Shopping Without Price Tags

Imagine walking into a department store to buy a pair of shoes, only this time there are no price tags and many of the shoes look identical.  Welcome to the healthcare market.

Three months ago, Steven Brill's article in Time Magazine sparked a lot of discussion around this already heated topic -- the lack of price transparency in healthcare billing.  From the extreme variability of procedure costs, even within the same county, to the sheer incomprehensibility of one's own medical bill, the cost of medical care continues to be a mystery to consumers.

In an effort to make health costs more transparent, the U.S. Department of Health and Human Services (HHS) released a list of what hospitals across the country charge for their 100 most common in-patient procedures.  This list for each hospital is known as a chargemaster. While hospitals are required to list the official value of their procedures on the chargemaster, private insurance carriers, as well as Medicare and Medicaid, all negotiate their own reimbursement rates. So even though the public has this newfound access to the chargemasters, the amount each insured individual ends up paying is subject to a private negotiation between that hospital and the insurance company -- and those figures remain a secret.

Yesterday, the Obama Administration released a memo stating that exchanges set up under the ACA will offer the consumer more choices, thereby spurring on competition and potentially lowering the cost of healthcare overall.  The goal is to increase the options for insurance coverage, particularly in those states dominated by one insurance carrier.



So far, only four states have confirmed the carriers that will be competing on their exchanges: California will have 13 carriers competing, Washington state will have nine, Maryland five, and Rhode Island just two.

While we wait for more states to lock in their insurers, here are some important takeaways from the White House memo promising more consumer choice will create more competition:

• The data in the memo comes only from states in which the Federal government will run the exchanges, coupled with the states running their own exchanges that have already released the relevant information (California, Washington, Maryland, and Rhode Island). 

•  The majority of states will have new health insurance choices that are not available today. 

•  In 75% of federally-run exchanges, at least one new insurance company intends to enter the market. 

•  About 90% of Americans buying individual insurance from the state exchanges will have at least five companies to choose from.

The effects of these new insurance choices, however, won't be clear until the country goes shopping for health insurance beginning October 1, when open enrollment begins on the state exchanges.