Payers have the strategies to mitigate rising healthcare costs but lack the incentive and ability to effectively do so, according to a new report.
Researchers at Georgetown University’s Center on Health Insurance Reform conducted a series of state case studies to examine the strategies insurers have deployed to mitigate the costs associated with increasing provider consolidation.
The analysis found that providers are increasingly flexing their muscles as they consolidate, pushing for higher reimbursements from regional payers. Insurers have identified several ways to address rising healthcare costs but are still in search of a “magic bullet,” as all their tools have downsides.
For example, narrowing networks to exclude providers with high prices can mitigate costs but runs into steep opposition from employers and members, the report found. As such, plans have a strong incentive to agree to price increases, which employers and workers feel more gradually.
“The result is the employers and employees become the proverbial ‘frogs in the pot of water,’” the researchers wrote.
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Another cost containment strategy is deploying a center of excellence, which tiers providers based on cost and quality. However, that’s an approach that’s only usable in a market where there is enough competition between providers to form a center.
As an alternative, some employers are including out-of-state providers as an option. In Asheville, North Carolina, which is dominated by Mission Health System, a large self-funded employer in the region found that paying for certain procedures and travel costs for workers was less expensive than care at Mission.
However, they’re limited on the services that can be covered in this way, the report said.
“Payers and purchasers also noted that they often lacked the necessary data to effectively tier providers, and that patients lacked access to real-time pricing tools to enable them to make cost-effective choices,” the analysts wrote.
In addition, the report found that some insurers are banking on value-based payment arrangements to address some of the cost concerns.
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That is, if providers are willing to take on downside risk. The report found physician groups were more likely than hospitals to agree to these arrangements, as in the studied markets insurers generally had greater leverage with physicians.
When all else fails, insurers are taking an “if you can’t beat them, join them” approach. Aetna, for example, entered into a joint venture with Inova in Virginia to launch Innovation Health, while General Motors—a significant employer in Michigan—entered into an exclusive agreement with Detroit-based Henry Ford Health System.
Whether this tactic will pay off remains to be seen, the report said.
“While it is too early to say what the impact of the GM-Henry Ford partnership will have, observers in Northern Virginia largely dismissed Innovation Health’s impact on the market, noting that Aetna had obtained no discernible competitive advantage from the venture,” the researchers wrote.