The secret negotiations between hospitals and insurance companies

The secret negotiations between hospitals and insurance companies
Hospitals are required to make their prices publicly available as of 2021. The Hospital Price Transparency rule went into affect January 1, 2021. It was intended to help Americans know the cost of a hospital item or service before receiving it. However, the price that you will pay, whether you are insured or uninsured will be much different. There is a broad range of prices paid for the same service in the same hospital. The negotiations between insurers and hospitals are often kept secret.
Insurers level their scale, the number of members they have, to get better pricing from hospitals. The rates hospitals charge private insurers is in turn passed through to us as consumers through higher premiums and deductibles. Patients are often left with thousands of dollars of deductibles before their insurance kicks in. Total spending for private insurance in the United States has increased ~40% in the last decade.
Hospitals typically have a sticker price for services called the chargemaster rate. This is a starting point for negotiations with insurance companies. There isn’t an exact formula for the chargemaster rate. These are typically tweaked to reach a certain level of profitability for the hospital. Some hospitals are looking at costs for procedures.
Prestigious or large hospital systems have more leverage in negotiations with insurance companies. They can make sure the insurer doesn’t exclude them from any of their plans. That all its plans must contain that hospital’s facilities. Anti-steering clauses prohibit insurers from directing members to less expensive hospitals.
Medicaid and Medicare plans get much lower rates than private insurance. Therefore, hospitals have to rely on the higher rates charged for privately insured patients for their revenue. Hospitals that are able to boost their margins are able to do so only through raising rates.
A study from Johns Hopkins shows that the cash prices for hospital care is lower for uninsured patients than for insured patients get even after the insurance company has aggressively negotiated those rates. “Researchers found that the price hospitals negotiate with commercial health insurance companies that get passed along to insured patients frequently exceed the cash price hospitals unilaterally set for uninsured patients.”
Works Cited:
https://www.wsj.com/video/series/wsj-explains/same-surgery-different-price-why-hospital-bills-vary-so-much/AEB3F724-93E9-4564-BEC5-1B5E6989926C
https://publichealth.jhu.edu/2023/study-finds-hospitals-cash-prices-for-uninsured-often-lower-than-insurer-negotiated-prices
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