When shopping for cars or computers, it’s relatively easy to compare prices across makes and models. It’s much harder to do the same thing for health care costs. A recent Supreme Court decision threatens to make it even more difficult.
Vermont and more than a dozen other states want to create databases that include information about what all insurers or health programs pay to any providers in the state. That would make health care prices more transparent. In Gobeille v. Liberty Mutual, the Court threw a wrench into Vermont’s plan for such a database. Its decision lets some employers opt out.
The databases in question are known as all-payer claims databases (APCDs). They collect information about all health care payments within a state. As we have learned in our examinations of health care markets, these databases provide essential insight into something that has long been shrouded in secrecy — what private health insurers pay for health care.
The Supreme Court case centered on an interpretation of the Employee Retirement Income Security Act (ERISA). Enacted in 1974, it was designed to help minimize the administrative burden for companies offering health insurance. It also protects self-insured firms — those that directly finance health care coverage rather than outsourcing it to an insurer — from state regulations. Liberty Mutual Insurance Company, which didn’t want its data included in Vermont’s database, claimed that ERISA prevents states from forcing self-insured companies to turn over their health care payment data.
Because 60 percent of workers are covered by self-insured plans, excluding data from self-insured companies would shoot a huge hole in APCDs and the price transparency they promote.
The Court went ahead and shot that hole. The ruling jeopardizes similar efforts in other states.
Letting some companies shroud their health care payments matters to folk like us, who study health care markets and who believe that transparency can only improve their efficiency. And ethically it is the right thing to do — people should know the price of what they’re buying. But it matters even more to the millions of Americans enrolled in high-deductible insurance plans that demand greater out-of-pocket contributions.
An important resource for them would be cost estimators that use real pricing data from the private sector. That would let them shop for care they’ll have to fund out of pocket. All-payer claims databases offer a means by which third-party intermediaries like web and app developers could create tools to help patients assess the real cost of their care and make better decisions about it.
The Court’s blow to transparency doesn’t hurt everyone. Large, consolidated hospital systems, which usually provide higher-cost care, are the primary beneficiaries of price opacity. After all, if you’re the most expensive hospital in your market, why would you want that information made public?
Large insurers may also benefit from the Court’s ruling. Big insurers often get better deals with providers, but they don’t tend to pass these savings to patients — something they might not want the public or regulators to know. Shining a light on the rock-bottom prices some of these insurers negotiate could provide smaller ones with insights they could use to push down their own prices and capture market share, which would take a bite out of big insurers’ profits.
It’s possible that all-payer claims databases could still be rescued. The US Department of Labor could authorize the databases to collect information in ways that don’t breach ERISA’s requirements. Alternatively, though less realistically, Congress could amend the law, allowing these kinds of databases to operate. Both solutions would take some time.
In the meantime, the Supreme Court has dealt the price transparency movement a significant blow. The ruling is good for some big market players and bad for consumers.
Yevgeniy Feyman is a fellow and deputy director of health policy at the Manhattan Institute. Austin Frakt, PhD, is a health economist with the Department of Veterans Affairs, Boston University, and Harvard University. The views expressed are the authors’ and do not necessarily reflect those of the organizations with which they are affiliated.