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Health insurance companies to make changes to prior authorizations
HHS secretary Robert F. Kennedy and Dr. Mehmet Oz announced that major insurance companies have agreed to cut down and streamline prior authorizations
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People often know whether their hospital or doctor accepts their insurance, but it’s difficult to predict the cost of a medical procedure even with coverage.
A new report from Trilliant Health reveals wide variations in prices for the same medical service at different hospitals and surgery centers. For instance, a total knee replacement can cost anywhere from $12,870 to $101,527. An ankle replacement costs about $22,011 at one Texas hospital but over $197,000 at another New Jersey hospital.
Using claims data from two major health insurers, Trilliant Health analyzed nearly 2,700 hospitals and 3,500 surgery centers. The report found that prices can vary as much as nine-fold for the same operation or procedure, with hospital prices within the same state varying more than three-fold.
The analysis also showed no correlation between higher prices and improved health quality at top-ranked hospitals. Allison Oakes, chief research officer of Trilliant Health, notes that this report helps consumers and employers better understand healthcare costs to gauge service value.
Trilliant’s findings highlight the significant role hospital prices play in driving overall healthcare spending. Research shows that such price variations contribute to the U.S.’s high healthcare costs compared to other nations. Despite spending $4.9 trillion, or $14,570 per person, Americans have lower life expectancy than large, wealthy countries.
Employers historically lacked price information when selecting hospitals for their health insurance plans. Consumers with high-deductible plans often face thousands of dollars in out-of-pocket expenses before coverage begins, or they may be charged coinsurance percentages on medical bills. Over the past 25 years, employer health insurance premiums have nearly tripled at the rate of workers’ pay raises due to rising hospital prices.
Under federal price transparency rules adopted earlier this decade, health insurance companies must disclose negotiated prices with hospitals and other providers. Trilliant’s analysis included data from two national insurers: UnitedHealth Group and Aetna.
Hospital Prices Drive Health Spending Higher
Price variations are a key factor in the high cost of healthcare in the U.S., which spent $4.9 trillion or $14,570 per person on health care in 2023. Despite these expenditures, life expectancy is lower among large, wealthy nations according to the Peterson-KFF Health System Tracker.
Employers historically lacked price information when deciding which hospitals and surgery centers to include in their insurance plans’ networks. Consumers with high-deductible plans often face thousands of dollars out-of-pocket before coverage kicks in or are charged coinsurance. Over the past 25 years, employer health insurance premiums have nearly tripled the rate of workers’ pay raises due to rising hospital prices.
Under federal price transparency rules adopted earlier this decade, health insurance companies must disclose negotiated prices with hospitals and other providers. Trilliant’s analysis included data from two national insurers: UnitedHealth Group and Aetna.
Will Price Transparency Spur Competition, Lower Prices?
Research on price transparency data reveals widespread price differences. For instance, a study by Johns Hopkins University found X-rays and CT scans varied more than 10-fold nationwide, with prices nearly tripling based on different plans from the same insurance company.
Ge Bai, a professor of accounting and health policy at Johns Hopkins University, said this underscores the lack of competition in health services. “We have a long way to go before we can reach a competitive market for health care prices,” he stated.
A study comparing prices from three Houston hospitals found large differences negotiated by three health insurers: Blue Cross Blue Shield of Texas, United Health, and Humana. For instance, an overnight stay covered by a Humana PPO plan ranged from $17,628 to $57,898 at different Houston-area hospitals.
Vivian Ho, an economist who has studied hospital pricing, said employers can use this information to tailor their health insurance offerings. “There is a great deal of opportunity for employers to take this information and start restructuring their benefits,” she stated.
Another study in Massachusetts found that tiered pricing charged higher copays if consumers chose more expensive hospitals. After three years, overall spending dropped by over 8%, indicating that consumers were willing to choose lower-cost options.
Ho said the tiered copay approach is easier for consumers to understand and what steps they can take to lower their costs. “The average consumer doesn’t understand the problem,” she noted.
Consumers are quick to blame their insurer when health prices rise, but the main driver of health insurance premiums are hospital charges for both inpatient and outpatient services. “Hospitals and consolidated health care systems are charging very high prices,” Ho said. “And there’s nothing in your health insurance benefit to stop you from going to the highest-priced providers.”
