People save money and get awards for health care price shopping

Feb. 15--Karen Kuiper of Grand Rapids received $100 in the mail from her health insurer, simply for shopping online for good deals.

What did she buy? A low-cost colonoscopy.

Her insurer covered the entire bill for the roughly $530 procedure, which, thanks to Kuiper's bargain hunting, could have saved the company $1,000 or more than if she had visited a higher-cost medical provider. The $100 was her reward for saving all that money.

"I want to make sure I get a good deal on anything that I purchase," Kuiper said, "so why shouldn't I do the same for my health care?"

Her insurance company, Priority Health, is at the forefront in Michigan of the national trend in health care toward providing consumers with greater transparency to costs.

Insurers here and across the country have been launching websites and smartphone apps that offer detailed cost information on some medical procedures and services, such as knee replacements, MRIs and colonoscopies.

The goal is to lower health care costs by helping people find and compare prices at area hospitals and clinics, which traditionally haven't advertised what they charge.

Insurers rolled out these cost calculators as more of their customers enrolled in high-deductible health plans that require spending hundreds or thousands of dollars out of pocket each year before insurance kicks in.

It's still to be determined whether price transparency on its own can substantially slow the rise or even lower the costs of health care, and, by extension, insurance premiums.

Early research suggests that people will simply cut back on office visits and elective services when faced with a high deductible, rather than adopt savvier shopping.

Still, when up against a big deductible, some patients do pay new attention to prices because they're on the hook for more of their medical bills.

"People are constantly amazed at the differential in pricing for everything from prescription drugs to gallbladder surgery," said Mike Embry, president of Southfield-based insurance agency Comprehensive Benefits and current president of the National Association of Health Underwriters.

Price shopping for health care is a relatively new notion for consumers. Many employer-sponsored health plans of the past didn't have deductibles, and employees could often get tests, procedures and office visits for minimal co-pays.

"Americans do not care about health care costs; they care about what it costs them," said Dr. Mark Fendrick, a University of Michigan professor and director of U-M's Center for Value-Based Insurance Design. "As more and more Americans are being enrolled into high-deductible health plans, understanding what things cost the typical patient have become more important."

'You can save thousands'

One challenge is that some patients still don't realize it is even possible to shop around for better prices on many nonemergency health care services. Many simply go to the clinic or imaging center that their doctor might mention.

A past nationwide survey found that even though 98% of health insurers in the survey had cost calculators for members, only 2% of their members actually used them, according to the group Catalyst for Payment Reform.

"People typically don't go and shop, which is a huge mistake. You can save thousands of dollars by taking 15 minutes to look at health care costs," said Embry, who advises many employer groups about health insurance options.

"You have to get people engaged. Employees are so used to basically just doing whatever their doctor tells them to do," Embry said.

To be sure, not all patients have the option of price shopping. Those enrolled in narrow-network plans and HMOs are restricted to a small set of medical providers. In exchange, they get lower insurance premiums.

Yet most employer-sponsored insurance plans in southeast Michigan are still so-called PPO plans, which offer patients broader choices in which providers they can see.

The annual average in-network deductible last year for those in an employer-sponsored PPO plan was $985 for singles and $2,037 for families, up from $822 and $1,669 in 2014, according to a Marsh & McLennan Agency survey of nearly 400 metro Detroit employers.

More seniors are also seeing rising deductibles in their Medicare Advantage plans, area hospital officials said.

Cash rewards

Many health insurers have set up detailed cost calculators for their members, including Blue Cross Blue Shield of Michigan and Health Alliance Plan. So far, Priority Health is the only Michigan insurer that gives cash to customers who choose lower-cost medical providers.

Priority began its rewards program in 2015 as an extra incentive for customers to become active shoppers and save everyone money, said Nathan Foco, the insurer's senior director of market research and consumer analytics. Priority Health is owned by the Grand Rapids-based hospital system Spectrum Health.

Priority members who chose lower-cost providers can qualify for free Visa cards, ranging from $50 to $200. Even those who have yet to meet their deductible -- and therefore are only saving themselves money -- still get the cash rewards.

"We've been getting very positive feedback, just on the simple fact that we're providing people with the information on cost," Foco said. "The reward tends to be the icing on the cake in a lot of ways."

Kuiper said she found at least 20 different locations and price options for colonoscopies when she logged on to Priority's cost calculator website, with about a $1,500 price difference between the highest and lowest providers.

Kuiper's insurance plan has a $4,000 deductible, she said. However, because basic preventive colonoscopies are free under the Affordable Care Act, she didn't have to pay anything toward the procedure's roughly $530 price.

Kuiper could have chosen a pricier colonoscopy, and Priority still would have paid the bill. But she said she didn't mind shopping -- and appreciated the $100 Visa card.

Hospitals list prices

Several Michigan hospital systems now post prices on their websites for common procedures, such as blood tests, pregnancy ultrasounds and MRIs. But these prices apply only to patients who are uninsured, which is only about 5% of Michigan's population.

In interviews, hospital executives said it is impractical for them to post prices that would be helpful to patients with high-deductible insurance plans because too many complex variables are involved in such calculations.

The payments that hospitals accept for a specific procedure depends on the hospital's negotiated rates with the patient's insurance company, and the fine-print details of the patient's health plan, the executives said.

"It has less to do with what we charge, and more to do with what an insurer pays us and the benefits that patient has in their plan," said Kevin O'Neill, vice president of Revenue Cycle for Henry Ford Health System.

Patients seeking precise price quotes are encouraged to call their hospital or clinic's billing department.

There have been occasional legislative proposals to force Michigan hospitals to publish their "charge masters," which are closely held lists of the sticker prices for every procedure and service at a hospital.

Health care experts say these lists often serve as starting points for payment negotiations between hospitals and insurers.

But hospital executives contend that these prices have little relation to what insurers and most hospital patients actually pay.

For instance, at the U-M health system, the payments it accepts are based on the prices that specific insurance companies have paid in the past for each service or procedure, said Dr. David Spahlinger, president of the U-M Health System.

"If the charge master rates went down, it would not change what we get paid by most of our insurers," he said.

Limits to shopping

It remains unclear whether price transparency on its own can significantly affect health care costs.

By some estimates, only about 10% of overall health spending is "shoppable" and paid out of pocket by consumers. And rural areas have less competitive health care markets, which means fewer medical providers for patients to price compare.

Additionally, a study published last year in The Quarterly Journal of Economics noted how after a large firm shifted its tens of thousands of employees from a no-deductible insurance plan into a high-deductible plan, total health spending dropped about 15% --but not because people began shopping for better prices.

The spending drop was entirely because of people cutting back on health care because of their new deductible, and not from savvier shopping. "We find no evidence of consumers learning to price shop after two years in high-deductible coverage," the authors concluded.

Stronger incentives may be needed to get patients into the shopping habit.

Carrots and sticks

There have been experiments in other states with a more aggressive system of price transparency and cost-control incentives, known as "reference pricing."

Patients in such a system can still shop numerous options for health care. But their insurance will pay only up to a set amount for each type of service, procedure or pharmaceutical order, called the reference price.

Patients must pay the difference out of pocket for a more expensive provider.

Reference pricing has been credited with lowering overall health care spending and the prices some providers charge

The California Public Employees Retirement System, known as CalPERS, which covers more than 1.3 million retirees and their dependents, is perhaps the best-known user of reference-based pricing.

Fendrick, the U-M professor, said some providers lowered their charge amounts to meet the reference price.

"More hospitals offered the service at the reference price once the reference price was determined," he said.

In Michigan, so far no corporations, organizations or health insurers have attempted reference-based pricing, industry experts said.

Foco, Priority Health's marketing research director, said the insurer isn't considering more aggressive incentives, or "sticks," to complement the cash reward "carrots" that encourage people to shop for deals.

"I don't think a stick in this case would build a lot of trust with our members," he said. "We want them to feel that we're here to help them, should they be concerned about budgeting their health care dollars."

Contact JC Reindl: 313-222-6631 or [email protected]. Follow him on Twitter @JCReindl.

___

(c)2018 the Detroit Free Press

Visit the Detroit Free Press at www.freep.com

Distributed by Tribune Content Agency, LLC.