By Stephanie Armour
The Trump administration Friday released a far-reaching plan
that would for the first time force hospitals and insurers to
disclose their secret negotiated rates.
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
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 for the negotiated rate file could cost
insurers an estimated $200 million to build based on estimates in
Other costs include an estimated $64 million to $161 million for
three years to implement and maintain posting about cost
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
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
On 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 in 2016 dollars, according to an estimate in the rule.
Annual costs range from $38.7 million to $39.4 million in 2019
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
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's actually worse than we expected," said Tom Nickels,
executive vice president of the American Hospital Association.
"They have additional requirements. It's additional data that I
don't know is particularly helpful for consumers."
If rates are public, health-care companies say, some hospital
systems might push for payment rates that match their crosstown
Proponents argue it would bring costs down. Out-of-network
doctors could try to compete with in-network negotiated rates.
Health systems that charge higher negotiated rates could lose
business if they don't match competitors' rates or justify the
reasons for their steeper costs. And employers could press their
insurers to include hospitals with lower negotiated rates in their
Employers and patients are often unable to see which hospital
systems and doctor's offices are driving prices upward. Some
health-care economists argue that the secrecy is a factor in why
the U.S. spends more per resident on health care than any other
The administration's vision is to arm patients with information
needed to make health-care decisions much like shopping for other
consumer services. Rates potentially could be posted on public
websites, where consumers would check the negotiated price of a
service before they pick a provider.
The White House push on price disclosure comes as President
Trump seeks to close the gap with Democrats, who hold an advantage
on health care in public polling.
President Trump has stated that under his health-care plan,
Americans will get better care at a lower cost than they currently
pay. About three in 10 adults are very or somewhat confident the
president will deliver on his promise, while 62% say they aren't
too confident or not at all confident, according to an October poll
by the Kaiser Family Foundation.
The White House is prepared to defend the rule and the proposal
covering insurers from lawsuits, a senior administration official
said. Officials said authority for the requirements stem from the
Public Health Service Act.
"You'll be able to negotiate all over the place," Mr. Trump said
in an October speech in Florida. "And you'll be able to pick
everything you want, from the hospital to the doctor. And it's
going to save you a tremendous amount of money."
Write to Stephanie Armour at firstname.lastname@example.org
(END) Dow Jones Newswires
November 15, 2019 12:26 ET (17:26 GMT)
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