Can Employer Caps Lower Hospital Prices? In California, Yes

Hoping to tamp down hospital charges, employers are more commonly shifting to health benefits policies that cap payments for individual procedures, and the trend is putting pressure on hospitals in some markets to lower prices, according to a report by the New York Times. The largest scale example currently is the California Public Employees' Retirement System, known as Calpers. The public benefits program partnered with Anthem Blue Cross of California and its parent, WellPoint, in 2011 to pilot a $30,000 maximum reimbursement rate for hip and knee replacements for some employees last year, giving them 54 hospitals to choose from for such procedures, which range in price statewide from $15,000 to $110,000, according to a report by the Los Angeles Times.

The change shrunk WellPoint's average payment for the joint replacements by almost $7,000 to $28,695, without affecting the quality of care, according to the report. That could save $5.5 million over two years for Calpers and the state taxpayers who fund it, according to the report.

WellPoint has piloted similar programs with other large employers and seen successful outcomes, according to the report.

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