Administration officials said the final rule will compel hospitals in 2021 to publicize the rates they negotiate with individual insurers for all services, including drugs, supplies, facility fees and care by doctors who work for the facility.
The administration proposed extending the disclosure requirement to the $670 billion health-insurance industry. Insurance companies and group health plans that cover employees would have to disclose negotiated rates, as well as previously paid rates for out-of-network treatment, in file formats that are computer-searchable, officials said.
The insurers, including Anthem Inc. and Cigna Corp. , would have to provide a transparency tool to give cost information to consumers in advance, senior administration officials said.
The requirements are more far-reaching than many industry leaders had expected and could upend commercial health-care markets, which are rife with complex systems of hidden charges and secret discounts. The price-disclosure initiative has become a cornerstone of the president’s 2020 re-election health strategy, despite threats of legal action from industry.
“Right now there is too much arbitrage in the system,” a senior administration official said in an interview Thursday with The Wall Street Journal. “There are a ton of vested interests who will oppose this. We expect to get sued. We’re really goring people’s oxes.”
Hospitals and insurers typically treat specific prices for medical services as closely held secrets, with contracts between the insurers and hospital systems generally bound by confidentiality agreements. Policy makers, employers and patients are often unable to see clearly which hospital systems and doctor practices are driving high costs.
The proposal covering insurers is the newest part of the price-disclosure initiative, and it would include the private-employer market, where about 158 million people get their health insurance. Insurers and group health plans would have to put the negotiated rates into a file that third-party developers could incorporate into shopping tools.
Insurers would also have to create a web-based tool for beneficiaries that discloses the list price, the negotiated rate, cost sharing, and the amount left on a plan deductible, as well as allowable out-of-network rates, officials said. There will be a 60-day public comment period on the proposal.
The requirements could cost insurers an estimated $200 million annually based on estimates in the proposal. The estimate includes planning and developing the online tool
The proposal also states that “price transparency may have the opposite effect because in some markets where pricing is very transparent, pricing can narrow and average costs can increase.”
Studies show consumers are often required to pay more out of pocket when they don’t have the price information they need to comparison shop. Employer health-plan deductibles are outpacing wage growth and have risen to an average $1,655 for a single plan, according to a September survey by the Kaiser Family Foundation. Workers on average pay $6,015 toward the cost of their coverage.
n the final rule covering hospitals, facilities will have two obligations. First, they will have to provide insurer-specific negotiated rates in a computer-readable file.
Second, hospitals will have to post negotiated charges online for 300 specific services that patients typically shop around for. Seventy of those services, including vaginal birth, colonoscopy, and joint-replacement surgery, are stipulated in the rule, according to senior administration officials. Hospitals can select the other 230 services they post online.
Hospitals face fines of up to $300 a day if they don’t comply with sharing negotiated rates.
The requirements would cost hospitals more than $23 million annually, according to an estimate in the rule.
Taken together, the price-disclosure initiatives could reshape the $3.5 trillion health-care industry.
Prices charged for health care vary widely depending on whether a provider is in or out of the patient’s insurance network and on the insurer’s undisclosed price agreements with hospitals. A magnetic resonance image of the lower back costs $141 at an imaging center in Jefferson, La., but $7,646 at a hospital in Torrance, Calif, according to data from Clear Health Costs, which publishes information on health costs.
Hospitals, insurers and others in the industry have spent the past nine months since the idea was floated by the White House denouncing the proposal and gearing up for a pitched legal battle.
The industry is also likely to argue in any legal challenge that negotiated rates are proprietary and include confidential contractual agreements. Industry groups have also said it runs counter to the First Amendment.
Pharmaceutical companies prevailed with a similar argument when the Trump administration said they had to disclose list prices for drugs in television ads. A federal judge in July ruled that the requirement overstepped regulatory authority.
“It will have a negative impact on competition,” said Tom Nickels, executive vice president of the American Hospital Association, though he hadn’t yet seen the final rule.
If rates are public, health-care companies say, some hospital systems might push for payment rates that match their crosstown rivals’.