Typically, individuals and families with health insurance have the advantage of receiving free flu shots every season, but a recent report from the Kaiser Health Network paints a different picture of the true cost insurers pay to provide free vaccinations to its plan holders. While the cost of a yearly flu shot appears low, the millions of Americans who are vaccinated in the US do not realize that the costs of providing such services are recouped in the high insurance premiums consumers pay each month. Specifically, the true cost of this “free” service can be found in the explanation of benefits provided by insurers. Moreover, Kaiser Health Network reported significant variations in the cost of flu shots among health care payers and insurers.
Cigna reported paying different prices for the vaccine in DC versus MD where distances between some clinics were 10 miles or less. For instance, in 2017, the Peterson Kaiser Family Foundation Health System Tracker reported flu vaccine costs ranging from $28 to $80, with a misleading median cost of $45.” Insurance payers such as Cigna indicate that geographic variations are major price factors, even in the DC/MD region.
Market dominance has also been attributed to the varied cost of flu shots. Sutter Health, a nonprofit medical network giant, tentatively settled a lawsuit with expected damages of $2.7 billion after being accused of violating antitrust laws. Self-insured employers initiated the lawsuit and were later enjoined by California’s Attorney General’s Office. The lawsuit accused the conglomerate of taking advantage of its market dominance by charging insurers higher rates to provide flu shots at affiliated health care facilities. The state alleged that Sutter Health, a major health care system in Northern California, used its market dominance to drive up the cost of services and apply an all-or-nothing approach when contracting with insurance companies.
US antitrust law prohibits the use of unfair tactics to control a market or form a monopoly. When determining whether a company engaged in antitrust behavior, the court considers the company’s effect on the market as well as if the business activity intended to remove competition. Federal and state authorities can bring charges against those who violate these laws, and both civil and criminal remedies are available to companies affected by unlawful business activity.
The Sutter Health settlement may have nationwide implications on price negotiation tactics between large hospital systems and insurance companies. The lawsuit revealed that Sutter Health uses tactics to unnecessarily increase insurance prices. For example, Sutter Health uses factors such as location, competition, and plan provider when determining the cost to administer the vaccine. But the Kaiser Foundation reported that, even in consideration of those factors, Medicaid pays significantly less for the flu vaccine, and the price appears to be comparable across locations within states. This public revelation may send a signal to other large health systems who might be involved in similar practices.
Nonetheless, it seems disadvantageous for consumers to pay the high cost of the flu vaccine when there is no guarantee of its effectiveness. The rising cost of the flu vaccine is indicative of a larger problem in the US health delivery system. While the flu vaccine has proven beneficial to most Americans, its administration across the country lacks efficiency due to unfair business practices. Lawmakers should use the Sutter Health antitrust lawsuit as an opportunity to examine this aspect of the healthcare market and develop meaningful policies to prevent unfair and predatory practices.
This blog was posted on the AU WCL Health Law and Policy Brief website. www.healthlawpolicy.org