Obama Administration Oks Caps on Health Care

The Obama administration has given the go-ahead for insurers and employers to use a new cost-control strategy that puts a hard dollar limit on what health plans pay for some expensive procedures, such as knee and hip replacements.

Some experts worry that such a move would surprise patients who pick more expensive hospitals. The cost difference would leave them with big medical bills that they’d have to pay themselves.

That could undercut key financial protections in President Obama’s health-care law that apply not just to the new health-insurance exchanges, but to most job-based coverage as well.

Others say it’s a valuable tool to reduce costs and help check premiums.

Some federal regulators appear to be concerned. A recent administration policy ruling went to unusual lengths, acknowledging that the cost-control strategy “may be a subterfuge” for “otherwise prohibited limitations on coverage.”

Nonetheless, the departments of Labor and Health and Human Services (HHS) said the practice — known as reference pricing — could continue. Plans must use a “reasonable method” to ensure “adequate access to quality providers.” Regulators asked for public comment, saying they may publish additional guidance in the future.

HHS spokeswoman Erin Shields Britt said in a statement that the administration is monitoring the effects of reference pricing on access to quality services and will work to ensure that financial protections for consumers are not undermined.

One way the new approach is different is that it sets a dollar limit on what the health plan will pay for a given procedure. Most insurance now pays a percentage of costs, and those costs themselves can vary from hospital to hospital. Now if you pick a more expensive hospital, the insurance still pays the same percentage.

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