Hundreds of businesses, most of them small firms are signing up with a Massachusetts insurance company in the USA. The insurance company charges large fees if employees decide they want treatment at expensive hospitals. As such, they are encouraged instead to go to low cost hospitals.

With ever increasing health costs many American firms who pay employees insurance premiums are looking for ways to reduce costs. So, this will come as a welcome opportunity.

Other insurance companies in Massachusetts are following this example by offering businesses similar plans. In these cases, insurance companies either charge extra if a patient needs or wants treatment at more popular or expensive hospitals, or are banned altogether from going there.

Paul Pietro, chairman of Mid-State Insurance Agency Inc., an insurance broker in Worcester, Massachusetts told the Boston Globe: “[These plans] really help the employer and the employee start to understand what is driving health care premiums higher. “Simple things, like MRIs and CAT scans, if you’re just able to stay out of those hospital settings that can save money. It helps everybody.’’

However, not everyone is happy with this new approach. One physician Dr. Thomas Lee, head of Partners’ physician group, suggests that seriously ill people may not get the proper treatment they need because they either can’t afford it or their insurance company won’t allow it. Consequently, they will be frustrated with the insurance company for denying them care.

Dr. Lee said: “There will be some painful moments down the road.’’

A number of hospitals are also up in arms over how low cost insurance companies determine which are expensive and which are not. For example, the chief financial officer of one organisation said that the costs can appear high for some treatments such as cancer simply because the patient needs more of them, over a long period of time.

Health care reform is a growing issue in the USA. Many people have been calling for years to introduce a system similar to that in Britain or across Europe which puts the patient first. However despite the Obama reforms, this is still a long way off.

Will this new proposal help? Only time will tell.