Healthcare insurance companies and payers negotiate rates with providers for services and care delivered to consumers, but not all prices are negotiated the same. It remains somewhat of an unknown how those interactions unfold and why that process is important, according to nonprofit research organization the National Bureau of Economic Research (NBER), which penned a paper on price variation.
Variation in provider prices negotiated by payers and insurers is important because it can impact out-of-pocket spending for consumers and result in higher prices for self-insured employers, potentially even leading to higher premiums on the individual market, according to the paper.
Measuring the financial value of a health insurance plan to a person often depends on the cost of the premium and the cost-sharing function of the plan. However, the prices a plan has negotiated should also play into its value because they affect the cost sharing for the policyholder.
NBER analyzed data from the Massachusetts All-Payer Claims Database for its paper and looked at five specific services––knee and hip replacements, vaginal and cesarean deliveries, and MRIs––as well as overall price levels for inpatient care.
Among the cohorts analyzed, the most costly payer is approximately 13 percent more expensive on average than the cheapest major payer, while the highest-priced hospital system in the data was 27 percent more expensive than the average of other hospitals.
Consumers have seen better transparency between providers, which can help them choose care that is more affordable, but transparency among insurers about their negotiated rates can help with the earlier choice of choosing which insurance to buy.
However, provider prices are hard to pin down. The paper concluded that consumers’ response to negotiated provider prices is also a “crucial determinant of insurers’ negotiation effort,” but further measurements are needed.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."