Health care costs, especially for businesses, have risen steadily in recent years, despite 60% of non-elderly Americans getting health insurance through their employer. 

At Pacific Steel & Recycling, Jeff Millhollin decided the increasing costs of health care deserved further scrutiny. He’s the president and CEO of the Montana-based company which has 16 employees/owners at its Kennewick location; 27 in Pasco; and 30 in Yakima. 

“On the trajectory it was on, it was unsustainable for the size of our company,” he said. 

His efforts paid off with $3.6 million in health care savings and an invitation to speak to members of Congress to advocate for legislation that would make it easier for companies to replicate his company’s success. 

Deeper scrutiny 

Pacific Steel hired a third-party administrator, or TPA, to dig deeper into the health costs, and what they found was upsetting. The company would pay drastically different prices for the same procedures for employees depending on where they got care.  

“What we kept getting told was that’s the price it was,” Millhollin said. 

But patients and employers rarely get to see what the prices for procedures are to compare, let alone negotiate, based on price discrepancies.  

Pacific Steel decided to not only find out what different procedures cost but also negotiate a price so that the company — and employees — weren’t getting financially gouged every time they used their health plan. 

He and other company leaders embarked on a lengthy but ultimately cost-saving mission to negotiate with health care providers directly, so that they were always paying the same price for a procedure — no matter where it was happening.  

Pacific Steel leaders used what is called reference-based pricing, hiring a TPA and consultant to run their program. Starting at a certain percentage above the Medicare price, they negotiated with hospitals and health systems directly, cutting out the middleman. 

Millhollin said his company would be charged anywhere between double to 15 times the Medicare price for procedures before their team started negotiating with providers directly for a set price or percentage above Medicare prices. 

If a facility wouldn’t take their deal, they would have to steer their employees to a different health system or facility in their area that had agreed to the set price. 

These negotiations took the better part of a decade. 

Cost savings 

A large part of making this new system work put the onus on the employees to become better consumers of health care, including asking questions about costs before they got to the operating room. 

After a decade of negotiating with health care centers, Pacific Steel has saved $3.6 million. In 2013, the average monthly cost Pacific Steel spent on health care per employee was more than $800. In 2023, the company spent $450 monthly per employee. 

There are a few reasons why Millhollin thinks his company was set up for success to do this. 

First, Pacific Steel is an employee-owned business, so the employees have a direct financial incentive to get the best price possible. Spending less on health care means more money can go directly to their salaries or their retirement plans. 

Secondly, it has 900 employees and covers about 2,200 people across nine states, Millhollin said. It has offices and employees in Idaho, Washington, Nevada, Colorado, North and South Dakota, Montana, Utah and Wyoming. 

As a small to mid-sized company, Millhollin thinks hospitals and health centers were interested in him just going away and agreeing to his plan because of the potentially lower stakes than if he was a much larger employer. He acknowledged that it might be harder to negotiate for larger companies.  

In some markets, Pacific Steel steered employees toward the provider that would participate in reference-based pricing. The company has also hired an in-house employee to work on their health claims. 

For companies that aren’t employee-owned, Millhollin said, “I’d come up with a way to give monetarily some portion of that savings back to the employee in some sort of bonus or paycheck or something.” 

Lobbying Congress 

In January, Millhollin was invited to talk about Pacific Steel’s successful strategy with members of Congress. 

U.S. Rep. Cathy McMorris Rodgers met with Millhollin, rapper Fat Joe and other Patient Rights Advocates supporters discussed how the House-passed Lower Costs, More Transparency Act could incorporate certain provisions of the Senate bill, Health Care PRICE Transparency Act 2.0, to be made even stronger. 

Patient Rights Advocates operates as a nonprofit and works to put more power into the hands of consumers, at least when it comes to transparency.

Transparency 

There are federal health care pricing transparency rules on the books, but not all hospitals and health care systems are following the law, studies show. 

Advocates, like Milhollin, and others from Patient Rights Advocates were on Capitol Hill in January to ask lawmakers to strengthen transparency laws or force health care facilities to follow them. 

Even before health care transparency laws went into effect, Pacific Steel was asking hospitals for their prices, but health facilities should be posting prices, making it easier to comparison shop. 

In some states, including Washington, hospitals must report pricing data to the state, including how much they charge for services offered on off-campus sites.  

Patient Rights Advocates’ website has price transparency data from hospitals in every state that patients can use. In its most recent survey, the nonprofit found that 36% of hospitals were complying with transparency laws. 

Nationwide prices varied on average up to 10 times the cost, depending on the insurance company covering the same procedure in the same hospital, said Cynthia Fisher, founder of Patient Rights Advocates. 

 With more data, the hope is that more consumers and employers will not overpay for services when they shouldn’t, she said. 

“It shifts the power from the big industry that’s putting profits over patients to actually shifting that power to all of us,” Fisher said.