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Why Payers Should Improve Cost Transparency for Consumers

To find out how the lack of data and cost transparency is affecting the health insurance industry, spoke with Joel Ario.

By Vera Gruessner

The health insurance industry could benefit from greater cost transparency, as it could bring new methods for lowering healthcare spending and create a more competitive market among providers. Federal and state regulators aiming at reducing healthcare spending would benefit from creating new legislation focused on improving cost transparency.

Cost-Sharing Health Insurance Plans

One report called Liberating Data to Enable Healthcare Market Transparency: A Guide for Regulators and Policy Makers outlined that, despite the reforms and provisions of the Affordable Care Act, consumers are still not receiving enough data and cost transparency when it comes to their health insurance options.

For instance, many are still lost on their cost-sharing options, out-of-pocket costs, provider networks, premium spending, and prescription drug access. To learn more about this report and find out how the lack of data and cost transparency is affecting the health insurance industry, spoke with Joel Ario, author of the report, former Director of the Department of Health and Human Services (HHS), and Managing Director at Manatt Health. Katherine Hempstead, Senior Adviser to the Vice President of the Robert Wood Johnson Foundation, also joined in on the exclusive interview.

“What are the benefits in the plans that are offered? What is the cost sharing structure? What’s in the formularies and provider directories?” Ario spoke about some of the transparency issues relevant to consumer decisions. “When consumers are making choices between plans, they need to have as much information as possible.” What steps can health payers and federal regulators take to improve cost transparency for the average consumer?

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Joel Ario: “The first step is that the regulators would make available this data that allows the consumer to understand what their cost-sharing responsibilities would be under different health plan choices. Making this data available, which CMS has started to do and has done a good job at taking data about the types of plans that are offered on the marketplaces and making it available through standardized data templates and through public use files that make that data easier to use by researchers and other people who want to use that data to understand trends and help consumers understand their options.”

“Our paper talks about how that’s a part of the data but really, a lot of individuals still purchase off-exchange rather than on-exchange so state regulators should do the same as federal regulators in terms of making this information available about benefit plans and cost-sharing structures.”

“Then, what happens next is that foundations and others interested in this can build on that regulatory data. If the regulators do their job right, then a foundation like the Robert Wood Johnson Foundation can build on that to help the consumer.”

Katherine Hempstead: “A big focus of our work has been to try to make the individual direct to consumer insurance market more efficient and better serve consumers by making people be able to compare the plans head to head. We’ve funded the creation of this data set that has a lot of cost-sharing information for all 50 states for the plans on the ACA marketplace.”

“We’re going to release it on Friday and it’s going to have an Excel version and a machine-readable file that people can download for research purposes. It’s called Hicks compare. It’s something that was now done ever since the market opened, but in the first year, it was only silver plans. We’re reissuing 2015 and putting in 2016 for bronze, silver, and gold health plans.”

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“The idea is for people to be able to really analyze what’s going on in the market and compare the plans and also for people to use that information to help make decision-support tools for consumers so that they can make the best choices when they’re shopping for a plan.” What are the most important topics outlined in your roadmap that health insurers should pay attention to?

Joel Ario: “I think that the four dimensions to the plan that are important to the consumer include what benefits are covered. Those are fairly standardized by essential health benefits, but they do vary some by state.”

“The second issue that varies quite a bit is what kind of cost-sharing applies. There’s a big difference between buying a bronze plan where you could pay more than a $5,000 deductible and buying a richer plan where you’d pay a much smaller deductible.”

“The third and fourth dimensions, which are getting a lot of attention under the ACA, are the formularies and how to really understand the formulary structure. This can be quite complicated with different tiers of cost-sharing and different utilization management restrictions. Unpacking that and understanding how the formularies work and which plans cover prescription drugs and how much cost-sharing does a consumer have - those sorts of questions are very important.”

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“Finally, what probably gets the most attention these days, the provider directories and trying to understand my choices with a lot more narrow network products out 

there. How do I understand whether the plan covers my doctor and whether I want a plan that’s maybe a little cheaper and has a narrow network or do I still want a more traditional, broad network type of plan. Information about that dimensions of plans. All of that is critical to the consumer.”

Katherine Hempstead: “I think plans have made a lot of progress. Whether it’s the providers that make it complicated, payers are starting to realize it’s not really adequate for carriers to act like they’re not able to tell consumers whether providers are in their network or not. Consumers increasingly are feeling like they have a right to know that and they’re even starting to not react well when it changes in a year.”

“I think that it’s been an adjustment for carriers but I do see a lot of progress.” Why is cost transparency important for the health insurance industry? How does it benefit health insurers?

Katherine Hempstead: “A lot of the all-payer claims databases that a lot of carriers don’t want to participate in, but one of the things that they do is that they can shine a light on high negotiated provider prices. By putting that information out there, it can actually help negotiate more competitive networks. Even though they tend to resist participating in these things, they can also be the biggest beneficiaries.”

Joel Ario: “A second dimension of this is, as consumers do have what the carriers like to call ‘more skin in the game,’ so higher cost sharing, then I think it’s incumbent on the carriers then to be explaining a lot more about how that works and disclose a lot more about pricing in the marketplace so that consumers can actually be intelligent purchasers.”

“It doesn’t do a whole lot of good to say ‘We want you to pay a higher share of the bill through cost-sharing but we’re not going to provide much information about how much your cost-sharing is going to be.’”

“An example of where you see this now is mostly in the federal and state exchanges. They have what’s called a total out-of-pocket cost calculator so that when you’re comparing a few plans, you’re not only seeing what the premium is for the plan but you see an estimate of what your out-of-pocket spending would be on that plan. If you’re a traditional user or if you entered more data, then there could be an estimate that’s based on your particular usage patterns.”

“The more consumers are expected to share in cost through cost-sharing, the more they’re going to want good transparency around what those costs may be to them.” What are the biggest challenges that health payers face when it comes to cost and data transparency? Are there any solutions to these problems?

Katherine Hempstead: “It depends on the market segment. I definitely think that most carriers would still probably say out-of-network issues in most states and provider high-negotiated rates, provider prices, and, of course, pharmaceutical prices are some of their biggest and most difficult cost items to control.”

Joel Ario: “I do think that consumer education is an important part of this as well. The consumers that are not used to having a lot of cost-sharing and, therefore, aren’t very well educated about what deductibles mean and what copayments mean. Increasingly, you want improvements in consumer literacy, which take not just data being available but, more importantly, consumer tools of the sort that you see on these web pages that help people sort through their options and understand them and help them become more literate consumers.”


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