September Research Round Up: What We’re Reading

After observing Labor Day this September, researchers were hard at work to analyze one of the most important benefits of the labor movement: health insurance. This month’s research round up features studies on trends in employer health benefits, potential effects of value-based purchasing, and how hospital consolidation affects prices across the country.

Claxton, G, et al.  2019 Employer Health Benefits Survey. Kaiser Family Foundation; September 25, 2019. Researchers at Kaiser Family Foundation released their annual report on trends and developments in employer-sponsored health benefits.

What It Finds

  • Over the last year, the average annual premiums for employer-sponsored insurance rose five percent for family coverage and four percent for self-only coverage. This upward trend outpaces both inflation (a two percent increase) and workers’ wages (a 3.4 percent increase) over the same time period.
  • Employees’ dollar contributions to their health insurance premiums for family coverage increased 25 percent between 2014 and 2019, while total premiums increased 22 percent over the same time period.
  • In 2019, the average total premiums across plan types was $7,186 for an individual and $20,576 for a family.
  • High deductible health plans (HDHPs) now make up 30 percent of covered workers’ health plan enrollment, up from 20 percent in 2014.
  • Average self-only coverage deductibles were $1,655 in 2019, up 35 percent from 2014, and 98 percent from 2009.
  • Preferred Provider Organizations (PPOs) remain the most popular benefit election, accounting for 44 percent of covered workers’ health plan enrollment, but have seen a decrease from a 58 percent share in 2014.

Why It Matters

It’s no question that health care costs are growing nationally. Unlike Medicare and Medicaid, which have a government-set rate for provider prices, the costs underpinning employer-sponsored insurance are negotiated between plans and providers. This study, along with other important data on how employers, workers and their families are hit by rising costs, suggests that these private market negotiations have had limited effectiveness keeping cost growth in check.

Sinaiko, A, et al.  Marketwide Price Transparency Suggests Significant Opportunities for Value-Based Purchasing. Health Affairs; September 1, 2019. Recently, the Massachusetts Center for Health Information and Analysis created a dataset including prices paid for 291 in-network outpatient medical services by procedure, insurer, and provider using the state’s All-Payer Claims Database. To assess the potential effectiveness of value-based purchasing, researchers at Harvard evaluated price variation, and examined the effects of two policy simulations on commercial fee-for-service (FFS) payment prices:

  • Price steering: reallocates all services from high-price providers to lower-price providers within the same insurer and hospital service area.
  • Price ceiling: Reducing payments to providers with prices above the 75th percentile of statewide price distribution down to the 75th

What it Finds

  • The price steering simulation showed possible price savings up to 12.8 percent, and the price ceiling simulation could save up to 9 percent.
  • Prices for medical services delivered in an acute hospital were 76 percent more on average than those delivered at all other facilities in the dataset.
  • The highest prices paid in the mainland hospital service area (excluding island service areas) were 70 percent greater than the lowest-priced hospital services in the same area.
  • The widest price variation in the service categories occurred in ambulance/transportation services, physical/occupational therapy, and laboratory/pathology testing.
  • Researchers note that findings indicate that policies that reduce price variation can result in meaningful savings, and point to price steering as a more effective method than a price ceiling.

Why it Matters

To combat rising health care prices, payers may look to value-based purchasing arrangements that encourage patients to go to lower priced facilities through network designs like tiered provider networks or narrow networks. Another strategy is capping provider reimbursements. Studies like these may help insurers and employers determine the most effective tools to obtain better value in health care purchasing.

Johnson, B, et al. Hospital Concentration Index: An Analysis of U.S. Hospital Market Concentration Health Care Cost Institute; September 17, 2019. Studies have shown that increased hospital concentration often raises prices, rather than producing cost savings. Using the Herfindahl-Hirschman Index (HHI), a common measure of market concentration, the Health Care Cost Institute, supported by the Robert Wood Johnson Foundation, mapped market concentration, price, and use across 112 metro areas in 43 states between 2012 and 2016.

What It Finds

  • In 2016, 72 percent of metro areas studied had hospital markets considered “highly concentrated,” up from 67 percent in 2012.
  • More than two-thirds of all studied metro areas showed an HHI increase between 2012 and 2016.
  • Hospital markets in larger metro areas, like New York City and Chicago, were generally less concentrated, while the three most concentrated markets were in metro areas with fewer than 300,000 people in 2016.
  • Hospital markets that became more concentrated over the study period generally saw larger growth in prices for inpatient services than markets with less concentration.

Why It Matters

Hospital concentration and the resulting higher health care prices have recently come under greater public scrutiny as insurers, employers, and consumers find themselves at a financial tipping point. This research helps to pinpoint problem areas and better quantify the impact of hospital concentration on prices as payers and policymakers seek ways to combat rising costs.

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