Price Transparency, Real Healthcare Costs, and Insurance

Patients covered by a health insurance plan typically are unaware of their healthcare cost borne by insurers. For any healthcare services, this cost can range from low to high depending upon the hospital or provider’s contract with that insurance company. Lack of healthcare price transparency is also burdening physician practices due to their inability in most instances to respond to patients’ inquiries into the cost to their insurance company for any upcoming services.

Described below are recent federal regulations impacting healthcare price transparency. Additionally described are the impact of these federal regulations on your decision-making in determining whether to obtain care from a particular hospital or outpatient group practice.

Understanding Upcoming Change in Healthcare Price Transparency

President Trump’s Executive Order 13813 in November 2019 directed the Centers for Medicare and Medicaid Services (CMS) to issue rules to increase healthcare price transparency (per the Department of Health and Human Services [DHHS] website). Consequently, two separate rules were issued by the CMS.

The first is titled Calendar Year (CY) 2020 Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule, and this rule specifically impacts billing by hospitals. The second is a proposed rule titled Transparency in Coverage Proposed Rule that would impact health insurers to require increased price transparency.

Meanwhile, the DHHS, Dept. of Labor, and Dept. of the Treasury co-issued a Transparency in Coverage proposed rule impacting health insurers to increase price transparency.

The consequence of these rules is that hospitals, outpatient providers, and health insurance companies will need to increase their transparency such that consumers will be able to acquire a clearer understanding of the invoices for services – whether to the healthcare consumer or that consumer’s health insurance carrier.

Why Healthcare Transparency Matters

Many private insurance plans (along with Medicare) require that a deductible be met before that insurer will pay for the medical care received by an enrollee. This is likewise the case for Medicare Advantage plans (as privately-administered health plans). Meanwhile, there is often a co-pay required of the person for receiving a particular healthcare service (e.g., consultation with a specialist physician). However, the actual cost for a healthcare service can vary hugely between hospitals (and between physician group practices). For example, the invoice for a Covid-19 test – while paid for by the federal government – can vary by a large dollar amount depending upon where that Covid-19 test took place.

For a person planning to have knee replacement surgery, one hospital in that person’s geographic vicinity may charge a certain price while another may charge a vastly different price. Complicating an understanding by a given patient of the real cost is that the price presented to the patient upon request (i.e., provided prior to the surgery) may be the typical cost if no insurance coverage exists – and that price may be solely for the surgery and exclude the cost of anesthesia, pain medications, and any other costs associated with that hospital stay.

Furthermore, the cost on the bill to the insurance company may vary depending upon the contractual agreement between that hospital and the insurance plan. Even more complication exists when a patient is covered by a PPO plan that covers a different percentage of the billed cost depending upon whether the enrollee visited an “in-network” or “out-of-network” provider.

Impact of New Regulations on Your Healthcare Costs

According to a Health Affairs article in 2020, the federal rules changes will necessitate that hospitals provide consumers with their standard out-of-pocket charges for all items and services so that consumers can compare these across hospitals. However, this article also notes that the hospital industry is resistant to the rules changes, and that – rather than decreasing insurance costs – healthcare price transparency requirements may drive up insurance premiums as hospitals (and outpatient providers) pass their heightened administrative cost-burden onto insurance companies.

Why Reviewing the Costs Paid by Your Insurer is Important

Most people – when their insurer pays the bulk of their medical bill – do not carefully review the itemized expenditure report provided by their private insurance company or Medicare/Medicaid. After all, the invoice was paid by their insurer. However, reviewing this report can alert the consumer of healthcare services to billed medical services that were not actually provided. In addition, it can enable the insured person to identify if a cost was billed at at an “out-of-network” rate rather correctly at the “in-network” rate. Costs borne by insurers through over-payment to hospitals and medical providers can be passed on to consumers through increased premiums/deductibles, so consumer involvement in cost-containment is vital.

The professionals at Life First Financial & Insurance seek to aid you in choosing a health insurance plan that will meet your needs.

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