Given the need to reduce unnecessary costs in health care, what value do health insurance plans add?

Consumer-directed health care is the idea that a person armed with good information will select the right services from the best provider of that service and this will translate to improved overall quality and reduced costs as providers compete on price.  The gap between this concept and the reality of the U.S. healthcare market is better described as a yawning chasm.

Imagine being a person shopping for a colonoscopy:  Which doctor has the lowest rate of complications?  How much will you have to pay out of pocket?  Which site of service has the best record of patient safety?  A typical colonoscopy will create separate charges for the clinician performing the procedure, the anesthesiologist, analysis of biopsies at a lab (sometimes with a separate lab fee and pathologist review), the endoscopy center, as well as the pre-procedure consultation and prep meds.

If healthcare consumers purchased care directly from each provider, we might be able to cut out the health plan as middle man, but we might simultaneously expose ourselves to untenable prices.  If you’ve ever looked at an Explanation of Benefits letter from your insurer, you will find that insurance companies pay a negotiated (a.k.a. “allowed”) price that is usually a fraction of the list price.

Wellmark---a Blue Cross Blue Shield health plan in Iowa and South Dakota---has negotiated rates that do not differ across their region, so that people with (“members of”) Wellmark insurance are protected from rates that might vary dramatically across different providers.

In a conversation with Mike Fay, Wellmark’s Vice President for Health Networks and Innovation, we talked about the role health plans play in rationalizing healthcare charges, in using administrative data to shed light on quality, and collaboration between health plans and provider groups working to improve outcomes and reduce unnecessary costs.

In addition to the obvious role of mitigating the risk of catastrophic costs through insurance, health plans can buffer the dizzying complexity of the U.S. healthcare market and provide us with information that helps us make choices that better fit our needs.

L. Gordon Moore, MD, is Senior Medical Director, Clinical Strategy and Value-based Care for 3M Health Information Systems.