For more than 20 years, people have discussed the need for more transparent health care prices in the US. Building on findings from earlier studies,1,2 in 2019 the RAND Hospital Price Transparency study revealed significant variation in commercial insurance prices across 25 states, ranging from 156% to 311% of Medicare payments.
With this growing evidence, states have enacted price transparency initiatives to stabilize variation, draw attention to particularly high-cost providers, and enable consumers to make high-value choices. We highlight examples from a public database that catalogs state transparency laws and other legislation aimed at curbing health care costs.3
State Legislation Establishing All-Payer Claims Databases
Seventeen states have developed mandatory all-payer claims databases (APCDs), and 3 more states are implementing APCDs. These databases collect and house health care claims data from payers to monitor prices and quality and, in some cases, make the data publicly available.4
States use APCD data in many beneficial ways. However, the Employee Retirement Income Security Act (ERISA) preempts state APCD laws from applying to self-insured employer plans. Missing information from these plans can skew data, preventing APCDs from accurately reflecting market prices and quality. However, some self-insured employers voluntarily contribute claims data because they value comparing their data with that of other payers.
New Hampshire implemented its APCD through its insurance law, which enables the state to collect data from a broad range of individual and employer-based plans and provide oversight over local entities. However, such state insurance laws still do not apply to self-insured employer plans because ERISA does not deem those plans to constitute insurance.
New Hampshire used its APCD data to develop a public website called NH HealthCost, which provides residents with costs at the provider and service levels. Following the launch of NH HealthCost, the negotiated prices for procedures listed on the website declined. For example, 5 years after launch, negotiated prices for outpatient medical imaging visits had decreased 4% and out-of-pocket costs had declined 11%. In one instance, an insurer used the database to draw attention to a particularly high-priced local hospital, inspiring a price reduction. Furthermore, evidence revealed long-term reductions in negotiated prices, especially in areas with higher provider concentration, and lessened variance in prices throughout the state.5
Colorado has also used its APCD to expose significant variation in health care prices across the state. The state found that hospital payments range from 115% to 576% of Medicare fees. The state could save more than $54 million annually if prices were brought down to the Colorado statewide median.
Several states have implemented laws encouraging consumers to seek high-value care. Rather than making patients bear costs up front with high deductibles, right-to-shop laws require that health plans offer consumers incentives to choose lower-cost, higher-quality providers. Along with tools that identify such providers, consumers who select lower-cost providers also receive reductions in premiums or out-of-pocket costs.
In 2015, New Hampshire implemented the nation’s first right-to-shop program. Maine and Utah followed in 2017 and 2018, respectively. Maine’s right-to-shop law requires referring providers to notify patients of their right to obtain care from a different provider, including a written notice of what may qualify as a comparable service or procedure. A price transparency tool assists patients in making lower-cost choices. Furthermore, the law requires that health plans offer financial incentives that encourage consumers to select low-cost, high-quality providers. The law also allows consumers to receive care from an out-of-network provider if the provider’s price is at or below the statewide average for that procedure. Utah’s law required the Public Employee Health Plan to create a savings reward program to encourage patients to shop.
As states implement such right-to-shop policies, it will be important to evaluate carefully whether they increase the use of transparency tools by consumers and are associated with declines in health care prices and out-of-pocket costs.
State Legislation Tackling Surprise or Balance Billing
Finally, much state activity has centered on protecting patients from catastrophic out-of-network bills. More than half of the states have passed protections for consumers with varying limits on consumers’ financial exposure.6 Surprise bills occur when patients receive services from providers that have not contracted with their health plans. For example, patients often encounter surprise bills when they receive care from in-network surgeons with anesthesiologists who are out-of-network. Surprise bills also arise in emergencies when patients need immediate care without time to determine which providers are in network.
With approximately 57% of people in the US affected by surprise bills, more than half of the states have implemented legislation to curb them. Of those states, 13 provide more comprehensive protections that extend to in-network hospital and emergency services.6
New York implemented the Emergency Services and Balance Billing Law in 2014, which protects consumers from out-of-network charges incurred during emergencies or other unforeseen circumstances that their insurance plans refuse to cover. To settle payment disputes, New York uses “baseball style” arbitration, in which both the insurer and provider submit proposed rates and an arbitrator selects the final payment amount.
The Center on Health Insurance Reforms conducted a case study on New York’s law to assess its effects. After the legislature enacted the law, the number of calls and complaints related to surprise billing declined, and the accuracy of health plans’ provider directories improved. An analysis of claims data found that, after implementation, the frequency of out-of-network billing declined by about 34%. Accordingly, state officials reported experiencing a rise in provider complaints, particularly from high-priced providers.7
With the cryptic nature of health care information and such wide variation in prices, it is not surprising that states have taken legislative action to promote greater transparency. Given the pace at which states have recently implemented laws to establish APCDs, promote health care shopping, and protect consumers against surprise medical bills, we are likely to see more states follow. As the goals of greater transparency are to support informed health care choices for consumers and payers and to generate greater competition among health care providers, research will be needed to examine whether these laws significantly increase price shopping and reduce prices.
Open Access: This is an open access article distributed under the terms of the CC-BY License.
Corresponding Author: Suzanne Delbanco, PhD, Catalyst for Payment Reform, 1344 Oxford St, Berkeley, CA 94709 (email@example.com).
Conflict of Interest Disclosures: Drs Delbanco and King reported receiving grants to their institutions from the Robert Wood Johnson Foundation. No other disclosures were reported.
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Murray R, Delbanco S, King JS. Promoting Health Care Transparency via State Legislative Efforts. JAMA Health Forum. 2020;1(3):e200212. doi:10.1001/jamahealthforum.2020.0212