As the House drafted and revised the American Health Care Act (AHCA) to reflect different policy positions, one aspect attracted relatively little controversy from policymakers: expanding the use of health savings accounts (HSAs).
Understandably, attention from healthcare providers to the AHCA has focused on issues such as insurance coverage and Medicaid funding. However, the bill’s proposed expansion of HSAs adds fuel to the rapid growth of HSAs and the accompanying focus on pricing, which have significant ramifications for healthcare providers.
Two of the pillars of President Donald Trump’s campaign platform were to allow Americans to set aside more money in tax-deductible HSAs, and to require price transparency from all providers so people can shop for the best prices. The U.S. Secretary of Health and Human Services Tom Price and leaders in the Republican-led Congress, including House Speaker Paul Ryan, also have long been proponents of HSAs and price transparency as important means to lower overall healthcare costs.
The House version of the AHCA would broaden the types of expenses covered by HSAs and increase allowable contributions. Although the bill currently is being rewritten in the Senate, expanded HSAs likely will remain a component.
Momentum among employers and commercial insurers has led to rapid growth in HSAs. The most common consumer-directed health plan—a high-deductible health plan paired with an HSA—was offered by 57 percent of large employers in 2016, compared with 52 percent in 2015 and 16 percent in 2006, according to the Kaiser Family Foundation. As of 2016, 29 percent of workers were enrolled in a high-deductible plan with an HSA, compared with 24 percent in 2015 and 4 percent in 2006.
As the use of HSAs has grown, so have deductibles. The annual deductible for single coverage for covered workers in 2016 is 63 percent higher than in 2011 and 300 percent higher than in 2006, according to the Kaiser Family Foundation.
The rise of high-deductible plans and HSAs puts an increasingly intense spotlight on provider prices in two key ways. First, consumers and other stakeholders need access to comparative price and quality information in order to shop for care. Second, as that information becomes available, providers will need a pricing strategy that allows them to compete both with traditional competitors and with upstarts whose value proposition is built on low prices.
Historically, healthcare providers have struggled to communicate information about price to consumers in an accessible and understandable way. The media is full of stories about the difficulty that consumers encounter in trying to put physician costs, facility costs, deductibles, and other factors together for a clear picture of their out-of-pocket responsibility for care.
In addition, few providers have developed pricing strategies that address the effect of consumer comparison-shopping for healthcare. A recent Kaufman Hall survey found that strategic pricing is an above-average priority for only 29 percent of respondents, and only 9 percent have advanced capabilities to understand what consumers are willing to pay and to evaluate the effect of pricing on different consumer segments.
Developing a strategy for transparency and pricing is a complex undertaking. Transparency requires that information:
- Be easy to communicate and use
- Be paired with information that defines value of services
- Include total out-of-pocket expense and what is included in that figure
- Clear articulation of the organization’s value proposition compared with competition
- Evaluation of market conditions influencing consumer decisions about care
- Benchmarking of the organization’s negotiated rates with competition (including non-traditional competitors)
- Measurement of price sensitivity in the market by service
- Principles for pricing at individual service or geographic levels
Providers face many barriers to developing pricing strategies. There are intense competing priorities, lack of good data, and lack of clarity or even skepticism about the current and future effects of consumers’ increased financial responsibilities.
Despite these barriers, organizations need to feel a sense of urgency about price transparency and strategic pricing. The pressure on price is coming from all directions.
Federal and state governments are targeting unwarranted price variation and trying to influence its causes.
Employers are demanding comparative price information for themselves and their employees.
Insurers are seeking provider price transparency to manage beneficiary costs.
Special-interest groups and media are highlighting what they perceive to be egregious examples of price variation.
Almost three-quarters of consumers with high deductibles are seeking price information.
Well-funded new companies such as Castlight Health and Healthcare Bluebook are building businesses around providing comparative information to all stakeholders.
And other companies such as diagnostic imaging chains and freestanding surgery centers are offering services at prices lower than most hospitals and health systems can reasonably match.
Proposed HSA expansion in recent health legislation is only the latest chapter in the intensifying scrutiny of healthcare prices. As long as America’s healthcare spending rises faster than GDP, and as long as more than half of that spending goes to hospitals and clinicians, healthcare provider organizations will need an effective strategy that includes transparent, strategic pricing.