Just in time for Halloween, the new Transparency in Coverage Final Rule released Thursday is a sweet treat for consumers, as it means insurance companies must stop the tricks and end the masquerade of keeping their scary and mysterious prices in the dark.
The new rule, issued by the Dept. of Health and Human Services, requires insurance companies to uncloak their secret contracted rates, get their skeletons out of the closet, and show what their health plans actually pay for medical care on our behalf. The shadowy prices must be unmasked and online by Jan. 1.
With this rule in effect, consumers will soon know exactly what their premiums are buying them, and whether they would be better off paying for their health care in cash. It should also put a stake in over-priced premiums, giving consumers something to howl about.
In 2020, the average annual premium for a family health plan rose to over $21,000, 4 percent higher than last year, according to the Kaiser Health Foundation. On top of vampire-like premiums, consumers pay scarily high deductibles, an average of over $8,000 per family. That means the typical working family pays over $29,000 a year to insurance companies before they get their first coverage dollar. And for what?
A recent economic study out of Vanderbilt University found that the contracted rates that insurance companies negotiate “on our behalf” were 40 percent higher on average than hospitals’ cash prices. Like a ghost, we can’t see that our insurance coverage may not be such a sweet deal because insurers and hospitals keep their spooky prices ― and us ― in the dark. Thankfully, that frightful practice is about to change.
The coverage rule is the second of two that follow President Trump’s executive order for health-care price transparency. The first rule requires hospitals to reveal their cash and negotiated rates online by Jan 1. Hospital groups are challenging that rule in court, so far unsuccessfully. The U.S. Court of Appeals for the D.C. Circuit is currently considering the case.
If the appellate court upholds the lower court’s decision, then both rules can start to work together to give us systemwide price transparency and put an end to gory price-gouging and freak surprise billing.
For consumers to be truly empowered, however, they need both hospitals and insurers to reveal their cash and “secret” contracted rates, prices we now only get to see after we receive medical treatment and get our statement of benefits. Once consumers have up-front prices in their treat bags, they will be free to shop for both care and coverage that provides the best value. Price competition will drive down the health-care costs, and those who pay for premiums will finally be in charge of their health-care spending. They will be able to see, for example, what one health plan pays for a service, like a knee replacement, compared to another health plan, or what rate a plan pays one hospital compared to another. Pressure will be on insurers to level the rates.
Once these prices and data are unmasked, high-tech wizards will aggregate the prices and create apps that will magically put useful, comparative pricing information at our fingertips. These apps, which are just a wand-wave away, and would make finding the most reasonably priced place to have a baby or a colonoscopy as easy as calling an Uber or getting plane tickets online.
Happy Halloween patients, workers, and employers! The days of being haunted by unknown prices, and being spooked by medical bills we could not see coming are almost over.
Cynthia A. Fisher is a life sciences entrepreneur, and founder and chairman of PatientRightsAdvocate.org.