Published: May 19, 2017

In our last update, we let you know that we pushed hard at our April PEBB meeting to get insurers to do their part in bargaining for lower prices.  Given that hospital prices and skyrocketing pharmaceutical prices are making our healthcare plans more expensive, it was important to let the industry know we think something needs to be done around price gouging.

The good news is that two of the insurers came back with ideas around how to leverage lower prices from hospitals. Moda and Providence both came back with proposals around “hospital tiering” which would allow PEBB to maintain a similar plan design for most of the hospitals that are currently considered in-network.

This is how dividing hospitals into three tiers would work:

  • A hospital would be designated as Tier 1 if it charges less than 200 percent of the Medicare rate. (The target might be different for some rural communities).

  • A hospital would be designated as Tier 2 if it charges more than 200% of the Medicare rate.

  • Out-of-network hospitals would be designated as Tier 3.

  • PEBB members would pay similar out-of-pocket costs for Tier 1 as what currently applies for in-network hospitals.  The cost sharing would increase for Tier 2 and Tier 3 hospitals.

  • Emergency situations would be treated the same as they are now. If someone visits a Tier 2 or out-of-network hospital in an emergency, they would pay the same emergency co-pay and other out-of-pocket payments as when they currently have an emergency and go to an in-network hospital.

  • The different costs for the hospital tiers would apply for planned hospital visits only.

We expect this plan will bring hospital prices down because there is an incentive for hospitals to be designated as Tier 1, which carries the lowest cost to members.