Hospital price transparency data suggest that health insurance exchange (HIX) plans get lower negotiated rates than commercial group plans and higher negotiated rates than Medicare Advantage plans.
Objectives: This study investigates a sample of the pricing data released by hospitals under the price transparency law effective January 2021 to better understand the prices paid by health insurance exchange (HIX) plans relative to commercial group and Medicare Advantage plans.
Study Design: Cross-sectional analysis of hospital pricing data.
Methods: We compared allowed amounts for 25 common inpatient services and 56 common outpatient services across 22 hospital-insurer dyads, selected by the availability of plan-specific pricing data from the top 100 hospitals by bed counts and the top 100 hospitals by gross revenue based on 2017 CMS data.
Results: Insurers in our sample generally negotiated allowed amounts for their HIX plans that were lower than their commercial group rates and well above their Medicare Advantage contracts within the same hospital.
Conclusions: Allowed amounts for HIX plans were generally lower than commercial group rates and higher than Medicare Advantage rates. Better information on HIX pricing is needed as the federal government and states consider additional ways to expand health care coverage, such as public options or expanded Medicaid or Medicare eligibility.
Am J Manag Care. 2022;28(9):In Press
- Allowed amounts paid by insurers for their health insurance exchange (HIX) plans are typically lower than their commercial group rates and higher than their Medicare Advantage rates for the same service at the same hospital.
- Insurers appear to negotiate allowed amounts for HIX plans that are tethered to the rates of their commercial group or Medicare Advantage plans.
- Policy makers considering policies to improve affordability in the HIX market should not assume that plans pay providers the same prices as they do for their commercial plans.
State and federal policy makers seek to expand insurance access and enhance affordability through premium subsidies and public option plans on the health insurance exchanges (HIXs) established by the Affordable Care Act.1 Achieving these aims requires an understanding of the prices that HIX plans pay providers, but data have been limited. We leveraged hospitals’ public price data sets, which were recently made available under the federal hospital price transparency law effective January 2021, to compare the allowed amounts paid by HIX and non-HIX plans offered by the same insurer at the same hospital.2 On average, for their HIX enrollees, the 16 insurers in our sample with both HIX and commercial group plans pay providers prices that are 88.6% and 88.9% of their commercial group rates for inpatient and outpatient services, respectively. The 19 insurers with both HIX and Medicare Advantage (MA) plans pay providers higher prices for HIX enrollees than for MA enrollees, with HIX prices averaging 143.3% and 243.6% of their MA prices for inpatient and outpatient services, respectively.
We searched for hospital price transparency data on the websites of the top 100 hospitals by bed count and the top 100 hospitals by gross revenue based on CMS Hospital Cost Report data (excluding children’s hospitals)—a total of 133 hospitals. Among these hospitals, 115 had a machine-readable file with procedures and prices, 31 had insurer-specific pricing information, and 8 had plan-specific prices where the insurer had at least 1 plan offered on the HIX and at least 1 other commercial group or MA plan for comparison. A list of these hospitals is provided in eAppendix A (eAppendices available at ajmc.com). Two of these hospitals are in Indiana, and there is 1 hospital each in Connecticut, Florida, Massachusetts, Michigan, Ohio, and Pennsylvania. We analyzed price data for 22 hospital-insurer dyads, of which 16 have commercial group plans and 19 have MA plans. The files of these hospitals varied significantly in format and content; we combined all usable data into a single file for analysis.
We sought the allowed amounts for 25 common inpatient services (according to diagnosis-related groups [DRGs]) and 56 common outpatient services (according to Current Procedural Terminology [CPT] codes) (eAppendix B). Pricing data availability for specific services varied across hospitals and plans (eAppendix C). We found 19 inpatient and 13 outpatient services with available pricing information among the hospital-insurer dyads in our sample (as designated in eAppendix B), and we calculated the ratio between the HIX price and the commercial group and/or MA price for each service within each hospital-insurer dyad.
We applied Laspeyres price index methods, building on modifications by Neprash et al, to construct sentinel service and market basket ratio price indices for inpatient and outpatient services.3 We selected sentinel services to represent several types of care provided in inpatient and outpatient settings, including inpatient lower extremity joint replacement (DRG 470), vaginal delivery (DRG 807), and septicemia (DRG 871) stays, as well as outpatient chest x-ray (CPT 71046), complete blood count (CPT 85025), and high severity emergency (CPT 99285) services. We computed the mean ratio of HIX to commercial group and MA prices across hospital-insurer dyads for sentinel services. For the inpatient and outpatient market baskets, we calculated mean ratios across hospital-insurer dyads weighting by service market share (see eAppendix D for detailed methods).
For both sentinel service and market basket price indices, the ratios of the HIX to commercial group price indices are less than 100%. In our market basket analyses, the HIX inpatient and outpatient prices are 89% of commercial prices (Figure 1 and Figure 2). Among sentinel services, the ratio of HIX to commercial group prices ranges from 82.1% to 93.2% for inpatient services and from 82.1% to 90.6% for outpatient services. At the hospital level, HIX price indices are less than or equal to commercial group price indices for all hospital-insurer dyads in our sample, with the exception of 1 hospital-insurer dyad’s outpatient prices and 1 hospital-insurer dyad’s inpatient prices (eAppendices E and F). Of the 16 hospital-insurer dyads in our sample with an HIX to commercial group comparison, 2 dyads at 2 hospitals have HIX market basket price indices that are the same as commercial group market basket price indices for inpatient services, and 6 dyads at 2 hospitals have HIX market basket price indices that are the same as commercial group market basket price indices for outpatient services. Among dyads with unequal prices, the ratio of HIX price indices to commercial group price indices ranges from 59.4% to 122.7.% of commercial group prices for inpatient services and 33.2% to 144.6% of commercial group prices for outpatient services.
HIX plan price indices were greater than or equal to MA price indices for all insurers in our sample that had an MA plan (eAppendices E and F). The HIX inpatient market basket is 143.3% of the MA inpatient market basket, and the HIX outpatient market basket is 243.6% of the MA outpatient market basket. For the selected sentinel services, the ratio of HIX price indices to MA price indices ranges from 130.8% to 151.4% for inpatient services and from 208.3% to 234.4% for outpatient services. Within hospitals, the ratio of HIX price indices to MA price indices ranges from 98.7% to 211.4% for inpatient services and 97.4% to 482.1% for outpatient services.
Some insurers appear to use a consistent multiple of either their commercial group or MA provider prices across each service we evaluated. This strongly suggests that the negotiation for HIX prices is a simple discount or inflation of the prices negotiated with providers under these other non-HIX contracts. Among the 22 hospital-insurer dyads in our sample, 10 appear to have negotiated HIX prices as a discount off their commercial group prices and 6 as a multiple of their MA prices, as shown in eAppendix G. Five have prices that are not consistently aligned with either commercial group nor MA prices. For 1 dyad, HIX prices are consistently aligned with both commercial group and MA prices, suggesting that all 3 contracts are negotiated off a common source, such as the Medicare fee schedule or a chargemaster.
In our analysis of a convenience sample of hospital price transparency, we observe that the prices insurers pay hospitals for their HIX enrollees are lower than or equal to what they pay those same hospitals for their commercial group enrollees but higher than what they pay for their MA enrollees, with wide variation in relative generosity across insurers, hospitals, and settings of care. The lower prices we observe among HIX plans may be reflective of narrow network plan design, as prior studies have attributed cost savings in this market to narrow networks.4 Hospitals may also be willing to accept lower rates for insurers’ HIX plans, considering that many HIX enrollees would otherwise be uninsured and unable to pay hospital bills—73% of HIX enrollees in 2021 had a household income at 100% to 250% of the federal poverty level.5 Although hospitals receive lower reimbursement for HIX enrollees than other commercial plan enrollees, the HIX plan payment level is still preferable to the uncompensated care burden hospitals faced before the Affordable Care Act established the HIXs.
The heterogeneity in HIX plans’ payment generosity suggests that local market trends should be evaluated when policy makers are considering introducing a public option in the HIX market with the goal of reducing premiums. For example, assuming that HIX plans pay hospitals the same prices as commercial group plans could actually result in higher premiums if typical HIX plans instead typically pay less. The lack of clarity around relative provider prices in the HIX market may have contributed to the public option plan recently introduced in Washington state’s HIX having premiums approximately 5% higher than average.1,6 Better information on HIX provider prices is also relevant for policy makers as they consider trade-offs of other policy proposals to expand coverage to other populations, such as expanding Medicaid or Medicare eligibility, including the relative costs of doing so through HIXs compared with alternative options.1
Our findings are also relevant to policies addressing surprise medical billing. Under rulemaking for the federal No Surprises Act, historical contracted rates will be used to calculate qualifying payment amounts (QPAs) as arbitration reference points for out-of-network payment disputes between insurers and providers.7 The rulemaking specifies that payers should calculate these QPAs separately for individual and group markets.8 The divergence between HIX and non-HIX commercial group plans that we observe in this study suggests that bifurcating the markets when calculating QPA measures is appropriate.
Our findings suggest that insurers and hospitals may negotiate rates for HIX plans that are tethered to, and sometimes equal to, the rates of their commercial group or MA plans. Prior studies demonstrate that MA plan payments align closely with the traditional Medicare fee schedule,9-12 and commercial prices are typically negotiated as a multiple of the traditional Medicare fee schedule or the hospital’s chargemaster.13 This study extends this body of literature to the HIX market.
Additionally, our efforts to study HIX plan hospital prices highlighted challenges with accessing comprehensive pricing data (despite the newly implemented CMS hospital price transparency rule) and challenges in analyzing nonstandardized file formats, as other investigators have reported.14
Over time and with further compliance from hospitals, and therefore more data completion, this study could be expanded to elucidate HIX pricing and hospital pricing transparency, as well as health care pricing broadly. More robust hospital price transparency data, made available as legislated, would enable investigators to evaluate longitudinal trends in contracted rates, compare payment generosity across insurers, and assess the association between prices and market competition.
The limitations of this study come primarily from the limited plan-specific pricing data available. We chose the top 100 hospitals by revenue and beds, which may limit the generalizability of our findings, as these larger hospitals may command greater bargaining leverage than smaller hospitals in price negotiations with insurers. It is possible that data from smaller hospitals would reveal larger HIX price discounts relative to commercial prices, but additional research is needed because many factors beyond just size can affect hospital-insurer bargaining dynamics. Within this group, there were few hospitals with insurer-specific pricing information, and fewer still with data provided for at least 1 HIX plan and at least 1 commercial group or MA plan comparator. As only 8 hospitals fit our inclusion criteria, our sample is small and may not be representative of prices overall.
At the hospitals in this study, insurers pay prices for their HIX enrollees that are typically less than what they pay those same hospitals for their commercial group enrollees but more than what they pay for their MA enrollees, with notable heterogeneity in relative generosity. Local market variation in the relative magnitude of HIX and commercial prices should be considered as policies are developed to expand access to insurance, such as state public option plans through the HIXs.
Author Affiliations: USC Schaeffer Center (SR, ELD, SG, ET), Los Angeles, CA.
Source of Funding: Arnold Ventures.
Author Disclosures: Dr Trish has received consulting fees from Centene related to litigation for out-of-network services and from Cedars-Sinai Health System related to value-based care and health care policy; has served as an expert witness for Varian Medical Systems, Mallinckrodt, and Guardian Pharmacy; has received compensation from Cornerstone Research for her work as an expert; is the principal investigator on a grant from Arnold Ventures that supported this work; and has received grant support from the Commonwealth Fund and Arnold Ventures outside the scope of this project. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.
Authorship Information: Concept and design (SR, ELD, ET); acquisition of data (SR); analysis and interpretation of data (SR, ELD, SG, ET); drafting of the manuscript (SR); critical revision of the manuscript for important intellectual content (SR, ELD, SG, ET); statistical analysis (SR); provision of patients or study materials (SR); obtaining funding (ET); programming (SG); and supervision (ELD, ET).
Address Correspondence to: Erin Trish, PhD, USC Schaeffer Center, 635 Downey Way, Verna & Peter Dauterive Hall (VPD), Los Angeles, CA 90089-3333. Email: firstname.lastname@example.org.
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