Insurers need bargaining power to control costs: study

Insurers must be given the same bargaining power that providers have in order to help rein in rising healthcare costs, according to a paper published today in Health Affairs.

That bargaining power is critical as the U.S. prepares for health insurance exchanges next year with the goal of not only increasing competition among carriers, but also between insurers and providers.

“Insurers that sell policies in the exchanges may gain some market share, but it will not be sufficient to justify expectations that exchanges can help contain costs,” researchers in Europe and the U.S. argue in their study, “Health insurance exchanges in Switzerland and the Netherlands offer five key lessons for the operations of U.S. exchanges.” They say other measures are necessary to create incentives to contain costs.

The researchers write that despite the reforms in Switzerland and the Netherlands—which introduced private insurance markets in, respectively, 1996 and 2006—healthcare spending has risen due to a lack of pressure from insurers on providers. In the Netherlands, for instance, carriers are limited in the ability to negotiate with providers due to government payment controls. Consumers need access to reliable information about costs and quality to become savvier about how they use care.

Like health insurance exchanges in the U.S., the marketplaces in the Netherlands and Switzerland require that everyone purchase health insurance or pay a penalty; insurers can't reject applicants and must offer a set of standard benefits; and premiums are set based on community rating.

However, experience in Switzerland and the Netherlands has shown the threat of fines or penalties for noncoverage is not enough to ensure universal coverage and “states should be prepared to spend resources to determine why people do not obtain coverage and to craft responses that will help people enroll in plans.”

Along those lines, states need to inform people whether they are eligible for subsidies and make the application process easy.