By Maanasa Kona and Nadia Stovicek
Health care prices in the United States have long been shrouded in mystery. Until recently, the prices negotiated between hospitals and insurers were treated as confidential, and consumers had no idea how much they would end up getting charged for a service until they received their bill. Furthermore, large employers and policy makers interested in tackling high and rising health care prices have lacked the data they needed to compare prices across different plans and providers.
To remedy this, in 2019, the federal government required first hospitals and then insurers to publish their negotiated prices. Despite these developments at the federal level, significant gaps remain in terms of overseeing compliance by both hospitals and insurers. States, as the primary regulators of hospitals and insurers, can play an important role in monitoring compliance and improving access to the price data. Furthermore, federal price transparency rules specifically make state departments of insurance responsible for enforcing these rules against the insurers they regulate. A small but growing number of states have started to embrace their authority in this space. In this article, we examine state efforts to promote price transparency both before the enactment of federal price transparency rules as well as after it.
The Federal Push Toward Price Transparency
Federal hospital price transparency regulations, which went into effect in 2021, require hospitals to post chargemaster or gross prices, the prices they negotiate with each insurer, and discounted prices paid by self-pay patients for each service. Additionally, hospitals are required to publish prices about certain popular elective procedures in a consumer-friendly format, such as a price estimating tool. The Transparency in Coverage (TiC) regulations, which went into effect in 2022, require insurers to publish negotiated rates for all items and services provided by in-network providers (including but not limited to just hospitals) and what they have historically paid out-of-network providers. Insurers are also required to share cost-sharing information with enrollees upon request.
In the first year after the hospital price transparency rules went into effect, few hospitals complied with the requirement to post prices in a machine-readable file. In 2022, the Centers for Medicare and Medicaid Services (CMS) increased the penalty for noncompliance from about $100,000 to more than $2 million annually. CMS found that compliance had improved “substantially” in the second year of the rule being in effect.
Compared to hospitals, health insurers have been quicker to comply with the price transparency requirements, but the quality of the data being released by both hospitals and health insurers leaves much to be desired. Researchers have found the price data released by hospitals to be “consistently inconsistent,” with significant variance in terms of how each data element is defined and displayed. The price data released by health insurers have largely been inaccessible to anyone without a supercomputer. This has made analyzing and using the data difficult, if not impossible. Late in 2023, CMS finalized a rule that could standardize hospital price data and make them easier to use, but they have yet to address the deficiencies in the insurer TiC data.
The US House of Representatives recently passed the Lower Costs, More Transparency Act, and it is now under consideration in the US Senate. If enacted, it would codify most of the federal price transparency requirements into statute and even expand them to other types of providers, including providers of laboratory and imaging services and ambulatory surgical centers.
While the federal government ramps up its efforts to finetune price transparency requirements and enhance oversight, given limited resources, there is only so much federal regulators can do to monitor all the hospitals and insurers in the country. States, as primary regulators of both hospitals and health insurers, can support federal efforts and help policy makers, researchers, and employers gain access to key information to make health care more affordable.
State Efforts To Promote Price Transparency
States began promoting price transparency even before the federal government enacted the transparency rules discussed above. Most early state efforts were geared toward consumer education, but since the federal rules have gone into effect, states are starting to embrace more comprehensive price transparency approaches.
Consumer-Facing Price Shopping Tools
Prior to 2020, about a third of states had their own price transparency laws in place, and they almost exclusively focused on enabling consumers to access data to help shop for care. For example, Massachusetts, Alaska, and Florida require insurers and providers to make cost estimates available to all consumers upon request. Evidence shows that relatively few consumers use these tools, and these consumer-facing tools tend to have minimal effects on prices.
One assessment of a price comparison tool operated by the state of New Hampshire found that a modest number of patients (8 percent) shopping for imaging services used the website to compare prices, and that, within five years, there was a 4 percent decrease in the prices of imaging services that were included on the website. However, these consumer-facing tools tend to be significantly more effective in exerting a downward pressure on prices of services by providers who are seen as being interchangeable, such as imaging and laboratory services, and fail to be as effective with hospital and physician services.
On the other hand, requiring providers and insurers to make the entire list of their pricing data publicly available could help those with data analysis capabilities, such as policy makers, employers, and researchers study price trends and outliers, enhance antitrust enforcement, and support the development of better cost-containment strategies.
Pursuing Comprehensive Price Transparency
Since the federal price transparency rules have gone into effect, several states have enacted laws to support the federal efforts. For example, Virginia now requires hospitals to comply with the federal hospital price transparency rules, and Indiana requires hospitals to continue complying with federal hospital price transparency rules even if the federal rules get repealed or the federal government stops enforcing them. Minnesota requires not just hospitals but also other providers such as outpatient surgical centers, large imaging and laboratory service providers, and large dental service providers to publish their negotiated prices, gross charges, and discounted prices for self-pay patients.
Some states have coupled price transparency requirements with provisions to enhance oversight and enforcement of both state and federal rules. For example, Arizona makes its Department of Health Services responsible for overseeing compliance with federal price transparency rules and requires the agency to publicly post information about noncompliant hospitals. Arkansas imposes state-level penalties if hospitals don’t comply with the federal requirements. Colorado has taken the unique approach of prohibiting hospitals from pursuing patients for unpaid medical debt unless they can demonstrate compliance with the federal transparency requirements.
Texas has gone further than some of the states discussed above to enforce price transparency. The state has codified the federal hospital price transparency rules and established enhanced penalties for noncompliant hospitals. In addition, Texas has extended TiC requirements to certain types of health plans that are otherwise not required to disclose prices under federal rules, such as short-term limited duration plans. For these plans, Texas has issued detailed rules and guidance to improve standardization of the data, and make it easier to analyze.
Generally speaking, state departments of insurance are the primary regulators of insurance and have the responsibility under law to enforce TiC requirements against the insurers they regulate, but it is unclear how active they have been in doing so. While awaiting federal guidance on standardizing TiC data and making it more usable, states could benefit from developing their own standardization guidelines and bolstering their enforcement efforts.
Looking Forward
Price transparency is a necessary first step in developing effective cost-containment strategies. The progress to date implementing meaningful price transparency requirements for hospitals and health insurers has been glacial. In response, federal lawmakers are debating legislation that would increase the pressure on the industry to open up their books. States, with their broad oversight authority over hospitals and insurers, can both hold hospitals and health insurers accountable if they fail to comply and raise the bar to ensure the data are accessible and usable for all.
Authors’ Note
This work has been made possible thanks to funding provided by the Robert Wood Johnson Foundation and Arnold Ventures.
This post is part of the ongoing Health Affairs Forefront series, Provider Prices in the Commercial Sector, supported by Arnold Ventures.
Maanasa Kona and Nadia Stovicek, “State Efforts To Improve Price Transparency,” Health Affairs Forefront, April 15, 2024, https://www.healthaffairs.org/content/forefront/state-efforts-improve-price-transparency. Copyright © 2024 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.