It’s finally here – after wrangling substantially more time to prepare than hospitals had, insurers are now required to post their negotiated prices publicly on their websites. According to Fierce Healthcare, the mandate requires insurers to post the amounts they pay to healthcare clinicians for the services they provide to patients.
This was the second part of a federal transparency ruling issued in October 2020. The first part required hospitals to publicly disclose their standard charges and negotiated rates, and this part of the rule went into practice mere months after it was published. Yes, hospitals had less than 3 months to prepare, while insurers were given a 12-month lead. Then, back in August of 2021, they got another extension (must be nice to have such influential lobbyists on the payroll!), which brings us to July 2022.
When the curtain on payors is pulled back, what might consumers discover? The raw information likely won’t be particularly useable for consumers directly. But once the data analysts get ahold of it, we might uncover some interesting tidbits.
We might, for example, find out that much of the criticism insurance companies leverage against hospitals are actually misdirection – and the blame for consumers’ cost and access woes lies squarely with the health plans.
For example – insurers are quick to criticize hospitals for a supposed lack of price transparency. But it’s your insurance plan that determines how much you’ll owe, not the hospital – and it’s your insurer that determines when and where you can even receive care that’s covered.
Insurers also have plenty to say about high healthcare prices. But what they don’t like to report is that they have no incentive to work with hospitals on making care more affordable; in fact, they benefit when prices are higher.
How is that possible? You might think insurers are there to make care efficient and affordable – and that’s exactly what they want you to think.
We pay premiums into a pool of money the insurer uses to pay for claims. The lower the cost of care, the more cash the insurer gets to keep, right?
Wrong.
It goes back to our favorite subject: the medical loss ratio. Insurers are required to spend approximately 80% of all premium dollars on medical care. So even if hospitals have really low prices and claims are affordable, insurance plans don’t get to keep any more than 20% of premiums. The medical loss ratio is intended to ensure that insurer dollars are spent on your medical expenses, and not on executives’ bonuses, but it creates a perverse incentive for insurance companies.
Insurers raise their premiums along with the cost of care. If it’s more expensive to pay claims, they need to bring in extra cash to cover it, right? So they bump up their premiums, which brings in more cash. They can still only keep 20% of the pie – but that 20% just got bigger.
It’s quite an impressive sleight of hand, actually. Insurers get to publicly blame hospitals for high prices – use it to their financial advantage by spiking premiums – and then restrict access to care for patients and undercut hospitals in reimbursement negotiations behind closed doors.
Until now. Will this new rule bring these practices to light? We’ll certainly stay tuned.
