When Uwe Reinhardt tries to explains the Gordian Knot of hospital pricing to his health care economics students at Princeton University, he has a go-to metaphor:
“It's almost like blindfolding people, shoving them into Macy's and saying, ‘buy — efficiently — for a shirt.’ Well you come out with a pair of shorts,” says Reinhardt.
As WLRN and the Miami Herald have been documenting all this week, the tangle of employers, insurance companies and providers makes shopping for health care and health insurance difficult enough — but underneath that web is a layer of secrecy that prevents consumers from seeing what actually gets paid for care.
And according to Reinhardt and others, what you don’t know can cost you.
We Are The Insurance Company
Last November, Miami-Dade County school superintendent Alberto Carvalho was pleased to announce the district and the teacher’s union had just ratified a new contract. It included bonuses for most teachers. And it settled a very contentious battle over how to handle health care expenses after yet another year of rising costs: individuals could still keep their coverage without employee contributions, but premiums would go up for covered family members.
“We are the insurance company, there’s no profit to be made,” Carvalho told the school board. He explained that as a self-insured employer, the district was aware of exactly what was spent on health care and was sensitive to each rising cost.
Even though the contract was settled, the board still had questions: Was it true that annual premiums for family members could go up thousands of dollars? Would that cost really cancel out the bonuses? Was the district doing enough to help its employees?
It was not the conversation the superintendent wanted.
“I thought we were coming here today to first and foremost celebrate something pretty remarkable,” Carvalho said.
“Employees actually pay for what they think is company-provided insurance by lower wages,” says Reinhardt. “They take the money out of your paycheck and buy you insurance and you say, ‘thank you.’”
Reinhardt says that as health care costs increase for employers like the school district, more of that money is taken from the employee in the form of higher employee contributions and out-of-pocket expenses.
But driving costs even higher for employees, says Reinhardt, is the secrecy of the actual prices.
Carvalho’s right: the district knows exactly how much it pays out for health care claims — at least, in aggregate. What it doesn’t know is how much it’s paying to any one hospital or provider for a given service. Which means it doesn’t know which providers are the most or least expensive.
While self-insured employers — like Miami-Dade County and the school district — bear the financial risk, they still have to hire an insurance company to manage the claims process and negotiate rates with hospitals on behalf of employees.
Insurers and providers protect those negotiated rates behind non-disclosure agreements — secret even from self-insured employers taking the financial risk.
“To save money, why don’t we know? And that’s our frustration about transparency of reimbursement rate” says Martha Baker, president of the union that covers nurses, doctors and other employees at Jackson Health System.
She says it’s frustrating for her and other county union leaders to have a conversation about health care contributions without knowing exactly where the money goes.
The school district and the county are both subject to the state’s open records laws. Still, the insurance carriers they use — Cigna and AvMed — rejected our public records requests for detailed accounts of what was actually paid out—even though the county and schools own that risk.
Both insurers cited trade secrets.
Even A Second Grader Would Be Upset
“Our salaries have not gone up in the same way that health care costs have gone up,” says Fedrick Ingram, head of the United Teachers of Dade.
Ingram has been urging the school district to figure out where the money is going. And, Ingram says, the district has that opportunity: the school board plans to shop around this year for a company that will negotiate better rates on the district’s behalf.
“We have to know who’s driving up costs, what’s going to affect the bottom line for our premium costs and what is actually contributing to that,” says Ingram.
After all, Ingram points out, money spent on health care is money that’s not going into a teacher’s paycheck.
“It’s difficult, you don’t feel like you’re getting your full value,” says Cheryl Collier, who teaches gifted second graders at Leewood K-8 Center. “Obviously they’re negotiating sort of blindly.”
According to Collier, her students would be furious if they were presented this scenario of secret prices and rising costs.
“They would be angry that they are paying for something — or being forced to pay for something — not really fully understanding the value of what they’re paying for,” she says. “Even a second grader would be upset.”