Are expensive research hospitals pricing themselves out of the health care market? It's possible, if recent developments in Los Angeles are a sign of what's to come, according to a medical industry research group.
HealthLeaders-InterStudy says Los Angeles' decision to go with Anthem Blue Cross for its 27,000 city workers shows that employers are eager to trim costs by avoiding high-priced academic and research institutions. The city's arrangement with Anthem, which excludes doctors from Cedars-Sinai Medical Center and UCLA Health System, would stop referrals to those pricier, but often better, hospitals, according to HealthLeaders.
Jenny Kerr, an analyst for HealthLeaders, believes this could signal a trend in the health care insurance market.
"Employers are more willing to do things they wouldn't do before," she says. "They are trying to find ways to cut costs and will tell people to go to another hospital instead of a research hospital. California is a barometer for the rest of the country. We will see more of this." (See: "5 ways your boss is downsizing your health insurance.")
Further, health insurance exchanges mandated by the Patient Protection and Affordable Care Act (ACA) may not include these prestigious hospitals in their networks. Covered California, designed to handle the state's health insurance needs under the ACA, is one that doesn't, according to HealthLeaders. (See: "Health reform sticks: Now what?")
These exchanges, slated to open Oct. 1, are online marketplaces where individuals and small businesses can shop for health plans. Ideally, exchanges would make it easier for people to purchase coverage and could lead to lower prices due to increased competition among providers. Currently 15 states are on board to run their own exchanges, while 35 have opted out, which means the federal government will organize and implement them on behalf of those states. (See: "Health insurance marketplaces: How they work and who benefits.")
To guarantee care at a prime research hospital will mean more out-of-pocket costs for a worker as well as their employer, notes Ric Gross, a senior analyst for HealthLeaders. In Massachusetts, which passed its own health reform in 2007 that reflects the ACA, employees have the option of paying more to have the best hospitals, like Massachusetts General Hospital in Boston, included in their pool of providers, he says.
"It will come down to individuals having the choice … but it will also come down to higher costs, that's clear," he says.
And what can these premier hospitals do to compete? For Kerr, the answer is simple: "There's going to be pressure to lower prices," she says. "That's what will be looked at."
Another report, meanwhile, shows that medical plan costs continue to rise, but at a slower pace than in prior years.
The 2013 ADP Annual Health Care Benefits Report, which looks at expenses tied to employer-sponsored health coverage along with enrollment trends, says medical plan costs continue to rise but at a slower pace than in prior years.
The report, based on four years of data drawn from 175 U.S. companies with at least 1,000 workers, found that premiums jumped by 3.1 percent in 2012. A tidy hike, but still less than half the 7.6 percent increase from 2010 to 2011. Overall, health insurance rates went up 13.9 percent between 2010 and 2013, according to ADP.
The report also found that:
While scrutinizing younger employees, ADP researchers learned that:
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