Why “Skin in the Game” Turns Out To Be Not Enough to Motivate Consumers to Check Healthcare Prices

April 22, 2018
An experiment in pricing transparency in Massachusetts reveals some hard truths about what happens when health insurers offer their plan members data on provider prices, and why “skin in the game” is not enough

Experts across the U.S. healthcare industry have been saying for years now—decades, really—that empowered health care consumers are going to revolutionize the healthcare system in our country. And it’s hard to argue with that idea in principle. The question is, just when will U.S. healthcare consumers really become “empowered”? The answer to that question is not as self-evident as it seems.

On the one hand, as the employer-purchasers of U.S. healthcare push their employees and employees’ families further and further into high-deductible health plans, it is inevitable that healthcare consumers will become more price-sensitive with regard to their contributions to healthcare expenses.

But will the very fact of price impacts automatically push consumers into becoming more investigative, discerning consumers of healthcare services? Will they actively use tools provided by health insurers in order to make choices among providers?

Well, the answer to that question turns out to be a decidedly mixed, even perhaps slightly discouraging, one, at least for now. As an April 17 article in the Boston Business Journal noted, “A new report has found that though insurers are doing a better job providing cost estimates for their members, consumers still aren’t all that interested in shopping for their health care. The results come from a recent study intended to follow up on an analysis done in 2015 by consumer advocacy group Health Care For All,” the Boston Business Journal’s Jessica Bartlett reported. The study was sponsored by the Pioneer Institute, “an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.”

As Bartlett noted in her article, “The online tools were developed as the result of a state law passed in 2012, which required insures to develop cost estimator tools by October 2014.” She quoted Barbara Anthony, the primary author of the report and the former Undersecretary for Consumer Affairs and Business Regulation, as stating that “We’re beginning to move in the right direction.”

As Bartlett reported, “Health Care For All assessed the tools the following year, and gave the state’s three largest insurers—Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim Health Care and Tufts Health Plan—a ‘C’ grade for their cumbersome and ineffective systems. Since then, Blue Cross has made several improvements to its tool, changing the name to “Find a Doc and Estimate Costs,” making it more prominent on the website and clearly showing out-of-pocket costs and remaining deductibles. Harvard Pilgrim and Tufts also had to completely remake their websites after their vendor for the service pulled out of the market. The new cost estimator sites now explain out-of-pocket consumer costs, remaining deductibles and even quality metrics.”

Still, Bartlett noted in her article, “Despite there being better tools, there were only 297,000 inquiries on the cost estimator tools from early 2014 through 2017. Combined, the three insurers cover three million people.”

Anthony told Bartlett that "Health care price transparency is still a new idea to many consumers and to providers. It’s almost an alien concept—the idea people should know how much their healthcare will cost before they incur the procedure and may opt for lower cost providers…so (we need to be) educating consumers, educating employers, providing information in an easy to understand way, providing incentives for people in an easy way,” Anthony said.

And, Bartlett wrote, “While the prevalence of high deductible health plans may spur some people to shop for their care and use price estimator tools, Anthony said there needs to be a growing focus on incentive programs that encourage consumers to shop for health care.”

Here’s what’s particularly interesting: as the report notes, “In 2012, the Massachusetts Legislature enacted what was intended to be comprehensive health care cost containment legislation: ‘An Act Improving the Quality of Health Care And Reducing Costs Through Increased Transparency, Efficiency and Innovation (Ch. 224). ‘Some of the more touted features of Ch. 224 were innovative provisions dealing with healthcare price transparency that require both insurance companies and providers of all types to make price information available to consumers seeking such information. The goal of these provisions was that transparency in pricing would help reduce healthcare costs as market forces would drive patients toward lower-cost, higher-value providers.”

Indeed, “By 2012, the Massachusetts healthcare insurance market had started seeing a growth in high-deductible health insurance plans. In 2014, almost 20 percent of Massachusetts families spent at least $3,000 on out of pocket health costs. Another indicator of the magnitude of family healthcare costs is reflected in the 2015 average statewide premium and cost-sharing of about $20,000.” What’s more, the report notes, “When Ch. 224 became effective in 2014, three major carriers controlled almost 79 percent of the Massachusetts insurance market: Blue Cross Blue Shield (BCBS); Harvard Pilgrim Healthcare (HPHC) and Tufts Health Plan (THP). In 2015, the advocacy group Health Care For All (HCFA) undertook a project to test and assess these carriers’ online consumer cost estimator tools. The results of that research, Consumer Cost Transparency Report Card, issued in 2015, assigned each carrier an overall “C” grade and identified specific areas for improvement with respect to each.”

And, now that the major health insurers in that state have made progress in sharing with their plan members tools to help them assess cost differences among different providers? Well, as noted, in the report, only a small percentage of health plan members have yet taken advantage of any of these online tools. The report’s authors note that “Consumers may not be aware that the contracts between carriers and providers actually specify charges (known as the allowed amount) for thousands of services, surgical procedures and any ancillary charges that may materialize during the delivery of medical services or procedures. The contracts between carriers and employers spell out the deductibles, co-pays and any other costs consumers or employees are expected to bear. In other words,” they write, “the price of healthcare services across providers and within a particular plan is known to everyone but the consumers who pay the premiums and other out-of-pocket costs. The first time consumers get cost information is usually after they receive a bill for the services or procedures rendered. So-called ‘surprise’ medical bills are a common occurrence. For a long time many healthcare policy makers, including in Massachusetts, argued that to reduce healthcare costs, consumers had to have ‘skin in the game’ to incent them to avoid unnecessary services and expensive providers. For approximately the past 10 to 15 years, consumers have seen increased deductibles, co-pays, and even more widespread use of co-insurance.”

Yes, clearly, because of the process issues involved—healthcare consumers are still not presented with actionable information at the point of service delivery—having some of this information simply remains irrelevant at the moment of service delivery, when it would really make a difference. So, as it turns out, “skin in the game” is not enough. But when will enough change take place to really change consumer behavior?

As this experience in Massachusetts demonstrates, we need to establish a whole new set of processes if we want to engage healthcare consumers more fully in participating in the “value chain” in healthcare. “Skin in the game” is not enough—not even as co-pays and deductibles continue to rise and as the employer-purchasers of healthcare force their covered employees and employees’ families to take on more of the financial burden of managing their healthcare.

In the meantime, credit is due to the leaders at the Pioneer Institute—as well as the Massachusetts state legislators—who are trying to move the needle forward here. Not all the puzzle pieces have yet fallen into place, but in some more advanced markets, at least some have, and more will in the coming months and years.

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