Recently a Kaiser Health News article http://www.kaiserhealthnews.org * noted: “After getting a green light from the Obama administration earlier this month, more employers may begin to cap what they pay for certain medical treatments, such as joint replacements and drugs, potentially shifting more costs to workers.”
“Done right, economists and policy experts say the move to “reference pricing,” as the approach is known, could slow health care spending by prompting consumers to choose less expensive providers or treatments— and leading providers to lower their charges. Still, consumer advocates warn that the approach is likely to make health insurance even more complex, and could expose unwitting consumers to thousands of dollars in out-of-pocket costs.
• “1) HOW DOES REFERENCE PRICING WORK?
• Insurers or employers survey what providers are charging for a specific treatment, and then set a cap — or “reference price” – to mark the maximum amount they will pay for that service as a way to encourage consumers to choose more reasonably priced providers or treatments. 2) WHAT DID THE ADMINISTRATION AGREE TO?
• In a May 2 document, labeled Frequently Asked Questions about Affordable Care Act Implementation, the administration essentially gave its blessing to large or self-insured employers to use reference pricing in designing health plan benefits. It also said that employers offering drug coverage can use generic drugs to set reference prices.
• 3) WILL MY EMPLOYER DO THIS?
• Paul Fronstin at the Employee Benefit Research Institute said the administration’s green light is likely to encourage some employers who had been concerned that reference pricing might violate the health law to move forward. Many see it as a potential cost-reduction tool, alongside strategies such as raising employee deductibles.
• 4) BUT AREN’T I PROTECTED FROM THESE COSTS BY THE HEALTH LAW’S ANNUAL CAP ON CONSUMER COSTS?
• Not in this case. The health law caps what consumers can be required to pay annually toward in-network care through deductibles or other cost sharing to $6,350 for an individual, or $12,700 for a family. But costs incurred by workers who choose providers that charge more than the reference price will not count toward that limit, according to the FAQ. Essentially consumers who spend more than the reference price are considered to be going “out of network” for their care.
• 5) DOES IT SAVE MONEY AND FOR WHOM?
• Fronstin and other economists say reference pricing can save money for employers when applied to high-cost services where there are big pricing variations and consumers have the time and information to shop for the best option. It won’t work, for example, with emergency care, or other situations where consumers have no time or ability to compare prices
• 6) BUT DON’T HIGHER PRICES MEAN HIGHER- QUALITY SERVICES?
• No, most studies have found that higher prices do not necessarily mean higher quality care, but consumer groups are concerned that insurers and employers rank quality, as well as cost of different providers. That might be difficult since there may be little information comparing the quality of one provider with another for many procedures, such as colonoscopies.
* *to read the full KHN article “7 Things You Should Know About The Next Big Benefit” by Julie Appleby, highlight and click on open hyperlink http://www.kaiserhealthnews.org/Stories/2014/May/28/What-You-Should-Know-About-Reference-Pricing.aspx?utm_campaign=KHN%3A+Daily+Health+Policy+Report&utm_source=hs_email&utm_medium=email&utm_content=12905158&_hsenc=p2ANqtz-8gozSYBJ8cuReNYJ7DlNhNO2Zh-Ayl6JAsihc9hPjCmaAdVO7Vkl7KFyF6Sz1CC10HuuYKAtZugswk34k9owEZZ7_3i_yyLDVJiI3Pv04-FrclsPA&_hsmi=12905158
Doctor, Did You Wash Your Hands? ™ provides information to consumers on understanding, managing and navigating health care options.
Jonathan M. Metsch, Dr.P.H., is Clinical Professor, Preventive Medicine, Icahn School of Medicine at Mount Sinai; and Adjunct Professor, Baruch College ( C.U.N.Y.), Rutgers School of Public Health, and Rutgers School of Public Affairs and Administration.
This blog shares general information about understanding and navigating the health care system. For specific medical advice about your own problems, issues and options talk to your personal physician.