What transparency looks like in the health benefits industry.

Transparency is a popular buzzword these days. Management Consultants and Harvard business professors are constantly pushing for leadership transparency, supply chain transparency, transparency between teams, transparency of purpose, and of course, price transparency.

They contend that modern consumers are too smart to tolerate anything less. And that’s probably true in every industry category — except health care.

For the last 50 years the health care business in America has been veiled in an industry-wide smokescreen that obscures prices, ignores the needs of consumers, and drives costs sky high.

Consumers — and employers who are required by law to offer health care benefits— have been left in the dark. The only players that win are the big insurance companies and Big Pharma.

Currently, there are no set prices for specific medical services, such as a CAT scan or hip replacement. And because the price of such procedures varies greatly from hospital to hospital and city to city, patients never know what to expect.

It’s a random system of sub-optimal choices.

Two patients who receive identical services at the same medical facility can end up paying drastically different prices, depending on the contracts the facility has with their respective insurance companies.

But those negotiated prices are not made public. In fact, contracts between insurers and providers often contain gag clauses specifically designed to limit the amount of information patients can get about costs.

Most people do more research on pillow sham purchases than they do on major medical procedures. Consumers just take the word of the provider, pay the ever-increasing copays and deductible, and hope that they’re not left with massive out-of pocket expenses.

Even the most well-informed, proactive consumers have a hard time deciphering the real cost of medical care. The numbers are purposely veiled because the big insurance companies don’t want anyone to know where their profits really come from.

“There’s lot of power, and a lot of profit, in hiding every nickel,” said Dr. Donald Cornforth, CEO of Incentive Health. “Face it… The big insurance companies are not on your side, as a consumer.. And they’re certainly not on the side of the doctors or hospitals that provide the services, or the employers who foot the bill. They’re only looking out for #1.”

Thankfully, there is some sign of hope and change on the horizon.

Dr. Cornforth and a few other visionary entrepreneurs are working to change the status quo and introduce some level of transparency into the health care system. But it’s like going from the muddy depths of the Mississippi to the crystal clear waters of the Caribbean.

“We know we can’t change the whole system,” Cornforth said. “So we’re tackling the problem from the perspective of the employer who’s trying to manage the cost of the health benefits they’re required — by law— to provide.”

Cornforth believes that most businesses simply can’t afford to absorb those rising costs, year after year.

“Choosing a benefits plan has always been a no-win proposition for employers,” Cornforth said. “Every year the big insurance carriers demand more and cover less. Even the most savvy CEOs who have switched to self-funded benefit programs are still having trouble managing the rising costs.”

In the past ten years more and more companies have chosen self-funded plans over the traditional, fully-insured approach. Benefit managers say they get more flexibility and usually see significant cost savings over traditional plans. However, transparency is still an issue because the big insurance carriers dominate the self-funded market as well.

“The large companies only talk in terms of savings percentages,” Cornforth says. “They might promise a 40% discount over current charges, but they still don’t release the actual cost of specific charges from a particular hospital. ”

Without any specific data on cost and quality, employers cannot make informed decisions on benefit design features, such as offering limited or preferred provider networks and designated centers of excellence for high cost and complex procedures.

That’s where Incentive Health comes in.

“Our clients know exactly where every dime is going,” said Debbie Hankins, COO at Incentive Health. “There are no hidden costs, no middle men. We provide meticulous monthly reporting, so they always know where their plan stands. That gives CFOs a lot more control over spending, and enables them to improve their plan every year. So instead of annual price increases, they can actually see increased savings from one year to the next.”

Hankins believes that reference-based pricing is a good first step toward transparency, but her team goes even further.

“We not only gather the real cost of every procedure, we proactively provide that data to our client’s employees in order to help them make good decisions that will save the patient money, as well as the employer,” Hankins said. “There’s a built-in incentive there to become a more informed consumer.”

Incentive Health uses a grading system that ranks hospitals and providers as Gold, Green, Yellow or Red. Whenever possible, they steer their clients to Gold providers that have the highest quality service at the lowest price.

They like to call it value-based pricing, and it’s how Incentive Health achieves a drastic reduction in exorbitant, inappropriate claims for their clients.

We have software systems in place that flag any charges to a plan that are out of sync with our value-based pricing model,” Hankins said. “So we’re always on top of it. We’ve been able to save our clients millions of dollars because we go to bat for them.”

And that, according to Dr. Cornforth, is the difference between Incentive Health and the big insurance carriers.

“Our business model is simple. We charge a flat fee to help our clients save money on their benefit plans. We’re working for the employer in a truly collaborative way, and we’re incented to help them save money without sacrificing the quality of coverage they provide.

It’s a totally transparent, win-win arrangement that is rarely seen in the medical benefits industry. It works for their employees as well as it works for their bottom line.