PPO and HMO discounts are ineffective in controlling hospital claims costs.  

Hospital / facility claims account for most of the total claims cost in a health plan. Carrier PPO & HMO’s do achieve a 50-60% discount on these billed charges. Unfortunately, there is a lesser-known challenge remaining: the carrier discounts apply to wildly different billed amounts.  It is extremely common for a hospital to bill 5 x or more what another hospital charges in the same city for the identical procedure. This means that the carrier discount is often ineffective in obtaining a fair price. And your health plan simply absorbs these high costs.  In a fully insured program, this affects renewal rates. In a self-funded program both your current claims costs and renewal rates are affected.