Q&A: The role of employers in achieving healthcare price transparency

What does Trilliant Health do?

We started Trilliant around the idea that healthcare is local—but most of the data analytics were national. So, we decided that if you built a data set from the ground up that focused on local market dynamics, that would be more insightful than national benchmarks and that sort of thing. We focus at the ‘atomic’ level on individual interactions between patients and physicians. 

When you take all of those individual interactions and roll 'em up into the totality, it's billions and billions of interactions. But from that, you can see patterns that are helpful for strategy, for entering new markets, for exiting other markets, for investing in service lines.

We focus on that individual physician-patient interaction and then roll it up into a larger data set. From an employer perspective—looking at all of the employee journeys through the system—that turns into what the health benefits spend is for that employer.

We talk about price transparency as a patient issue. But, there is obviously a business case here for employers who provide insurance.

Yeah, the first thing price transparency does is expose the price. Now, in terms of actually bending the cost curve, what it exposes is that there’s massive variation at the market level—even for the same payer. If you think about who’s writing the check, well, really, it's the federal government and employers.

If you look at Medicare, Medicare has said, ‘Here’s the price we’re paying,’ and that’s it—there’s no mystery there. But it’s the employers who are underwriting the fact that Medicare and Medicaid underpay, and they’re also the ones most exposed to price variance. 

Think about it like going to a gas station. The price might be three or four cents different per gallon depending on the neighborhood or even which side of the street you’re on. But in healthcare, it could be five or ten times more—literally across the street.

That seems to be one of the big challenges. The cost of care is regional. If you’re a company hiring people all over the country, how do you manage that?

That’s the thing—employers haven’t really had a way to focus on this. They’ve been sitting there, year after year, getting the renewal from their broker saying, ‘Okay, it’s 12% up,’ or ‘15% up,’ or ‘20% up,’ but they haven’t been able to look underneath and ask: ‘Why is it 20% up? Why are these health systems or providers in my network?’

We’re really in the early days of what price transparency can do to help limit the cost curve. It’s not going to break the trend—but it can bend the trend. Once prices become transparent, employers suddenly have a fiduciary duty to use that information to make better purchasing decisions. That’s why we’re starting to see these early lawsuits—employees suing their employers, saying, ‘Hey, you’re violating your duty under Employee Retirement Income Security Act or under corporate law by not spending wisely on healthcare benefits.’

The Affordable Care Act (ACA) tried to skirt around this; the requirement being that insurance companies have to spend most of the funds from premiums on actual patient care. 

Yeah. When you think about it, if I say you have to spend 85% of your money on care, what I’m really saying is your margins are capped at 15%. And look, as an officer of the corporation, I’m supposed to make net income grow. But if my profit margins are capped at 15%, then I actually need costs to go up to increase revenue.

If you look at what’s happened since the ACA came into being, that’s basically what we’ve seen. The ACA did a lot of good by expanding coverage to people who couldn’t get it before, but it really implemented a kind of cost-plus insurance model.

I don’t think there’s any argument there. Since the ACA passed, the cost has only risen exponentially. Is this even a problem the federal government can fix?

I think that’s an interesting Constitutional question—whether the feds even have legal authority. Can they claim interstate commerce? Maybe. But, one limiting factor is that insurance is regulated at the state level. So, there are actually a lot of people whose jobs depend on state regulation of insurance, not federal. 

If you go all the way back to Harry Truman, he was really the first to suggest national health insurance. He did so after Britain had their nationwide conversation about the National Health Service. Since then, we’ve gone from Medicaid and Medicare not existing 60 years ago, to both programs approaching a trillion dollars in spending.

Once you implement a benefit, it’s hard to take it away. So there are lots of people with vested interests in building on what’s already in place, rather than tearing it down and starting over. If we really wanted healthcare consumerism, we’d go back to Truman’s idea and eliminate the tax deduction for employer-sponsored health insurance—which originally came about because of the wage freezes and inflation after World War II. We’d turn people loose in the market. It would be chaotic and frustrating for some, but that’s probably what would really unleash competition.

How long will it take before we know if the Indiana regulation is working or not? And could that start a price transparency trend?

It’s a logical question. The challenge for the industry is that other states might not wait to see if it works or not—and if they don’t, I think that’s likely to introduce more chaos rather than more thoughtful adjustment. Instead of waiting, they could just—as we say in the South—pull a ‘hold my beer’ and go for it. 

That would be chaos. While price transparency is important, most patients don’t really look at prices when seeking care. Nobody in Washington seems to understand that. 

I don’t know anybody who’s ever looked at their consumer app in the back of an ambulance and said, ‘Don’t take me here. It’s really expensive.’ Even when you look at the one area in hospital care that’s really consumer-oriented—births—an expectant mom theoretically chooses her hospital, but she goes to the hospital where her OB/GYN has admitting privileges. Really that's what patients tend to do is follow their doctor.

On that note, when we talk about insurance companies creating networks, it’s clear that benefit managers should play a larger role—especially if we’re going to live in a society where employers are the primary providers of insurance.

Well, haven’t the brokers kind of led them around by the nose? That’s been the problem. But now that the data’s out, employers are going to start looking at their brokers and saying, ‘Hey, wait a minute—why have you put me in this network? This network doesn’t deliver value.’

And with all the other pressures businesses face—tariffs, inflation, whatever else—they’re going to need to save every penny they can on healthcare. Especially by cutting out places that are lower quality.

It’s going to take years—three, four, maybe five years—for it all to roll out. But if you look at the data, it’s pretty obvious what employers should do.