Hospitals Argue to D.C. Circuit Court of Appeals That Insurance Charges Are Mostly Unknowable
The Supreme Court will hear a much-anticipated case involving the constitutionality of the Affordable Care Act (ACA, or Obamacare) shortly. However, another federal appeals court has also taken up an important issue involving a provision in the ACA that may require hospitals to disclose discounted insurance rates for procedures to the public. If you've ever wondered where you can spend the least amount for a routine medical procedure, this may be a case to watch.
The D.C. Circuit Court of Appeals recently heard oral arguments in American Hospital Association et al. v. Azar. The case involves a provision in the ACA, which, as interpreted in a new rule by the U.S. Department of Health and Human Services, requires hospitals to disclose both gross charges (i.e., "standard" list prices) and the contracted prices they agree to with insurers, among others. The HHS issued this updated rule in 2019 after President Trump issued an executive order.
As all sides in the case admit – and anyone who has had a hospital stay or medical procedure can attest – it is often extremely difficult to get cost information before the procedure or conclusion of hospital stay. Typically, insurers and the federal government negotiate rates with hospitals to establish the actual dollar amount charged. It is only in a patient's explanation of benefits letter that they get the procedure's cost and their amount due.
Insurers and the Federal Government Negotiate Discounts
Hospitals already have to disclose gross charges, which are the maximum amount that a hospital will charge for a given procedure, according to the hospitals arguing the case. Insurers ignore these listed prices and negotiate rates, sometimes paying numerous procedures and patients at once. Only about 10% of patients are charged the gross rate because they are uninsured. These rates are often hugely inflated, and insurers and the federal government typically pay less than half of that amount, according to a study cited in the district court's opinion. In some cases, hospitals enter into contracts to determine the amount charged for a given procedure, although comorbidities and other factors can greatly affect the price.
New DHS Rule Requires Disclosure
On January 1, the new rule is set to go into effect that will require hospitals to disclose the rates they agree to with insurers. The rule is intended to provide transparency for patients and the public. The goal is to help frustrated consumers know the cost of procedures, and in some cases, be able to determine which medical provider offers the lowest cost to them.
A hospital lobbying group sued to block the rule, saying it violates their First Amendment rights and the Administrative Procedure Act. Further, they argued the rule was unworkable, and it would mislead patients since prices can change. According to the American Hospital Association, "many rates are unknowable" and are not itemized. They can't disclose information from a database that is incomplete.
Judges Showed Skepticism
While we have to wait for the opinion, the panel all asked tough questions of the hospital advocacy group. For example, one of the appellant's main arguments was that disclosing prices would confuse and mislead patients. However, Judge Merrick Garland, sitting on the panel, wondered why disclosing discounted insurance rates is any less confusing to a consumer than revealing gross charges, which, as acknowledged, are often inflated and misleading.
Two presidential administrations have argued for increased transparency in billing, but obstacles remain. It will be interesting to see how this case is decided. And, depending on the outcome of the Supreme Court case, whether it will soon be an obsolete question.
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