The prices that insurers pay physicians ultimately affect beneficiaries' health insurance premiums. Using 2014 claims data from three major insurers, we analyzed the prices insurers paid in their Medicare Advantage (MA) and commercial plans for 20 physician services, in and out of network, and compared those prices with estimated amounts that Medicare's fee-for-service (FFS) program would pay for the same service. MA prices paid by those insurers were close to Medicare FFS prices, varied minimally, and were similar in and out of network. In contrast, commercial prices paid by the same insurers were substantially higher than FFS, varied widely, and were up to three times higher out of network than in network. Those results suggest that insurers can use statutory limits on out-of-network charges in MA to negotiate lower in-network prices in those plans. In contrast, without those limits on out-of-network prices, in-network prices in commercial plans are much higher.
Objectives
To describe how spending in private, nongroup health insurance plans compared to spending in employer plans and to attribute those spending differences to components related to provider prices and quantity of care.
Data Sources
The 2016 commercial claims and enrollment data of three large, national insurers from the Health Care Cost Institute.
Study Design
We compared per member per month spending across three employer and three nongroup market segments, including on‐exchange, off‐exchange, and short‐term plans, to average commercial spending. We constructed price indices in each market segment and then decomposed spending differences into those attributable to differences in prices, health risk, plan generosity, and other factors.
Data Collection/Extraction Methods
We selected all medical claims for enrollees in commercial plans. We excluded enrollees with Medicare Advantage coverage or those for whom the majority of claims were covered by a secondary payer.
Results
Provider prices were 4.1% lower in on‐exchange plans (p < 0.001) and 1.4% lower in off‐exchange plans (p < 0.001), compared to average prices in the same geographic area. In contrast, prices in employer plans were within roughly a percentage point of those averages. Differences in average spending were much larger than price differences. Off‐exchange enrollees spent 20% less than the sample average (p < 0.001), whereas on‐exchange enrollees spent 12% more (p < 0.001). Those differences were driven largely by variation in health risk, with variation in prices, plan generosity, and other factors contributing smaller amounts.
Conclusions
Our results indicate that provider prices in nongroup plans are much closer to the prices paid by employer plans than to the substantially lower prices paid by public payers. In addition, health risk was the largest contributor to differences in spending. Lowering provider prices and attracting healthier enrollees in nongroup plans may be crucial for lowering premiums.
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