With all the news about soaring health care costs, one may be surprised to learn that while insurance premiums and prices for common procedures for insured people continue to increase, cash or negotiated self-pay prices for many procedures vary little from year to year.

This is exactly what a team of journalists found as documented in the book “The CEO’s Guide to Restoring the American Dream,” authored by Seattle-based Dave Chase, co-founder of Health Rosetta, which promotes reform for the U.S. health care system. According to the book, a “cash price” is what a provider charges an individual who is either paying directly, using a check or credit card, or is covered by an employer or union that pays immediately under a direct contract that bypasses the insurance claims process.

“Insured individuals who ask for cash prices pay less than other insured individuals. For example, in San Francisco, Castro Valley Open MRI charges $475 cash for a lower back MRI. An insured individual who asked for a cash price for the same MRI at a different care provider knocked a $1,850 bill down to $580. A different insured individual was initially charged $5,667 for the same MRI at a third care provider. Their insurer paid $2,367, and the individual was asked to pay $1,114.54, a total of $3,471.54 to the third care provider for the same $475 MRI,” the book says.

Insurance premiums and non-cash prices go up for several reasons, including the following:

• Contracts between providers and carriers can include things like automatic escalator clauses, which stipulate that payment rates automatically increase each year.
• Third parties taking a cut, small or large, of every transaction. For example, a good size hospital probably has multiple vice presidents for strategic planning, business-office workers, pricing consultants and people to make revenue-cycle management projections—just as the insurance company does. 
• Benefits brokers are pitching themselves as buyers’ agents but compensated as sellers’ agents, leading to conflicts of interest.

Fixing the Problem of High Health Costs

In an article in Forbes in 2015, Chase said the problem of higher health costs can be fixed with current resources and no new legislation. He said employers and benefits brokers or consultants should keep in mind the three goals of enhancing patient experiences, improving population health and reducing costs. Chase explains that enhancing the patient experience improves health, which leads to lower costs.

He tells PLANSPONSOR there are two main components to improve benefits and lower costs. For one, employers should remove preferred provider organization (PPO) networks. Employers are paying two- to four-times as much as they should and they share this cost with participants. Typically, PPO networks are paying two- to five-times Medicare rates for procedures.

Chase says employers can save money by negotiating direct contracts with medical and pharmaceutical providers. He cites one case study in which the employer in the course of two years signed 4,000 direct contracts with many providers. These contracts say, “We’ll pay Medicare rates and agree to pay on a timely basis.” Hospitals are willing to take less money than a PPO would pay because they can collect more dollars timely since costs are cheaper, according to Chase. He says the employer now is spending so much less on health care and there’s no cost-sharing with employees, which, of course, employees like.

The other main component to this cost saving strategy is to use value-based care, according to Chase. UBS Wealth Management’s 2017 Corporate Health Report explained that increasingly, payers are linking the price paid for treatment to health outcomes, rather than simply paying for the volume of services provided. By changing the provider payment model, payers hope to reduce waste and duplication, spread clinical and operational best-practice, and ultimately achieve higher quality patient outcomes for a better price. “While value-based care (VBC) is not yet pervasive, its influence will be among the key elements to control health care costs over the coming years amid increased longevity, in our view,” UBS said. Providers, namely hospitals and large regional health care systems, are increasingly being asked by payers to accept at-risk reimbursement, where payment is heavily influenced by the quality and outcome of patient care, UBS said.

Chase gives an example that value-based care means a patient going to a primary care physician about lower back pain will not be just given a pill or an unnecessary surgery for which there is no evidence of success. He will instead get treatment proven to work, which will improve his health.

Chase says for one mid-sized hotelier with about 5,000 employees that has implemented these components, its per employee cost for health care is less than half the national average. And, in the more than 20 years since it has changed its approach, it has saved over $200 million. The company uses money saved to pay for employee and dependent college education.

Changing the Broker Model

Just as individual’s use of stock brokers has gone the way of the dinosaur, and investment advisers are more mainstream, there is an ongoing move away from traditional benefits brokers to benefits consultants. Chase recommends plan sponsors get away from traditional brokers and utilize benefits advisers/consultants.

Health Rosetta accredits benefit professionals that design health plans that meet “The Triple Aim” and otherwise participate in the effort to reduce health professional burnout and dissatisfaction. Consultants must also disclose all revenue in a form provided by the firm. Chase says his firm looked at broker payment models and found up to 17 undisclosed revenue streams.

“We train, educate and accredit benefit consultants who put in these benefit plans,” Chase says.

Health Rosetta also published on its website a plan sponsor Bill of Rights, a benefits consultant Code of Conduct and company disclosures for benefits consultants.