New Study Helps Employers Become Better-Informed Purchasers of Health Care

Despite the legislative moves made over the past 10 years with the ACA and other healthcare initiatives, healthcare costs continue to rise (albeit at a slightly lower rate of increase). These rising costs present a key concern for employers and health plan stakeholders.

In Indiana, our healthcare costs have typically been higher than our neighboring states and much of the nation. In the early 2000s, the Employers’ Forum of Indiana was formed, bringing together key stakeholders to discuss, debate, and address the impacts of and the solutions for rising healthcare costs. FirstPerson is proud to be a participant in the forum today.

In July 2013, the Employers’ Forum of Indiana commissioned The Rand Corporation to conduct a three-year study of healthcare costs in Indiana. The study focused on:

  1. How hospital costs compare to Medicare rates
  2. How hospitals compare to each other within the state
  3. How Indiana’s systems compare to other states’ costs of care

A summary published by the forum with links to the full Rand report can be found by clicking here.

Key findings from the study include:

  • Prices vary widely, ranging from less than 200% to as much as 370% what Medicare pays.
  • The state’s largest hospital systems generally command the highest prices.
  • The average price for inpatient hospital care in Indiana is 217% of Medicare rates, compared to 175% nationally.
  • The average price for outpatient care in Indiana is 358% of Medicare rates. National data are not available.
  • The relative price of hospital care in Indiana rose sharply over the three-year study.

As the study’s lead author, Dr. Chaplin White, states, “By itself, increased price transparency will not bring down prices, but it can enable employers and other purchasers to change their health benefit design in ways that reduce costs.”

What does this mean for employers?

Health care is a very local decision for consumers, and this data helps employers create awareness through plan design and transparency tools to make better buying decisions. As was true when interpreting the ACA, employers who win are those who develop a three-year (or more) comprehensive strategy that incorporates design, funding, communication, and well-being goals to bend the cost trends. This data gives creative plan sponsors and their advisors more confidence when considering narrow network options and working with the systems leveraged by their employees. Our team looks forward to addressing your questions and helping you execute on the strategies listed above. If you have any questions, please reach out to your Advisor.