Study: Health Plans Avoiding 3rd Party Fee-for-Service Model Haven't Produced Big Premium Reductions

Cheapest Healthcare Provider-Owned Insurance Plans 12% More Expensive on Average than Cheapest Insurance Plans Not Owned by Providers

Aug 20, 2015, 09:00 ET from HealthPocket

MOUNTAIN VIEW, Calif., Aug. 20, 2015 /PRNewswire-USNewswire/ -- HealthPocket released a study today that compared the cheapest premiums among traditional health insurance plans to the cheapest premiums of provider-owned health plans. Provider-owned health plans seek to eliminate wasteful healthcare expenses associated with the fee-for-service model of healthcare. The fee-for-service is a model of healthcare reimbursement where insurers pay third party doctors, hospitals, and other healthcare providers for the number and type of services delivered to patients enrolled in the insurers' health plans. The financial conflict of interest associated with this model has been credited as an important factor contributing to high American healthcare costs and, by extension, the health insurance premiums resulting from those costs. In the provider-owned health plan model, the insurer and the healthcare providers belong to the same organization. Consequently, there is a disincentive for delivering unnecessary medical services to patients because, instead of increasing revenue for the healthcare providers, unnecessary care drives up costs for the company employing the healthcare providers and, thus, reduces profitability.

HealthPocket examined the lowest premiums for provider-owned plans in the Affordable Care Act (a.k.a. "Obamacare") market to nonprovider-owned plans within twelve counties across the U.S. that contained both types of plans. The counties analyzed were spread across the eastern, central, and western regions of the United States. Premiums were based on a 40-year-old individual non-smoker applicant profile.

Contrary to expectations, the cheapest provider-owned health plans were more expensive on average than the cheapest plans not owned by providers. The cheapest provider-owned silver plans in the twelve counties that HealthPocket examined were 12% more expensive overall than the cheapest silver plans not owned by providers. Silver plans accounted for two-thirds of plan selections on the Obamacare marketplaces during the 2015 annual enrollment period. Bronze and gold provider-owned plans were 13% more expensive than the cheapest bronze and gold plans not owned by providers.  

"The result of HealthPocket's research is neither an endorsement for the fee-for-service model nor is it a rejection of the provider-owned health plan model," said Kev Coleman, Head of Research & Data at HealthPocket, "Rather, the research raises questions about the theory that eliminating the fee-for-service model would produce dramatic reductions in healthcare costs and, as a consequence, health insurance premiums." In response to the results, Coleman commented, "I'm reminded of a quote by T.H. Huxley, 'the great tragedy of Science–the slaying of a beautiful hypothesis by an ugly fact.'"

The full findings as well as research methodology can be reviewed at "Cheapest Healthcare Provider-Owned Insurance Plans Still 12% More Expensive than Cheapest Insurance Plans Not Owned by Providers" on is a free website that compares and ranks all health insurance plans, helping individuals, families, and small businesses to make their best health plan decisions. HealthPocket publishes health insurance market analyses and other consumer advocacy research. HealthPocket's research is nonpartisan and uses only objective data from government, non-profit, and private sources that carry no conditions that might restrict the site from serving as an unbiased resource. HealthPocket, Inc. is independently managed and based in Mountain View, California. Learn more at

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Shirley & Banister Public Affairs


SOURCE HealthPocket