Five years ago, it was the Wild West when it came to employers delivering information on health care costs to employees. Cost transparency tools, either provided by traditional insurers or stand-alone companies, were just beginning to appear, and the Affordable Care Act had not yet turned national attention to the wide variation in costs by region and provider.

Today, it's a little different. Employers have an array of options to choose from, and gone are the days of companies explaining what transparency is. Now employers ask, "How are you different?"

With a movement toward high deductible plans, transparency becomes even more important for an employee who is expected to pay out of pocket (either tax free or not), for care that was previously largely subsidized by employers.

"[Employees] need to have tools to help them understand the value the providers offer and what relative costs are," says Mike Thompson, a principal at PriceWaterhouse- Coopers, who focuses on health care and benefits. "It would seem that showing the price of services that people use is easy. But there is complexity ... and some of it relates to the fact that providers don't bill for a single item."

To complicate matters, Thompson says the easiest data to mine is from retrospective costs, but "deals change over time and keeping current is not easy."

Though employers may be reticent to push employees to use one treatment over another, they do want to get employees engaged in making decisions, and transparency tools are a critical component of this process.

Peter Isaacson, chief marketing officer at transparency tool-maker Castlight Health, says that the growth of transparency services is a good thing.

"There's no other market where people don't have the basic information to make informed decisions - it's strange that you can get more information on a TV than a hip replacement," Isaacson says. In many provider cases, he adds, there is no correlation between cost and quality, making the market a dysfunctional maze for consumers to wade through.


Price visibility

Isaacson believes the growth of companies like Castlight can be attributed to more data information, previously the biggest hurdle in creating a product to offer to employers. Getting pricing information was a challenge, so the company ended up getting claims data from employers themselves and creating an algorithm that sifts through individual employees' two-year history of claims and compares it against other employees.

Isaacson says Castlight initially sits down with employers with the assumption that the goal is to save money, but a deeper dive usually reveals that improving health outcomes and getting employees more engaged is equally important.

"The conversations that we have are that price visibility is the very beginning of the story. You have to make sure that you're engaging the employee population because if you don't, all bets are off," he says. Getting employees involved through an easy-to-use interface opens up possibilities for employers to tweak benefit design and introduce a more advanced wellness program. His firm hired software engineers from Google, Facebook and other consumer-facing platforms to build its tool to drive that engagement.

Isaacson says this was almost as important as getting accurate data: If employees are fed too much information and don't understand the tool, it's a waste of employer money. And with the Affordable Care Act, more employers want this cost information.

"[Transparency] is one of those seminal issues of our time - the raised awareness has gotten people thinking about health care spending, [but] how do we get our arms around it?" Isaacson says. "In a short couple of years, we've gone from explaining the basics of transparency to employers coming to us to ask how we are different from all the others."

The shift to high deductible plans has also created a further need for these tools, according to Doug Ghertner, president of Change Healthcare, another firm that offers transparency tools.

The program his company created scans an employee population for utilization of services - such as mental health treatment or prescription fills - and looks at both quality and cost metrics, and sends out alerts after an employee has a claim filed. That alert offers information about a cheaper or higher-quality provider.

Sixty percent of the 3,600 employees who currently have access to the alerts open them, and 75% regularly update preferences such as location or customer service experience so that the next message is more specifically tailored.

Change Healthcare's product also offers "Health Care University," which provides videos and games to help employees interact. Ghertner says that while most of the company's clients are employers, Change Healthcare also works with some smaller insurance companies such as Blue Cross Blue Shield of Minnesota. In the first six weeks the interactive platform was in operation, users watched 9,000 videos and played 19,500 games, which was a sign to Ghertner that it's working.

"The massive retailization of health care means that while employees were previously making purchases through employers, we're asking them to purchase through individual decisions," Ghertner said. "Transparency tools are a means to an end - the theory is to design them to get people to engage. If no one uses them, they don't derive value."

Employers should look for tools that are similar to what an employee would find if shopping for a product on or any other online shopping interface. They should be easy to use and break down cost next to quality and customer experience metrics. Employers should also ask what information is presented to the employee. Data should be tailored to an employee's or company's region, and should be updated more than annually because of changes taking place in the market.

Any tool should also give employees information on how much a service would cost based on in-network and out of network. Glossaries of terms are also helpful, because employees might not have previous experience working with insurance.


Potential for confusion

Robin Gelburd, president of Fair Health Inc., says that transparency tool-makers will sometimes rush to the market with systems that cause more confusion than clarification. She suggests employers try out demos of any product and try to get as much information as possible on what it provides.

Her company, Fair Health, was established in October 2009 as part of the settlement of an investigation by then New York State Attorney General Andrew Cuomo into the health insurance industry's methods for determining out-of-network reimbursement. Cuomo alleged that it was a conflict of interest for health insurers to determine "usual, customary and reasonable" charges for out-of-network services on the basis of data compiled and controlled by the industry because insurers had relied on a database compiled and operated by Ingenix, Inc., a subsidiary of the UnitedHealth Group. Additional allegations charged that the data was flawed. Fair Health was formed to take over and improve the database and to create more transparency. It offers tools to employers and also a free website to consumers on the reimbursement process.

While many insurance carriers offer transparency tools to employers, Gelburd says they may not meet employees' needs. In that case, an employer can license with another provider to offer a tool that is synced with benefit design.

"There may be a concern that the data provided is trying to coax a particular decision that is not [based] on data from the market. It's a way to neutralize the assistance offered to a consumer," Gelburd said.

Victoria Bogatyrenko, vice president of product development and innovation with UnitedHealthcare, a division of United Health Group, says that United has offered its own transparency tool for about six years, but launched a new version about a year ago. The new tool uses current fee schedules for doctors and hospitals, which she says gives a more accurate picture of what a service will cost.


Behavior change

In light of all of this clarity, a big question remains: Do employees switch doctors or hospitals because of what the tool shows? The answer may be more complicated than just getting employees to go to cheaper practices.

"Depending on the service, cost will be weighted differently - for a high-cost service, you might be more apt to switch providers. That's what's called 'shoppable' procedures," Bogatyrenko said. The likelihood of someone switching depends on how long they've been seeing their provider and how important the service is: Incidental services, rather than primary care, may be a more likely switch.

Thompson says there needs to be some way to shop around for providers, and offering a tool that is tailored to benefit design and carrier is key. Insurance often sets rates for how much it will pay, and consumers cannot just go to a doctor's office to find out how much something costs.

"When employees spend their own money on premiums and deductibles, they tend to take on more risk and they need to have more tools to manage the cost of care," Thompson says.

Lisa V. Gillespie is a Washington, D.C.-based writer.

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