Health insurers push comparison shopping

November 26, 2011

Shopping for health care has been more rhetoric than reality this past decade, but health insurers Anthem and UnitedHealthcare are making a new push to turn patients into consumers.

Indianapolis-based Anthem Blue Cross and Blue Shield and Minnesota-based UnitedHealthcare say they’re responding to demands from employers, who are desperate to rein in spiraling health benefits costs and have begun embracing the idea that to do so they must change their workers’ approach to health and health care.

Hillman Anthem Indiana President Rob Hillman

Anthem will roll out a program Jan. 1 in which employers give $50, $100 or even $250 incentives to their workers for using a cost comparison tool and choosing one of the health care providers charging the lowest cost.

Anthem’s parent company, Indianapolis-based WellPoint Inc., has tried the program, called Compass SmartShopper, in New Hampshire and Connecticut and found it to be popular.

Anthem is also trying to expand the number of procedures for which it has cost estimates, from about 50 now to 102 after Jan. 1. The insurer already has estimates for common diagnostic tests and procedures, such as MRIs, colonoscopies, childbirth and hip replacements.

“One of the reasons we have such a hard time controlling the costs in health care is because we don’t have a marketplace,” said Rob Hillman, president of Anthem Indiana.

UnitedHealthcare is making similar moves. In March, it will expand to 125 the number of procedures for which its Treatment Cost Estimator has figures.

And by the third quarter of 2012, the cost estimator tool on its website will generate price information tailored to the latest contracts it has with providers and the specific health plan a patient has, making the estimates more precise.

“Employers are becoming more and more interested in a high degree of transparency in terms of medical care costs,” said Dan Krajnovich, CEO of UnitedHealthcare’s Indiana operations.

The moves by Anthem and UnitedHealthcare are significant because, combined, they control nearly 70 percent of the commercial insurance market in Indiana.

Price information, which is crucial if health care is to operate like a marketplace, has traditionally not been available. The simplest reason for that is because doctors and hospitals have been paid by health insurance plans, with very little of their bills being paid by the patient.

Because of that, hospitals and doctors typically could generate price information only if a patient knew the right diagnostic and procedure codes used by health insurers in their billing documents. And even then, hospitals and doctors were reluctant to quote prices upfront, because the care a patient ended up needing could be different from what was expected.

But the dynamics of the industry have been changing, especially in the past five years. That’s largely because more employers have changed their health plans to include high deductibles as well as consumer-controlled spending accounts, which require patients to pay the full cost of many of their medical bills.

According to a survey released this month by the health benefits consulting firm Mercer, 22 percent of employees in Indiana are enrolled in such a plan, called a consumer-directed health plan.

Anthem’s SmartShopper program, which is administered by Massachusetts-based Compass Healthcare Advisers, aims to give incentives to shop for health care even to the 72 percent of workers that are still enrolled in traditional PPO plans, which require patients to pay a modest “co-pay” each time they visit a hospital, physician office or pharmacy.

Anthem asked the Jay School Corp. in Portland to pilot its SmartShopper program this summer. So the school system set aside $2,000 to fund incentive payments to its employees.

Brad DeRome, the school district’s business manager, said three employees have informed him that they received an incentive payment for choosing lower-cost providers for MRIs and wellness services. But just those three patients have already saved the district more than the $2,000 it set aside for the program.

“We thought, what do we have to lose?” DeRome said of the program, which Anthem offers to employers for $2 per month for every employee they insure. DeRome said the school corporation spends $6 million per year on health claims—or 17 percent of its annual budget—and has seen those costs growing 12 percent per year.

“This was just seen as a way to help our employees make better choices, and maybe that will help them, and maybe that will drive some of our costs down,” DeRome said.

Incentive program from Blue Cross Blue ShieldHuge cost disparities

There are savings to be had because the cost of health care services varies dramatically from one health care provider to another—even for services that are fairly routine and not more complex from one location to another. For example, getting a screening colonoscopy has a typical high cost for Anthem customers of $1,908 at St. Vincent Carmel Hospital, but will cost $4,145 at Indiana University Health’s Methodist Hospital in Indianapolis.

Such price disparities exist because of peculiarities in contract negotiations between hospitals and health insurers, said Marybeth Pitchkites, an Anthem program director who advises the company’s Indiana sales team. But Anthem officials hope SmartShopper and other initiatives help equalize those payments over time.

While information on the prices of medical services is critical to these efforts, it is not sufficient. Health care consumers also need good information on the quality of the services they’re paying for. A low price for shoddy services likely will do more harm than good in the long run, which could lead to patients needing higher-cost medical care down the road.

Both Anthem and UnitedHealthcare have tried to make quality information available to members of their health plans. For example, Anthem provides a physician look-up tool on its website, which identifies if doctors have been labeled a quality provider or, in addition, a low-cost provider.

Anthem also allows its members to write personal reviews of the doctors they see.

UnitedHealthcare has gone one step further, using their massive claims database to see if physicians give care according to the guidelines set by the professional associations that oversee their respective medical specialties.

UnitedHealthcare then ranks physicians with two stars, one star or no stars. It gives its health plan members bonuses if they see two-star physicians.

Online information

Anthem and UnitedHealthcare first started posting this information on their websites about five years ago. But now they’re looking to make it easier for patients to use.

For example, Anthem will revamp its website next year, so that when a patient looks up a doctor or health care facility, the cost and quality information are right alongside the name, address and phone number. Currently, it takes several clicks to get to the cost information and another series of clicks to find the quality information.

It will also make that information available through smartphones and other mobile devices.

The amount of cost and quality information is still not enough, but the efforts to expand it are steps in the right direction, said Jim Parker, an Indianapolis-based health care consultant. Eventually, they will force health care providers to change how they deliver and they price their services.

“A lot of individual consumers making decisions in favor of a $700 image instead of a $2,000 image, I think will make a difference. And the biggest difference it will make is on the provider community itself,” said Parker who is president of Meridian Strategic Advisors. “They’ll begin to do their own re-engineering of their processes.”•


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