Health care buying is a mystery to the average business professional, with annual negotiations more reminiscent of the heydays of the De Beers diamond monopoly than the detailed analytical sourcing exercise that a massive expense representing 18% of GDP should warrant.
The typical annual renewal starts with HR professionals giving their insurance brokers a list of employees with basic demographics and the overall health care cost incurred over the last several years. The broker comes back with prices from a handful of insurers for administrative services, projected per employee costs of using their network, and risk products such as stop-loss for smaller employers. Unsurprisingly, most quotes are up vaguely outlined and cluster closely together. Everybody feels good and a deal is done, usually with the incumbent.
Insurers’ key selling point is to give access to their provider network at prices that companies presumably cannot obtain on their own. They also provide transaction processing and compliance services, make payments, interpret contracts, manage disputes, etc. It is fair to ask how well insurers source their network, but until now nobody really knew, as the industry put a tight lid on pricing data, even going to court to keep it secret.