Surprise Bills: Patients Need Transparent Pricing
Action must be taken by health insurance companies to protect and work in the interest of their clients. We need price transparency in the healthcare market. In many cases consumers who have insurance are asked to sign a waiver that makes them responsible for any charge later found not to be covered by their insurance company. The result is a surprise bill that can mean considerable out-of-pocket costs to consumers.
For example, this could be a blood test that was deemed not medically necessary even though your doctor who is a specialist in that medical field such as an allergist deems that it is indeed medically necessary. It could be that such services are not covered by your insurance company, or the patient has reached the limit for a covered service or the service is provided out of network.
We can debate the long-standing issue whether the insurance company should override the physician’s decision, as well as what insurers decide to cover and how much should be covered. These debates will not be resolved easily or quickly.
In the interim we need to protect the consumer from not knowing the out -of- pocket cost that they will incur. Presently the patient can be billed thousands of dollars for which they are responsible. Consumers should be informed of their potential out-of-pocket cost. Just like they are when shopping in a grocery store or dining in a restaurant.
The role of the insurance company is to act as an agent for the insured and in the interest of the consumer. Therefore, a mechanism must be put in place to inform consumers of the price that they will pay for services either because the insurance company is not covering the service at all or the consumer has not reached their high deductible limit or there is a co-pay.
Currently technology exists that allows consumers to be informed about coverage, charges and any out-of-pocket cost. For example, in the case of prescription drugs a pharmacy informs the patient before the purchase of the out-of-pocket cost. In this instance, consumers can make an informed decision whether or not they believe that their cost of the drug is greater than the benefit and, if so, they will decide not to purchase the drug.
This is the way that markets are supposed to work and do work but not currently in the healthcare market. This same technology can be used for blood tests and other medical procedures. Under the present system of non-transparent pricing, insurance companies are not fulfilling the principal agent role of working in the interest of their client.
If the insurance companies do not take action to make prices transparent, employers – providing health insurance to the employee – should require that insurance companies provide price transparency to protect their employees. And, if insurance companies do not fulfill their obligation to their subscribers and consumers continue to make decisions without price transparency, the government may act to fully disclose prices.
The solution does not require price controls, but full transparency to correct a market failure. Price controls have many undesirable consequences including stifling innovation.
We do not need an act of Congress to resolve the issue of price transparency and surprising billing. We need insurance companies to take action to prevent this practice and allow their subscribers to make informed judgements concerning their medical care by knowing their out-of-pocket costs before they purchase the products.
This is the way markets work. Medical markets should work the same way.
Dr. Joseph Fuhr is a Professor Emeritus of Economics from Widener University and a Senior Fellow at The American Consumer Institute. For more information, visit www.theamericanconsumer.org.
