Health insurers have the ability to negotiate lower provider prices in markets boasting higher payer and provider concentration, according to a recent study published in Health Affairs.
For the study, researchers — led by Richard Scheffler, PhD, a health economics and public policy professor at the University of California, Berkeley — examined hospital prices for 640,000 annual inpatient admissions from 2010 to 2014 using the Health Care Cost Institute's medical claims database. Study authors restricted the analysis to acute care hospital admissions for individuals age 18 to 64 covered through a preferred provider organization health plan.
To examine negotiations between providers and payers, researchers sectioned provider markets into low, medium and high concentration groups and insurer markets into low and high concentration by market power. Researchers analyzed how different combinations of provider and insurer concentrations related to prices.
Overall, hospital admission prices rose 20 percent during the study period, from about $14,800 in 2010 to almost $17,800 in 2014. In markets with low hospital and payer concentrations, the average admission price was $16,171. Researchers uncovered no significant price differences in markets with low hospital concentration and high insurer concentration.
The association changed significantly when hospital concentration was high but insurer concentration was low. The average admission price was $17,952, up 11 percent from markets with both low payer and hospital concentration. Comparatively, when hospital concentration was high and insurer concentration shifted from low to high, the average price fell 5 percent, from $17,952 to $16,994.
"Hence, insurer bargaining power was associated with reduced prices, but the price of $16,994 was still 5 percent above the price when both hospitals and insurers had low market power ($16,171)," the report states.
Researchers noted the study is limited by a lack of claims from Blue Cross Blue Shield plans, which lead "some of the most concentrated insurance markets in the country."
"Significant premium increases and the profits of the health insurance industry in recent years suggest that little if any of the benefits of insurer bargaining power are being passed along to consumers," the researchers concluded. "It would seem to be only a matter of time before further intervention in and regulation of the health insurance market by state and federal legislatures, as well as private market innovations, will accelerate."