Effects of Health Insurance Price Transparency

Price-conscious consumers are accustomed to using online tools and mobile apps to shop for and compare services and goods—from restaurants and airplane tickets to plumbers and house painters. But anyone considering a medical procedure like a hip replacement would be hard-pressed to access similar information that would help them find the highest-quality care at the lowest price.

Three of the nation’s largest health insurance companies, however, hope to make shopping for a doctor or hospital easier—more along the lines of finding a good deal on a hotel—by providing data on the price and quality of healthcare services covered by their plans. Aetna, Humana, and UnitedHealthcare have all signed on to the initiative, with other carriers expected to participate in the future. Medicare Advantage and Medicaid health plans may also be included at some point, if the states agree.

The information about cost and quality of healthcare services will be freely available to consumers through an online tool developed by the Health Care Cost Institute (HCCI), an independent nonprofit organization, and the tool is expected to launch in early 2015.

“Consumers, employers, and regulatory agencies will now have a single source of consistent, transparent healthcare information based on the most reliable data available, including actual costs, which only insurers currently have,” said David Newman, executive director of the HCCI, in a statement. “Voluntarily making this information available will be of immeasurable value to consumers and other health system participants as they seek to manage the cost and quality of care.”

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What Information Is Available?

The development of this tool comes as more Americans are getting healthcare coverage under the Affordable Care Act. At the same time, many of the newly insured and those with existing coverage are facing higher out-of-pocket costs as their deductibles and co-payments rise.

The information portal will provide greater price transparency for consumers and employers concerned about the rising cost of healthcare in the United States. According to the HCCI, these costs have been rising more than three times faster than wages. 

Consumers will be able to see the prices for an “episode of care”—such as a hip replacement or heart surgery—by region, along with quality measures for those services. This publicly available information will be based on aggregated claims data submitted to and analyzed by the HCCI. People who already have a health insurance plan with one of the participating carriers will also be able to access password-protected data on payments made by their insurer to their healthcare providers. Employers will have access to even more detailed information.

However, consumers will not be able to compare prices across health plans. They will be able to see only the aggregated data—such as how much the cost of rotator-cuff surgeries varies in a geographic region—or information for a specific insurer. While the uninsured will be able to access the freely available information, their inability to compare plans may limit its usefulness in choosing new coverage.

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What's the Value of Healthcare Cost Transparency?

One of the main reasons behind the push for more healthcare transparency is to make the costs clearer to consumers. Unlike with buying furniture or booking a flight, determining the total cost of medical services before receiving care can be difficult.

The cost of medical services also varies greatly from one location to the next—for example, the cost of a joint replacement ranges from $5,300 to $223,000, while in-patient hospital charges for heart failure may be as high as $46,000 in Denver and $51,000 in Jackson, Miss.

As consumers pay for more of their healthcare directly—with less of the cost picked up by the insurance companies—the out-of-pocket charges can cause as much distress as some of the medical side effects. Having price information available beforehand can help people weigh the benefits of a medical procedure against both the side effects and the costs.

Healthcare experts also hope that increased transparency will encourage consumers to choose lower-cost, high-quality providers. While some research shows that consumers can make smart choices when given the right information, the effect of larger initiatives remains to be seen.

“We really don’t have good evidence at this point about whether or how price and quality data will affect how consumers choose and use health care services,” said Anna D. Sinaiko, Ph.D., a post-doctoral research fellow in the Department of Health Policy and Management at the Harvard School of Public Health, in an email to Healthline. “Patients, particularly patients who have high-deductible plans and pay for a lot of their care out of their own pockets, have an incentive to use this information when they are deciding where to receive care.”

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Will Transparency Help Consumers?

Whether greater price transparency will help consumers make decisions—such as which doctor to choose or whether to undergo an elective surgery—depends on many factors, including what information is provided.

“There is a real concern that in the absence of quality information patients will consider price as a proxy for quality, and select higher price providers,” said Sinaiko. “But in health care, providers who are higher priced aren’t necessarily higher quality.”

The tool developed by the HCCI will offer information on both price and quality. Presented correctly, this type of information can steer consumers toward choosing the best providers. A 2012 study published in Health Affairs found that including easy-to-understand cost and quality information together, as well as highlighting the options that are the best quality for the price, can make it easier for people to decide on medical services.

The choices that consumers make, however, also depend on how much of the medical costs they have to pay directly. As their portion of the cost increases, said Sinaiko, consumers cut back on how many medical services they use, and not just the elective services. In addition, people may struggle when facing too many options—such as information overload from an online tool—making it less likely that they make any choice at all.

“These difficulties don’t mean we shouldn’t provide access to cost and quality information,” said Sinaiko. “They do mean that we should consider carefully how this information is presented, so that it is understandable and doesn’t increase patient anxiety when making decisions.”

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