Good health insurance retains employees. Modern plan won't break their banks. |Opinion
Ross Klosterman is CEO and co-founder of Poppins Health of Columbus, a new health plan for small businesses.
When asked the question “Why do health insurance companies exist?” A reasonable person would likely respond that the role of health insurance companies is to use their influence to negotiate and keep healthcare costs low for members.
This same person might then be infuriated to find out that as a single person with effectively no negotiating power, oftentimes, they could potentially end up paying less out of pocket for medical services than what insurance companies negotiate on their behalf.
Which leads us to the following questionable, yet common scenario: A family of four pays an average of $22,000 a year for insurance, in addition to an approximate deductible of $5,000 before insurance even kicks in. How has this gotten to be the norm in the U.S.?
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The answer could lie in how broken healthcare prices are. The vast majority of knee and hip replacements are done with “in-network” providers (meaning insurance has negotiated with them). As a result, the total price – and ultimately what members pay out of pocket – can vary drastically, even within the same facility.
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According to recent data, the cost for the same procedure at a San Francisco hospital has a staggering range of $22,865 to $101,571. Since every hospital and insurance company has a different process in place to determine procedure costs, one patient might end up paying thousands of dollars more than someone else at the same location.
Under the traditional health care model, costs are confusingly divided between co-payments, co-insurance, and deductibles. The end result is that health plan members have no idea if they are overpaying for a procedure.
Enter modern health plans. Lesser known to business owners are newer, more innovative health plan options that allow employees to “shop” for a surgery.
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Let’s use a knee replacement as an example: Employees who have a modern health plan are able to know their exact out-of-pocket cost upfront, and are given options ahead of time. This “dynamic” co-pay is determined by three factors:
Quality of doctor: Modern health plans look at objective data such as patient outcomes, infection rates and readmissions to determine a quality score.
Cost of procedure: This number is determined by looking at what the provider charges relative to other providers in the area.
Billing practices at the facility: This score is related to the financial experience a member has at a given facility based on incidences of surprise bills.
After factoring in the above, the resulting member co-pay options are determined — if the employee chooses the option of a high-quality doctor with low cost and good billing practices, she’ll pay $0 for her knee replacement. Perhaps she wants to see the doctor who is still high-quality but is a bit more expensive — in this instance, the option might cost $1,500.
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In a traditional health insurance plan, if there was a $4,000 deductible with the traditional plan, in every scenario, the patient will pay $4,000 – no matter the quality of the doctor or the underlying price (and in just one metro Ohio area, knee replacement prices range from $18,000 to $45,000).
To better understand what a procedure will cost beforehand, businesses should take advantage of modern health plans like the above that do the price and provider comparisons for their employees to potentially save thousands of dollars in out-of-pocket costs.
Offering a good health plan is a great tool for employee retention, so careful consideration is critical when it comes to selecting one that is the best match for a company.
Ross Klosterman is CEO and co-founder of Poppins Health of Columbus, a new health plan for small businesses.
This article originally appeared on The Columbus Dispatch: Opinion: Modern health insurance plan can save customers money
