Why Are Health Care Prices Rising So Fast?

The Affordable Care Act established the Medical Loss Ratio (MLR) with the goal of forcing insurance companies to spend premium dollars on actual health care expenses.  The MLR, which legally requires 85% of the premiums paid by businesses with over 50 employees be spent directly on health care expenses, does nothing to encourage management of claims expenses.

Under this rule, insurance companies have no incentive to keep costs low, since managing claims costs would decrease the amount of profit available to them. As group premiums rise, so do the potential profits to the insurance company. As a result, hospitals have increased their markups to over 1000%, an increase that filters to employers as premium increases year after year.

four surgeons, gloved and masked and wearing blue scrubs, surrounding a stretcher and performing surgery


The Key to Cost Control is a Combination of Referenced Based Pricing (RBP) and a Focus on Outcomes.

physician wearing blue scrubs and a white coat with a stethoscope around her neck, in front of an x-ray viewing machine, with x-rays on the machine

We believe healthcare pricing should be transparent. 

Rather than paying whatever a health care facility charges, without limits or with enormous markup and arbitrary “discounts” for insured patients, reference-based plans pay claims on a standardized basis, calculated as a percentage over the Medicare reimbursement rate.  This rate offers hospitals a reasonable profit margin and aggressively controls costs. This type of system requires a smart, savvy third-party administrator, someone who will advocate for employers, their employees, and dependents.

We believe that positive patient outcomes should motivate choices.

Our partners use proprietary data to advise employees as they choose their doctors. Providers are evaluated, not only on how many procedures they perform but on how well their patients do following those procedures. Though it may seem counterintuitive, the less a provider is paid for a procedure the better the outcome for the patient.

When patients are provided with effective data and encouraged to make choices based on outcomes, the results consistently show both a better use of resources and better patient care.

older man using a walker, being assisted by a female health care worker wearing green scrubs with other patients in the background