In Priceless, I argued that a typical employer could cut the cost of elective procedures in half by choosing narrow networks, within which cost is low and quality is high, and making employees pay the additional charges if they go out of network.
WellPoint was the first insurer to adopt this strategy:
Last year, WellPoint worked with the Kroger Company, a large grocery chain, to start a…program in which payments for certain M.R.I.’s and CT scans were capped at around $800, and employees were given a list of places that would charge that amount or less.
This year, the insurer is working with the California Public Employees Retirement System (Calpers) to expand the idea:
Under the program, some employees are being given the choice of going to one of 54 hospitals, including well-known medical centers like Cedars-Sinai and Stanford University Hospital, that have agreed to charge no more than $30,000 for a hip or knee replacement. Prices for the operation normally vary widely in the state, with hospitals billing from $15,000 to $110,000 for the same operation, a spread that is typical for much of the nation.