- This article is about making your employees shop for the least expensive coverage- “We will allow you $12, 000 for that procedure” – and if the employee picks a more expensive provider, they pay the difference. – Reeve
- Anne Matthews, Wall Street Journal, June 25
- As companies seek ways to curb health-care spending, insurer WellPoint Inc. WLP +0.17% is rolling out a program that lets employers pay only a set amount for a medical service, asking workers who select costlier care to pay the difference.
The idea has been tested for years by a limited number of large employers. But the new option from the second-biggest U.S. insurer, which will be available for coverage that kicks off next January, will be offered broadly to any client with at least 100 employees.
Under the approach, workers are supposed to be given choices among hospitals, doctors or other providers to be used for a procedure—such as an imaging scan or even a surgery—each with pricing and quality information. If they pick one that costs more than the employer offers, they pay the difference. If workers opt for a provider that costs less than the employer’s price, an employer could choose to offer them a credit, WellPoint said.
The approach, known as reference-based pricing, is one of the options that companies are using to put more choice and responsibility on the shoulders of workers—ranging from high deductibles to “defined contribution” designs that supply a lump sum for health benefits and let workers pick their own plans in a marketplace.
Benefits consultants said that broader availability of the per-procedure pricing setups, if they work smoothly, may spark more widespread adoption by employers. A survey of large and midsize employers by Aon AON -0.94% Hewitt, a unit of Aon PLC, released earlier this month, found that 8% were using the approach. However, nearly two-thirds were considering the model for the future.
The new approach “encourages a member or employee to shop and become a smarter health-care consumer,” said Ken Goulet, chief executive of WellPoint’s commercial business unit, who said the company has seen “strong interest” from employers.
WellPoint said its program can include more than 900 different services. The vast majority are routine things like lab tests, but the list also includes some more complex procedures like hip and knee replacements and bariatric surgeries.
Consultants said that other insurers are also offering such options, though generally not as broadly as WellPoint will. Aetna Inc. AET -0.08% said it started offering reference-based pricing to self-insured companies with at least 250 workers in most of its markets for plans starting this year, and has a “handful” of big clients signed up. The program covers up to 11 outpatient procedures including imaging scans and colonoscopies.
Cigna Corp. CI -0.10% said it has been piloting the approach with a big client since 2011, but has seen mixed results, and is considering whether to launch more pilots. The Cigna test found that employees ended up paying around $600 on average out of their pockets for imaging scans, signaling that they may not have been shopping around as the program intended. “We do not want to roll out solutions that will be riddled with consumer gotchas,” said Wendy Sherry, vice president for product development at Cigna.
Employers will want to be sure that any reference-based pricing program can be explained clearly to employees, is simple to use, can offer multiple different providers, and provides accurate and complete information about costs and quality, consultants said. Otherwise, “it’ll just be seen as unworkable by the workforce,” said Alexander Domaszewicz, a principal at Mercer, a unit of Marsh & McLennan Cos. MMC -0.92%
WellPoint, which has tested its program with some big clients, said it has seen good results. The insurer recently announced that a version used by the California Public Employees’ Retirement System cut the costs of hip and knee replacements by 19% and found similar or better outcomes at lower-cost hospitals.
WellPoint is working with Castlight Health Inc., which has an online tool that gives pricing and other information about health-care providers. The companies will offer Web and printed materials and a call-in line for employees, and Castlight will send people to employers’ work locations to train workers on how to use the service. WellPoint and Castlight said workers would get quality information about providers drawn from multiple sources.