
As reported by Modern Healthcare, health insurer Priority Health in Michigan sees more than 20% of their commercial members using their product and has paid over $10 million in shared savings to its patients over 5 years, while the savings are likely several fold larger for the insurer.
By preemptively addressing the finalized CMS regulation and implementing a well-designed cost estimator, small and mid-size health insurers will be able to:
Cost Estimators can be more than just providing estimated costs
Cost estimators built with the member in mind will provide an enhanced and more transparent member experience. Including quality reporting data and patient satisfaction scores will allow for member decisions grounded in an improved side-by-side comparison view of both procedure cost and provider quality.
Despite increased tendencies toward price shopping, a systematic review of the association between healthcare quality and cost by The Annals of Internal Medicine reports that most Americans are inclined to choose a more expensive service, expecting higher quality. The study shows, however, that the direction of the association is inconsistent.
A similar study from The Health Care Cost Institute reports higher prices for medical services are not always indicative of higher quality of care. Health insurers can capitalize on these insights with user-friendly cost estimators to encourage member behavior changes through messaging and promotion of cost-effective care.
HealthSparq, a vendor providing cost estimator tools to providers and health insurers, reports that people aged 18-44 are especially inclined to use cost estimators and people aged 35-44 most inclined to use independent and social media (i.e. Yelp) reviews in conjunction with provider cost information. In order to grow these trends, offering a balance between quality information, without overburdening a member with disparate provider metrics will be crucial. For example, providing members with access to medical service provider locations, episodes of care, annual costs of care, as well as the previously mentioned quality metrics.
SmartShopper, another cost estimator vendor, displays cost ranges for procedures in more than 300 categories based on facility, zip code, and quality metrics. Both HealthSparq and SmartShopper present this information in an easy-to-use format to put decision-making power in members’ hands. As informed users, members will appreciate the agency to choose a provider or procedure location and will stay with health insurers that provide the highest quality data in the most user-friendly format.
Benefits realization from informed decision making
Once with the health insurer, members can be incentivized to choose the cost-effective option through incentives and cost-sharing opportunities. Cost estimator solutions can incentivize members to consider cost when deciding their procedure location by providing shared savings that are returned to the member. For example, if a member needs an MRI and they choose to go to a cost-effective procedure location rather than a state-of-the-art academic hospital, they can receive some of the savings the health insurer will incur.
Some consumers will naturally choose a lower cost service provider, but some may not. Cash incentives can encourage members to choose a cost-effective service provider with even a small monetary incentive. In a survey by MHealth and HealthSparq, it was reported that a $25 incentive influenced consumers up to 81% of the time for their laboratory services and 79% for imaging services. Health insurers will find those opportunities for savings through bringing transparency to cost-based decision-making regarding member procedures.
The opportunity for health insurers is to implement a well-designed cost estimator tool that goes beyond compliance to the new CMS rule and meets member and health insurer market trends by integrating more quality and cost metrics with an easy-to-use member interface. This interface will improve member experience all while saving the health insurer and the member money.
Hannah Bowlin and Chad Wagoner are healthcare experts at PA Consulting.