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Employers in Colorado Band Together to Directly Negotiate Rates and Lower Costs for Health Care Consumers

The Center for Improving Value in Health Care, a member of AcademyHealth’s partner, the Network for Regional Healthcare Improvement, highlights how Colorado is trying change the way employers purchase, and consumers shop for health care.

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When a free market economy works well, consumers understand how much things will cost, and have information to weigh the pros and cons of spending more or less for goods and services. Ideally, the market would respond appropriately according to their purchasing decisions. 

Unfortunately, when it comes to the health care system in the U.S., the people actually paying for the goods and services (employers and individuals) are not directly involved in the purchasing decisions. Health insurance companies and providers typically negotiate between themselves, leaving consumers and employers out in the cold- ill equipped to understand why their premiums continue to rise and unable to do anything about it. This is slowly starting to change as more and more employers are getting access to data and information that puts them in the driver’s seat. The Center for Improving Value in Health Care (CIVHC) helps educate stakeholders and provides data and analytics that inform new models of health care payment, including alternative payment models, that promote high quality, efficient care. 

However, we are not the only organization working to help consumers shop for health care. Colorado and a handful of other states have All Payer Claims Databases (APCDs) that are being used to provide patients with information about price variation across different providers in their service regions. Most health insurance providers also have online resources for their members that provide information specific to the price they will pay when they access services at different locations. The challenge is that very few patients actually use these tools for a variety of reasons. The tools aren’t always user friendly, and not all patients have the freedom to choose where they can go due to limited networks.

To combat these challenges, some employers across the nation are starting to band together, using transparent price information to take charge of rising health care costs. In 2019, Colorado legislators revised a state statute enabling employers to create purchasing alliances. In Summit County, home to some of the highest health care premiums in the nation, Peak Health Alliance is the first employer alliance to begin offering coverage in the state. The Colorado Business Group on Health (CBGH) is also in the process of developing a statewide purchasing group. 

Employer purchasing alliance models, like those mentioned above, allow employers to negotiate rates directly with hospitals and providers, as opposed to going through a health insurance third party administrator. They are able to do this because they have information from Colorado’s All Payer Claims Database (CO APCD) and self-insured employer data that shows how much providers in their region are getting paid compared to Medicare rates. Using Medicare as a reference provides employer groups with a common benchmark to understand how provider payments compare to each other and the state, and helps them have data-driven conversations on appropriate payments for services.  

CIVHC, administrator of the CO APCD, provides additional analyses from the database to support employer and state-led initiatives. Examples of these analyses include: 

•    Helping to identify opportunities to save money by reducing low value care; 
•    Isolating potentially avoidable costs and price variation for high cost episodes, and; 
•    Determining referral patterns that impact patient access to high value care.

It’s exciting to see momentum starting to build as employers begin to play a much more direct role in leading health care change. In Colorado we’re looking forward to seeing the results of efforts like Peak, CBGH, and others who are working collaboratively with payers, providers and community members to find solutions to make health care affordable. 

To learn more about the CO APCD and to access public transparent health care information for Colorado, visit www.civhc.org.

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Author

Cari Frank, M.B.A.

Vice President of Communications and Marketing - Center for Improving Value in Health Care

Cari Frank is Vice President of Communications and Marketing at the Center for Improving Value in Health Care. Read Bio

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