Private health insurance companies excel at making employers believe that their business arrangement is an equal partnership with shared goals based on health care price and value. And insurers know they can rely on the vast majority of their employer clients to accept their prices and contract terms with little or no push back. The administrative advantages of working with private health insurers are well known and appreciated by employers. But it is the insurers’ contractual advantage in having access to key costs information that makes the relationship less than equal or fair. This information, if shared, would weaken health insurers’ ability to charge any price they want for their health plans.

The Public Has A Right To Know What It's Getting For It's Health Care Dollars

The Trump Administration, according to a recent article in the New York Times, said, "it wanted to require public disclosure of the rates doctors and hospitals negotiate with health insurance companies." The operative words here are "wanted to require," this is not a formal proposal, according to reporting in the Wall Street Journal. But just wanting to broach the subject around the transparency of contracted rates between health insurance companies and hospitals and doctors is groundbreaking. After more than half a century of purchasing health insurance, employers never asked, at least to the public's knowledge, for this information, even though they and their employees are the true payers of health care.

As someone who worked in HR benefits departments of private companies and participated in annual health insurance negotiations, I have to admit I never requested information on insurer negotiated discounts with network providers. I wanted to know, but I took for granted that the discounts were significant and that it was in the best interests of the insurer to negotiate a “good deal” with the hospitals and doctors in the plan’s network. I’ll never know if the health insurance companies negotiated in good faith on behalf of my employers, but I have reason to be skeptical.

Private health insurance companies haven't behaved like insurance companies for decades. Self-funding by employers means no risk for the insurer, unless claim costs exceed the insured stop loss limit. And high premiums based on secret negotiated discounts for fully insured health plans ensure profits, not losses for the insurance company. The one health insurance product that may result in a loss for insurers is an individually purchased private health plan, which before Obamacare, was highly restrictive due to preexisting condition exclusions, excluded benefits, and premium costs. Post-Obamacare, sky-high premiums and deductibles for individually purchased health plans greatly reduce insurance company risk of loss.

It’s Not An Equal Relationship

Recent reports about some health insurance brokers and some private health insurance companies reveal that these brokers, often hired by employers, in effect work on behalf of the insurance company. Broker compensation and bonuses come from and are contingent upon selling the health plan to the employer and retaining that employer’s business year after year. Other reports show collusion with hospitals and doctors to set discounts on inflated medical care rates. Still, even large employers haven’t requested the discount information the Trump Administration is contemplating. Instead, they are working with consultants to help them create their own private networks (Amazon, Berkshire Hathaway, and JPMorgan) where they negotiate rates for medical care services directly with hospitals, doctors, and drug manufacturers.

This approach may just be a case of taking power from the health insurance companies and giving it to hospitals and doctors. It may not lower health care costs at all, and it still allows hospitals and doctors to keep their “discounts” a secret from everyone else. This means hospitals and doctors still do not have to compete on price, and they can still charge whatever they want, as well as continue to charge vastly different amounts to different groups and individuals for the same medical procedure.

Conclusion

Health insurance companies may call themselves “payers” because they handle financial transactions on behalf of employer groups, but employers and employees increasingly provide all of the money insurers use to pay health care providers, in the form of premiums and other fees. Private health insurers should not be able to keep employers in the dark on how it spends employer and employee money. If contract law permits health insurers and hospitals and doctors to have secret contracts that are anti-competitive, the law should be amended. If conservatives insist upon maintaining the health insurance status quo, the least they can do is make it competitive and stop claiming that it already is.

Tags: health insurance , health insurance rates, health insurance discounts