New research, Would you like to unite and reduce healthcare costs? Empirical study of the Colorado Peak Health AllianceReleased on February 28th Journal of Risk and Insurance, It provides compelling evidence that collective action can reduce healthcare costs by purchasing partnerships. Research led by Dr. Mark MaiselbachAn assistant professor at the Bloomberg Department of Public Health, analyzed the impact of the Peak Health Alliance, a Colorado public-private health purchasing initiative, finding that it reduced health insurance premiums for enrollees in the county that operates by 13-17%.
Using planning data from the Colorado Department of Regulatory Insurance (2017-2021), this study applied differences, event studies, and synthetic control methods to examine the impact of peak health alliances on health insurance premiums. The results show that the peak successfully increases the market power of insurance companies, and is driven by lowering prices for healthcare services, leading to significant cost savings for enrollees.
“Our research provides compelling empirical evidence that purchasing partnerships like the Peak Health Alliance can reduce healthcare costs,” says Meiselbach. “By pooling negotiation power and focusing on lowering healthcare prices, Peak has been able to reduce premiums for consumers in Colorado.”
This study also explored the potential mechanisms behind Peak's success. The findings show that lower healthcare prices are the main drivers of premium reductions, rather than changes in plan design or use. The research team also took into account policy and market changes, such as the state reinsurance program in Colorado and the withdrawal of Kaiser Permanente, and found that even if these factors are managed, the impact on peak premiums remained significant.
Important findings:
The Peak Health Alliance implementation was associated with a 13-17% reduction in the average premium, depending on the empirical method used. Premium cuts continued in 2021 when the peak expanded to seven additional counties. Lower negotiation prices were the key mechanisms for cost reductions than reduced service usage or changes to planning design. The market power of Peak County insurance companies has increased significantly, suggesting that collective action is important in cost reductions.
The peak achieved short-term success, but the long-term sustainability of such initiatives has yet to be observed. In particular, its first career partner, Bright Health, left the market in 2023, but Peak rebooted through a partnership with Elevate Health Plans.
“The effectiveness of purchasing an affiliate depends on several factors, including market conditions and insurers' participation,” Meiselbach said. “Our findings suggest that such models may be successful in reducing costs, but continuous assessment is required to understand long-term viability.”
