State and Employer Reactions to High Commercial Health Insurer Prices for Hospital Services

The black box of commercial insurer prices for health care is slowly being pried open. Hospital claims data are showing that commercial hospital prices are high relative to Medicare, and that the size of the price discrepancies is increasing. Hospital size and market power are playing a role in this trend. In a new JAMA Viewpoint, Milbank Memorial Fund President Christopher Koller and Dhruv Khullar, MD, of Weill Cornell Medicine summarize the research and say that some states and employers are taking steps to address the issue.

In Maryland, where state hospital rate-setting regulation has long been in place, public and private insurers pay the same prices for hospital services. Rhode Island, Delaware, and Massachusetts are setting overall spending growth targets and several other states are following suit. Surprise bill legislation has proposed referencing Medicare when determining out-of-network pricing, as some self-insured employers already do. Finally, numerous state and federal policies encourage more price transparency.

According to Koller and Khullar, “The current system, in which private contracts are shrouded in secrecy, leads to costs tethered to the negotiating leverage of health care organizations instead of the value they offer, and patients and employers are paying the price.”

Read the Viewpoint.