Some state employees can now shop for cheaper medical procedures — when will the rest of us be able to?

By: - October 15, 2018 6:05 am

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A new program lets 160,000 state employees price shop for medical procedures, such as mammograms or colonoscopies, and if they choose a cheaper option, they pocket some of the difference.

The shared savings program could save the state money — Kentucky started something similar that saved it $10 million between 2013 and 2015, of which $1.1 million went to employee rewards.

But in Virginia, it could be awhile before those tools are available to everyone else. During last year’s General Assembly session, legislation that would have required all insurance companies licensed by the Bureau of Insurance to offer similar programs to their members failed. 

Sen. Siobhan Dunnavant, R-Henrico, and Del. Kathy Byron, R-Bedford, introduced shared savings bills last year that would have required insurers to show their members how much procedures cost at different providers. If they chose a cheaper option, the member would have gotten half of the savings.

Byron’s bill was killed on the House floor, and Dunnavant’s was continued to the 2019 session. Now Dunnavant, who is an obstetrician-gynecologist, is hoping the state’s new program will show lawmakers that the idea works and could help lower the cost of health care.

Virginia’s program, called SmartShopper, went live on Oct. 1 for those covered by the state’s self-insured plans — meaning the state pays its own claims itself — and includes about 50 procedures. If the employee chooses a less expensive option, they can get between $25 and $500, according to Gene Raney, director of the office of health benefits in the Virginia Department of Human Resources Management.

“We see SmartShopper as a way to save the health plan money and to benefit employees and retirees through offering cash incentives along the way,” Raney said. “The program is confidential and voluntary.”

If someone does not want to choose the cheapest option, they don’t have to, Raney added. The tool simply shows them the different costs and rewards them if they choose a cheaper one.

“I think it’s one of the most promising, organic ways to start to tackle the complex issues of high health care cost and high health insurance premiums,” said Joshua Archambault, a health policy analyst with the Foundation for Government Accountability. “It doesn’t solve the problem overnight, but it starts to have a meaningful impact in changing the culture we have in health care.”

Dunnavant, said the programs get patients more involved in their health care, particularly because, with price transparency, the member would be able to shop around knowing ahead of time what their bill should be.

That doesn’t happen often the way insurers and providers are currently set up. Today’s system disassociates the actual costs of services with what people pay because they’re insulated by insurance, she said.

“It’s a way to empower the patient, I think,” she said. “It’s a carrot, it’s not a stick. We’re incentivizing people to participate in the decision making. And it would lower the cost across the board.”

Prices can vary dramatically between providers for the same procedure. In Richmond, for example, a digital wrist x-ray can cost as low as $54 or as high as $347.

That’s due, in part, to the fact that providers negotiate their own individual rate with the insurers, and because some providers, such as hospitals, claim they need to charge more to cover departments they’re required by law to have, like the emergency room.

The shared savings practice started in larger companies, which are often self-insured. Those companies would not be subject to the proposed legislation because they’re not licensed by the Bureau of Insurance.

But requiring that insurers offer the programs might not be so simple in Virginia, argues Doug Gray, executive director of the Virginia Association of Health Plans.

“We like the idea of shopping, but we don’t like the idea of requiring it to be applied to a service in which there isn’t any competition,” he said.

Some parts of Virginia have only one dominant hospital system without any competing options, Gray said. That’s due to the Certificate of Public Need law, which requires that new medical providers, such as those hoping to build an imaging center, receive state approval first.

The law prevents competition, Gray said, and so requiring health plans to let their members shop is pointless if they only have one option anyway.

“We think that’s not a good use of resources,” he said. “Don’t overreach and try to require us to do something that isn’t going to be of any value.”

He said he thinks the shared savings law could have gotten further if it had been more specific, perhaps exempting regions where there isn’t competition.

But for Dunnavant, the point of the law is to ensure that more people are empowered to make choices about their health care.

“The status quo cannot persist,” she said. “Everybody needs to get into the game: Consumers need to make better choices, consumers need to have more choices, we need to look at improved preventive health care and we need to find ways to both lower costs and improve outcomes.”

Archambault pointed out that, in a climate where high-deductible health plans are becoming more prevalent, shared savings tools, and particularly the price transparency that comes with it, might be one of the best ways to help protect patients from unexpected bills that might bankrupt them.

He said what often happens in markets that support these shared savings programs is that patients start going with the cheaper options, and usually higher cost providers will re-examine their prices.

“What is really interesting is, as soon as you have price transparency, you start to have a conversation about quality, and the higher cost providers say you should come to us because the quality is better,” he said. “Which is a healthy conversation to have.”

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Katie O'Connor
Katie O'Connor

Katie, a Manassas native, has covered health care, commercial real estate, law, agriculture and tourism for the Richmond Times-Dispatch, Richmond BizSense and the Northern Virginia Daily. Last year, she was named an Association of Health Care Journalists Regional Health Journalism Fellow, a program to aid journalists in making national health stories local and using data in their reporting. She is a graduate of the College of William and Mary, where she was executive editor of The Flat Hat, the college paper, and editor-in-chief of The Gallery, the college’s literary magazine.