This month, a federal rule requiring certain private health plans to disclose the rates they pay providers for covered healthcare services takes effect. The Trump-era regulation, along with a similar rule requiring hospitals to publish their prices, is an example of the previous administration’s drive to make the healthcare system more transparent.
Such transparency is sorely needed. It can empower patients to make more informed decisions about their care — and reduce costs throughout the entire healthcare system. Under this month’s new rule, individual and group health plans must publish the prices they negotiate with in-network providers and disclose the maximum price they’ll pay for care from an out-of-network provider.
While the large files of resulting pricing data may seem impenetrable to the average consumer, experts anticipate app developers and entrepreneurs will come up with ways to make the data more user-friendly. The rule also requires insurers to provide online tools to help consumers parse the data and compare prices for 500 “shoppable” services starting next year.
Employers and researchers might be able to use all of this information to illuminate price discrepancies among providers. The limited data we have now show that costs can vary wildly from one provider and payer to the next.
In Los Angeles, for instance, the negotiated cost of a basic blood test in 2016 ranged from $12 to $413, according to a 2019 study from the Health Care Cost Institute. Insurer-negotiated rates for identical services at a single hospital can vary by up to 13% between payers, according to a 2018 National Bureau of Economic Research working paper . Price transparency can allow patients to compare prices for a blood test that may cost their insurer a few dollars at the clinic down the street or hundreds of dollars at the hospital up the road. Going with the less expensive option could reduce patients’ out-of-pocket costs too.
Companies, meanwhile, might be able to save on employee benefits by opting for payers that negotiate lower prices than their competitors. Price transparency injects more competition into an opaque healthcare system. The new federal rule is a step in a more transparent, and less costly, direction.