By Josh Archambault

Patients need more pricing information to make the best care decision with their provider. It is not about just finding the lowest-cost option, but also the best-value option that is affordable, high-quality, and convenient. Patients want and deserve more certainty and predictability.

First generation price transparency: build on federal price transparency progress

1. Codify federal insurer rule and federal hospital rule

To protect real transparency from the possibility of a federal administration pulling back the insurer price transparency rule, similar provisions requiring insurers to post real prices for patients to compare rates on a tool should be codified into state law. Putting state requirements in place will make it more difficult for the federal government to pull back their rules.

Model States: Texas passed the closest version to this reform this last session in Section 1662.051 of their law. Alaska, Tennessee, Massachusetts and Minnesota also have some requirements on their books for insurers to provide price estimates but are not as comprehensive as the federal rules. Nebraska has a voluntary program. Maine has a requirement for small business insurers. Montana has an explanation of coverage by insurers for services over $500.

To hedge the risk that a federal administration will pull back the 2019 hospital price transparency rule at the request of special interests and to the detriment of patients, similar provisions requiring hospitals to post a machine-readable file of real prices for all items and services should be codified into state law.

Model States: Providers in Alaska, Maine, Minnesota, Vermont all have to provide price estimates upon request, including those in a hospital, but most are by request and don’t require posting of prices on a website like the federal rule. In Florida hospitals must provide price estimates within seven days, and Massachusetts has had a robust price transparency law since 2012. Nebraska has a voluntary program, and Montana has a floor of price disclosure for services over $500. Rhode Island requires price disclosure for those without insurance or for those with a deductible of $5,000 or more.

Second generation price transparency: improving the availability of prices

2. Robust Advanced Explanation of Benefits

Knowing the prices ahead of time can remove anxiety for patients. Congress took the first step towards this goal by passing something called an Advanced Explanation of Benefits (AEOB) as part of the No Surprises Act. An AEOB requires providers to coordinate with insurers to send patients their estimated out-of-pocket costs ahead of time. This information is helpful, but big hospital systems often manipulate plan designs in negotiation to make themselves look more affordable to patients from an out-of-pocket standpoint, but charge higher rates for the service. 

In response, states should build on the AEOB concept and require additional information to be included such as the estimated negotiated rate, the range of rates paid for the same procedure by the insurer in the past, average rates, and information on how a patient could compare prices between care options. This information provides patients with details on where to seek their care and context around pricing.

Model States: A few states as listed above have insurer price transparency laws; however this reform would further protect patients by making price transparency automatic and require more information be provided to patients.

3. Price transparency at all locations

The new federal hospital rule only requires hospitals to disclose prices. Patients need to know prices at many care settings to know their options, not just prices at hospitals. States should require or incentivize price disclosure at all state-licensed facilities and practices for which care could be shopped.

Like the hospital rule, this disclosure should also include the cash or out-of-pocket price. It has been reported that cash prices can be significantly lower than insured rates, and some patients may want to pay that rate instead of using their insurance. Transparency here will also deter exorbitant cash prices that surprise patients.

Model States: Providers in Alaska, Maine, Minnesota all have to provide price estimates upon request, and Massachusetts has had a robust price transparency law since 2012. California requires disclosure only to uninsured patients. Montana has a floor of price disclosure for services over $500. South Dakota requires healthcare providers, including licensed healthcare facilities, physicians, dentists, and psychologists, must disclose all fees and charges for services or procedures when requested.

4. Ensure implementation of price transparency

Knowing the price of care upfront is the only way to achieve a fully functional marketplace in health care that consistently delivers better quality, more affordable care. States can ensure that patients and small businesses gain full access to transparent pricing by vigorously enforcing transparency requirements. 

To signal the importance of price transparency requirements, a state could link noncompliance with the license to operate for hospitals, provider groups of a certain size, and insurers. The state could also decide to link noncompliance to the state recognizing the non-profit status of a company, as this recognition conveys a huge tax advantage. States could also consider looking at linking noncompliance to long-term participation in state employee health plans. At a minimum, non-compliance should trigger a much higher financial penalty.

Model States: South Dakota links price disclosure when requested to possible disciplinary action by the licensing agency.

5. Give state agencies more tools

Designate the state Division or Department of Insurance or Attorney General as the enforcer of price transparency laws. Allow these agencies to levy state penalties for enforcement, that could be given back to consumers in the form of a rebate (like they are for the medical loss ratio (MLR)) or contribute it towards a state-run reinsurance program. All state Attorney Generals have consumer protection responsibilities that could be utilized to prevent price gouging with more price transparency.  

Third generation price transparency: building a better market and the next steps

Not all price transparency is of equal value. Incentives must be aligned to reward the best value providers and reward patients for making high-value care decisions. These next-generation price transparency proposals have been shown to fully leverage the power of price transparency.

6. Reward public employees with right to shop shared savings

Health care prices can vary by hundreds or thousands of dollars for the exact same in-network service or procedure. Paying patients shared savings incentives when they choose lower-cost care motivates patients to seek value, and also grants high-value providers a tool to attract more patients.

Close to a dozen states are currently running a version of shared savings for public employees. Patient shared savings programs have been shown to save millions for taxpayers and state employees in longer-standing programs like one in Kentucky.

Model States: Connecticut, Florida, Kansas, Kentucky, Maine, Texas, New Hampshire, Utah and Virginia have shared savings programs.

7. Expand right-to-shop shared savings to individual and small business market

States should ask insurers in the individual and small business markets to offer products that reward patients directly with a shared savings for picking a lower-cost, high-value option. Shared savings could be for focused on lower-cost care in-network.  However, to maximize patient savings, it could also apply to lower-cost, out-of-network options.

The shared savings can come in the form of cash, a Health Savings Account (HSA) contribution, or a deductible or premium reduction.  To ensure these incentives to save money are properly aligned with how insurers account for medical spending, the federal insurer price transparency rule already allows insurers to count a shared savings payment as medical spending when calculating the MLR.

Model States: Maine, Tennessee and Virginia require shared savings for at least a portion of their commercial plans. Florida and Nebraska have voluntary programs.

8. Pay cash for high-value care, get credit toward your deductible to build a market

States should require insurers to provide in-network credit towards any out-of-pocket responsibility if the patient chooses to see an out-of-network provider that delivers a better deal (e.g., provides care below a certain benchmark such as below average in-network rates). In this circumstance, the patient’s choice saved themselves and insurers money.

Providers often will accept a lower cash rate because they avoid costly administrative expenses. Many lower-cost independent providers have been pushed out of network because they are not part of large health systems. Under the status quo, many patients are overpaying for services.

Model States: Ending network discrimination rewards cost-effective providers and would be modeled off existing laws in Maine and Arizona. New Jersey has a state law that allows price estimates for out-of-network procedures.

9. Allow smaller companies to see how their health care dollars are spent

Large companies have the clout and resources to see how their health care dollars are spent. By contrast, small companies are in the dark. As a result, most small companies have no idea if they are getting a good deal, if they should change their plan designs to better serve their employees or buy coverage another way.

Model States: To bring some light to pricing for smaller businesses, Texas passed a law that allows an employee welfare benefit plan, plan sponsor, or plan administrator to request 36 months of claims that must be shared within 30 days. States may want to add safeguards to ensure data is properly de-identified, and set a floor for the size of company that can access claims.

10. Ban anti-competitive contracting provisions, including gag clauses on price

Contracts between health care providers and insurers often feature clauses that harm patients. By banning the following practices, states can begin to reverse the process of cartelization in American health care and protect patients from overpaying for care.

• “All or Nothing” clauses: well-known, dominant, and high-cost health care systems often require insurance companies to include all their affiliated providers in network, regardless of the criteria used to evaluate the cost or quality of care to set a network. Some systems will take this a step further and also require all affiliated providers to be included in the preferred tier or cost-sharing arrangement, regardless of price or quality. As a result, premiums are inflated for patients and the quality of care for patients is lower.
• “Most favored nation” clauses: dominant insurance companies prohibit providers from giving other insurance companies more favorable rates and conditions, locking in high rates and creating an anti-competitive cartel. Some less strict clauses require disclosure of other providers’ rates to enhance bargaining power, which in turn drives rates higher.
• Group boycotts: groups of healthcare providers who should normally compete with one another sometimes refuse to individually contract with insurers on a basis other than jointly agreed-upon terms—a classic example of anticompetitive behavior that leaves the public worse off.
• Pricing blackouts: some contracts explicitly allow hospital operators to block their pricing information on insurers’ online shopping platforms, preventing transparency for patients and limiting competition. Recent federal regulatory actions provide a basis for eliminating this practice.
• Gag clauses: certain contracts prohibit or severely limit providers from disclosing prices or costs to patients or others. At times, this prohibits the disclosure that the up-front cash price would be lower than if the service were paid for through insurance—harming patients by forcing them to pay more for the same service.
• Exclusive contracting provisions: these provisions prevent an insurer from contracting with other competitive providers. They can work two ways: either forcing the purchaser to buy a product from only one seller, or the seller to provide to only one purchaser. By shielding providers from competition, these foster cronyism and misaligned incentives in the health care sector and should be prohibited.

Model States: 22 states have some kind of prohibition on most favored-nation clauses, but many only apply to a certain segment of the market. There have been recent bills in Colorado and New York on all or nothing clauses.