WellPoint program lets employers name their price for doctors

By Sue Ter Maat
American Medical News, July 29, 2013

Physicians collecting from WellPoint-insured patients who haven’t met their deductible or have a co-pay might have one more reason to send them a bill — to collect the difference between the price the insurer has negotiated with the doctor, and what the employer is willing to pay.

WellPoint plans to launch a program in 2014 in which self-insured companies can determine what they will pay for certain procedures. WellPoint would present a price range to the employer based on what has been negotiated with doctors. Then the company would determine the maximum price it’s willing to pay.

Patients insured through a participating employer would have access to a website that shows, in as much detail as possible, physician price and quality information, including what they would expect to pay out of pocket. Physicians would still be able to charge based on the rate WellPoint negotiated, but any difference between that rate and what a company is willing to pay would have to be collected from the patient, not the insurer.

Companies examine cost distributions for procedure midpoints to determine reference prices, said George Lenko, program director of national networks for WellPoint. So, for instance, hip surgery can range between $20,000 and $100,000. In that case, an employer may set what’s called a reference price at any point in between, Lenko said. If a physician’s contract with WellPoint calls for less than that amount, the doctor would be paid at that previously negotiated rate. But if a doctor’s negotiated charge was higher than the desired price, he or she would have to bill the remainder to the patient.

Reference-based benefits are becoming popular as it becomes easier to compare costs for the same service, Lenko said.

He said when employees know how much services cost, and they are sharing in that cost, they become more engaged with their health care. “The patient becomes a better consumer,” Lenko said. “The more they shop for their own health care, the more efficient they will be.”


WellPoint has been a leader in private insurance innovations. These innovations have worked very well for WellPoint, but for the patients, providers, and purchasers? Well, let’s see how this new innovation in reference pricing for self-insured employers seems to be designed.

For employers who want to insure their own losses in their health benefit programs but who need help in the administration of these programs, private insurers offer health plan administrative services without assuming any of the risks of medical losses (health care bills). As part of their services, they provide employers with lists of network providers – physicians and hospitals who have agreed to contracted rates for their services.

However, those contracted rates may be higher than the employer would be willing to spend, that is, the employer’s reference price. So what happens when the providers bill for their services? If the charges are higher than rates contracted with WellPoint, then WellPoint, using the self-insured employer’s funds after the deductibles are paid by the patient, pays the contracted rate and the rest is adjusted off – just as is done today with in-network services in the typical PPO plan. If the charges are higher than the reference price that the employer is willing to pay, even though at or lower than the WellPoint contracted rate, then WellPoint pays only that reference price on behalf of the employer. Yet the provider’s contract allows the full negotiated fee. So who pays the difference? The patient!

What is going on here? Well, a few things. First, insurers have not been as effective as public programs such as Medicare in obtaining optimal lower pricing for their contracted networks. Also, some economists have suggested that employers should be playing a more active role in slowing the escalation of health care costs. Introducing reference pricing allows them to do just that. They find the lowest prices for which the services can be realistically provided, and then they set their allowed rates at that level. In addition, those who believe that patients should be financially involved in their utilization of health care services (consumer-driven health care) support reference pricing because it requires patients to either shop prices more effectively, or to be personally responsible for prices that are higher than the reference prices.

Who wins? Employers with self-insured plans experience a reduction in their health benefit payments. Insurers who are providing only administrative services are able to market these less expensive models to employers, while selling them yet more administrative services, increasing insurer revenues without any exposure to risk. Providers who reduce their rates to the level of reference pricing will receive fewer revenues per unit of their services, but they will increase their market share if the patients actually do end up choosing providers who will cost them less out-of-pocket. Providers who are unable to match reference prices will lose market share.

Who loses the most? The patients. They cannot always shop prices, and even when they can, they may find that the providers offering reference prices may be their least preferred choices, or they may find that they are simply not accessible due to distances or scheduling difficulties. Not only do patients lose their choices of their preferred providers, they are once more the victims of the current trend in shifting the costs of health care from insurers and employers to the patients themselves. This insurer/employer conspiracy is yet one more manifestation of The Great Risk Shift (Hacker) – moving funds from the workers to the uber-wealthy.

Single payer would jettison this nefarious conspiracy.