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Health Care Reform:

Health Insurance & Affordable Care Act

Next Big Benefit Change: 7 Things You Should Know

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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. 

“The interest is there,” Fronstin said.

Benefits firm Mercer said about 10 percent of large employers, including CalPERS and Safeway, currently use some form of reference pricing, and 22 percent are considering it. 

Some additional restrictions would apply to coverage sold to individuals and small businesses through the federal and state online marketplaces.  Experts say they aren’t aware of such plans currently using reference pricing.

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.

Consumer groups fear that if employers don’t clearly explain the choices, workers could unwittingly be on the hook for thousands of dollars, with no upper limit.  Economists and policy experts say reference pricing can’t work if enrollees aren’t held accountable for choosing more expensive providers. If the costs were counted towards enrollees’ annual cap, insurers would be on the hook to pay the difference and providers would have no incentive to lower prices.

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. Because the approach relies on market pressure, it also would not work well in areas with only a few medical providers, or where price and quality information is not made available, either by the providers or the employers using reference pricing. Nor would it work well if consumers face no financial consequences for selecting the costlier options.  An analysis of the California effort found that CalPERS saved an estimated $5.5 million in 2011 and 2012 from the joint replacement surgery program, with more than 85 percent of the savings coming from hospitals lowering their prices to meet the cap.  Whether savings from reference pricing are passed onto consumers in the form of stable or lowered premiums remains to be seen.

Fri, May 23 2014

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