Colorado tries to woo state employees to lower healthcare costs with new insurance plan – The Denver Post | NutSocia

Colorado’s health insurance plan is taking steps to change how it pays for health care for state employees to test whether market-based solutions can deliver results.

State employees have a choice of two health plans operated by Kaiser Permanente and Cigna. The state is trying something new with the Cigna plan. It negotiated directly with hospitals and other providers, trying to get staff to use the ones that are cheaper and provide better outcomes.

Kaiser Permanente, which keeps most of the care in-house, will not make any significant changes to its plan.

Efforts like Colorado’s are trying to determine whether healthcare can function as a marketplace, said Bob Smith, executive director of the Colorado Business Group on Health, which works with the state to negotiate rates with hospitals and other providers.

People can’t easily choose not to have surgery or drugs they need if the price is too high, and hospitals have little incentive to bargain because there’s relatively little competition, he said. (The insurance industry is also consolidated, which can lead to battles between giants that leave patients stuck in the middle.)

In theory, insurers should negotiate prices down for their customers. In practice, they don’t necessarily have the incentive to do so because as costs increase, so does the amount they can claim as overhead and profit. Hospitals and utilities also don’t have much of an incentive to keep prices down because patient shopping is limited.

While the state tried to negotiate lower rates, there is still a wide variety of fees for the same procedure. The roughly 20,000 state employees in the Cigna plan are incentivized to choose providers that are on the lower end of the cost spectrum and have above-average results using a tool called the Healthcare Bluebook.

Users searching a procedure and their city or zip code are presented with a “fair price” and a list of facilities ranked from green to red based on how their listed price compares to what the Healthcare Bluebook is for the area deemed fair. If a patient elects to go green, they may be eligible for a financial reward depending on the procedure. It also includes outcomes data from Medicare to direct patients to providers who have better outcomes, Smith said.

“We want to incentivize staff to pick the best and incentivize doctors to do better,” he said.

Hilary Glasgow, executive director of Colorado state workers’ union WINS, said they generally support efforts to reduce health care costs.

“We hope this innovative program will give public employees more transparency about their healthcare costs and result in long-term cost savings,” she said in a statement.

The tool was only made available to employees in July, so it’s too early to know if it’s successful in containing costs, said Doug Platt, communications manager at the Colorado Department of Human Resources and Administration. Hopefully, employees will become more engaged with their healthcare and see better outcomes, he said.

The state hopes to save about $1,500 for every $1,000 in rewards and that employees will be more productive and take fewer sick days, Platt said.

“When we talk about saving the employer money, that means saving taxpayers,” he said.

Other measures the state is testing include working with Cigna to encourage state employees to use lower-cost drugs and sharing the savings with first responders when they prevent hospitalizations and other costly complications from employees’ health conditions, Smith said.

The state isn’t the first Colorado public agency to try to save money on health care by getting more involved in purchasing. The Colorado Public Education Health Plan, a group of 16 school districts negotiating together, has reduced the rate at which monthly health insurance costs for district employees have increased over the past 15 years, CEO Ben Taylor said. Staff pay less out of pocket if they choose a hospital that has good outcomes for their procedure and gets a deal at lower prices, he said.

“Our confidence comes from the idea that school districts can take more control,” he said.

They still have a manager who handles the actual claims processing, but counties are trying to use their combined power to negotiate better rates themselves, Taylor said. That can be more difficult in rural areas with few providers, although the plan reimburses travel expenses if it makes sense for a member to travel 100 miles or more to a hospital that offers better value for money, he said.

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