Health Insurance Companies Fight to Keep Their Secret Rates

The Secret:  Insurance Companies Pay Far Lower Rates to Providers and Hospitals Than Individuals Paying Out of Their Own Pocket

With rising health care costs and rising health insurance premiums more companies are requesting that insurance companies provide them with specific cost information.  They want to know the rates that insurance companies have negotiated with health care providers. Companies that sponsor plans, or are self insured and use health insurance companies as administrative services say they need this information.

So why don’t insurance companies and health care providers want to provide this information. One reason is this.

"There's a strategic advantage to both sides to maintaining confidentiality around pricing," said Chas Roades, chief research officer at the Advisory Board Co., a health-care research firm. A hospital may not want a low rate granted to one health plan in a negotiation to be known to rival insurers, and vice versa, he said.

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Pricing information is a requirement for a free competitive market to operate. If all insurance companies know the rates charged to different insurance companies, insurance companies will be able to bargain for lower prices, and produce lower premiums.  So the insurance company with the lowest rates from a health care provider doesn’t want the competition to know about those low rates, and the provider doesn’t want to have to provide those low rates to everyone.

The second reason has to do with public perception.  The public will not think it is fair that the lowest rates are paid by people with insurance, and the highest rates are paid by people without insurance, the very people that can least afford the higher rates.  The fact that, say, a hospital room for a night will cost different insurance companies and different individuals different rates is just not something providers want the public to be aware of.

So insurance companies negotiate non-disclosure agreements with providers, and then tell their clients, sorry, we cannot provide the information.

In June, Mr. Darrow of Indiana was one of seven employer representatives, along with Castlight officials, who met with WellPoint at a hotel in Indianapolis. A WellPoint handout from the meeting pointed to agreements with providers that "prohibit disclosure of terms and rates" and are "very restrictive," among other factors.

And more and more individuals are taking out plans with very high deductibles, and they need to have pricing information.  At this time it looks as if the industry will have to bow to pressure to release the prices, and that is a good thing.  It means that the single, uninsured person who has to pay all of the cost out of his or her pocket may get a break.