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Why Hospitals and Insurance Companies Hide Prices

Why Hospitals and Insurance Companies Hide PricesThis year, the federal government exposed both the hospitals and the private insurance companies in a major way. It began with a mandatory order for hospitals to publish a complete list of the prices that they negotiate with private insurers by the federal government.

Of course, there was initial pushback; the insurers’ trade association declared the order to be unconstitutional on the grounds that it undermines competitive negotiations and four bold hospital associations sued the government to block the order from being enforced. Both actions failed, however; the hospital associations lost their case, and seven months later, many hospitals are essentially ignoring the order and refusing to publish a list.

Still, there are some hospitals that have chosen to comply with the order, and after the data was published, it was evident why the two entities fought tooth and nail to keep the information hidden. The Phoenix insurance bad faith attorneys at Plattner Verderame, PC, discuss this issue in today’s blog.

First things first: what is this new rule about hospital prices?

The rule, which went into effect on January 1, 2021, came from the Centers for Medicare & Medicaid Services (CMS). It “establishes requirements for hospitals operating in the United States to establish, update, and make public a list of their standard charges for the items and services that they provide. These actions are necessary to promote price transparency in health care and public access to hospital standard charges.”

The goal of the rule was to promote transparency for ALL hospitals – “including hospitals not paid under the Medicare Outpatient Prospective Payment System,” per CMS – when it comes to pricing for patients with or without insurance. The rule amended Section 2718 of the Public Health Service (PHS) Act (part of the Affordable Care Act, or ACA), which deals with bringing down the cost of healthcare and what insurers must do to ensure their customers are getting their money’s worth.

In short, the rule picks up where the ACA and the PHS Act left off: by forcing hospitals and insurance companies to come clean about their pricing.

What did the list reveal about hospital prices?

The results from the list show that patients are being charged drastically different prices for the same types of services from different hospitals. There are numerous examples of hospital insurance companies negotiating unreasonable rates for customers, despite the fact that these insurance companies are generating at least a billion in annual revenue. Even worse, there are examples of insured patients receiving higher prices that they would not have to pay if they were uninsured.

Why is it important that this information is being released to the public?

Until the public release of these lists, consumers were at the mercy of the hospital insurance companies. Because insurance companies were not willing to reveal any information about the prices that consumers would be responsible for paying, consumers and employers that hired these companies were left at a disadvantage when negotiating prices with insurance companies.

Even when both parties would ask that the insurance companies provide them with the information about pricing, the companies would refuse. Because consumers and employers were not privy to certain information, insurance companies could get away with tricking consumers into believing that they were receiving actual discounts while charging them beyond what the average price for a service would be.

Why should consumers care that their insurance companies are negotiating bad deals?

Consumers should be very concerned that their insurance companies are negotiating bad deals on their behalf. There are many Americans who are currently enrolled in high-deductible plans that require them to pay as much as thousands of dollars before coverage can be applied. These bills are often difficult to maintain; and even if consumers are able to pay the deductible, they may also be responsible for paying a percentage of the cost. Eventually, those high prices are transferred to higher premiums, which are rising each year nationwide.

What has been the response from the hospital insurance agencies and hospitals?

Both entities are insisting that the information presented provides a limited scope into their negotiations. The institutions argue that a full picture into their negotiations cannot be viewed from just looking at a number of services, and that the published data does not take into account the other important aspects of their contracts, like incentives for providing high-quality care.

Molly Smith, the vice president for public policy at the American Hospital Association, declares that the rate sheets are not helpful to anyone, and would advise hospitals to set them aside and avoid them. Matt Eyles, chief executive of America’s Health Insurance Plans, stated that insurers want to ensure that their customers are receiving the best deals and that their products have competitive premiums. Five of the largest hospital insurance agencies – Aetna, Cigna, Humana, United and the Blue Cross Blue Shield Association – declined requests for on-the-record interviews.

How were the files interpreted?

To help transform the files into a database that can display how much basic medical care costs between 60 major hospitals, the New York Times collaborated with two University of Maryland-Baltimore County researchers by the names of Morgan Henderson and Morgane Mouslim. Currently, the data does not show any insurer always getting the best or worst prices.

There are instances where small health plans with seemingly little leverage are out-negotiating five of the most dominant insurers in the United States market. People carefully weighing two plans, mostly between choosing a higher monthly cost or a larger deductible, are unaware that they may be picking a price that is much worse when they later need care. Even when it comes down to simple procedures, there can be a difference of a thousand dollars, which the average American does not even possess a thousand dollars in savings.

Why are insurance companies and hospitals so protective about secret prices?

It is not just consumers that are left in the dark about the prices. Employers, who are the largest purchasers of health insurance, are left in the dark as well. Because of the secrecy surrounding pricing, employers cannot share certain information during open enrollment that would help their employees select the most beneficial insurance policies.

Most employers select plans without knowing exactly what they and their employees will pay; and if employers wanted to discover what the prices are, they would have to solicit bids for a new plan, which could end up frustrating employees who do not want to switch providers. In other words, employers have to spend money to find out what prices they are paying.

How can insurance policies use contracts to their advantage?

Hospitals and insurance companies also have the benefit of hiding behind contracts that they have signed that prohibit them from sharing their rates. Richard Stephenson, who runs a medical price transparency startup named Redu Health, worked for the Blue Cross Blue Shield Association from 2006 to 2017.

When recounting his experience, Stephenson expressed that gag orders existed in all of their contracts. He believed that insurers were concerned that if the prices were revealed, angry healthcare workers would leave their networks.


If your insurance company has acted in bad faith against you, you are entitled to receive fair and just compensation. At Plattner Verderame, PC, our Phoenix and Tempe insurance claims lawyers learn about the particular details of your case, so you know what assistance we can provide up front. Call our insurance dispute attorneys today at 602-266-2002, or you can contact us through a contact form to discuss your legal options.