Commercial Health Plans' Policies Compromise Patient Safety and Raise Costs | AHA – American Hospital Association

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Private commercial health insurance coverage has long served as the central pillar of our national health insurance system. Not only are commercial health insurance plans the dominant source of health coverage for most Americans and employers but Medicare and Medicaid programs often rely on private health insurance plans to administer their health benefits.
The cost of commercial insurance is increasing at an unsustainable rate — squeezing individuals and families, employers, and public programs. The average family insurance premium has increased 47% over the past 11 years — faster than general inflation and more than any other part of the health care system.i This contrasts with hospital prices, which have grown an average of 2.1% per year over the last decade, about half the average annual increase in health insurance premiums. And, more recently, hospital prices have grown much more slowly than the overall rate of inflation.ii
Some commercial health insurers have implemented policies that add billions of dollars in added unnecessary administrative costs to the health care system while compromising patient care. Commercial health plan abuses must be addressed to protect patients’ health and ensure that medical professionals, not the insurance industry, are making the key decisions in patient care.
Several under-examined features of commercial health insurance contribute to unsustainable cost growth — many of which are unnecessary at best and harmful to patient health and workforce wellbeing at worst. Insurers’ use of policies that deny or delay medically necessary care — often applauded by insurers as ways to control cost — have become extraordinarily burdensome on hospitals, providers and patients.
Massive administrative costs are due in large part to the complex payment and reporting requirements of various commercial health insurers.iii More frequently they include excessive and unjustified application of utilization management tools and prior authorization requirements. These practices add costs by slowing down the provision of care, requiring providers to purchase additional information technology tools, and requiring them to hire additional staff to manage the requirements.
Ironically, many commercial health insurers point to these processes and requirements as part of their efforts to manage health care spending. What is often ignored are the complicated business and financial relationships between many health insurers and intermediary service providers.
For example, the three largest pharmacy benefit managers (PBMs) are owned by commercial health insurers. The administrative services-heavy data and analytics company Optum drives more revenue for UnitedHealth Group than its commercial health insurance arm, UnitedHealthcare (UHC), despite UHC being the largest commercial health insurer in the country. These complex relationships create potential conflicts of interest. Specifically, the insurer may put in place an administrative requirement on providers that drives the provider’s need to procure the intermediary’s tool or service.
As the nation works to improve the affordability of the U.S. health care system, holding health plans accountable will help to reduce unnecessary spending on administrative processes and services while simultaneously improving patient access to care and reducing undue burden on our health care workforce.
The full report provides information on the areas with the most opportunity for improvement.
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