The majority of the U.S. population is enrolled in a private health plan, meaning that they obtain their coverage through an employer or union, or they purchase a plan directly from an insurer. A recent report examined U.S. hospital prices for 25 states and discovered that in 2017, the prices paid to hospitals for privately insured patients averaged 241 percent of what Medicare would have paid. The states included in the study vary twofold in their relative prices in 2017, ranging from roughly 150 to 200 percent of Medicare prices in Michigan, Pennsylvania, New York, and Kentucky, to more than 250 percent of Medicare prices in Colorado, Montana, Wisconsin, Maine, Wyoming, and Indiana.
The analysis examined health care claims for more than 4 million people, using data from three sources: self-insured employers, two state all-payer claims databases, and records from health insurance plans that chose to participate. For each private claim, researchers re-priced the service using Medicare’s groupers and pricing formulas.
The authors discuss several options employers could pursue to help address high hospital prices, including using benefit and network design to shift utilization away from low-value hospitals, and demanding that their health plans shift from discounted charge contracts with hospitals to contracts based on a percent of Medicare or another similar fixed-price arrangement.
The authors also note that employers may need state or federal legislative changes to rebalance negotiating leverage between hospitals and their health plans. Among the legislative options discussed are: