The problem with health insurers' price transparency initiatives

The insurance industry's growing movement to disclose prices to consumers might be flawed and could potentially backfire. Without context, the recent price transparency initiatives are essentially meaningless, according to an editorial published in the Wall Street Journal.

Initiatives such as the Health Care Cost Institute--which launched a website listing cost information for more than 70 common health conditions and services based on claims data from four major insurers--lack vital, corresponding quality information.

Leah Binder, CEO of Leapfrog Group, wrote in the editorial that price hinges upon quality. All consumers, regardless of the industry, want to know what they can get for the money they spend. In fact, quality information is so important that 97 percent of consumers in a survey published in the Journal of Patient Safety preferred hospitals with the highest safety grades. Pricing was relevant, but less important to those consumers.

"High-value care should be the right care, at the right price," Binder wrote.

Plus, disclosing pricing can actually inflate costs and mask suffering. Consumers generally believe that, like most other industries, high-end prices correlate with high-end quality in the healthcare industry. But since this isn't accurate in healthcare, consumers could assume they're receiving the best quality treatment when they see the highest-priced provider.

"Without good quality ratings, pricing becomes a proxy for quality, and can drive costs upward," Binder said.

What's more, she added, pricing information doesn't explain that "hazards, misdiagnoses, inappropriate referrals for the wrong service, errors and infections" are often built into providers' costs. That means information about providers' procedures, such as the infection rate for knee replacements, factor into the costs--without the consumers' knowledge.

To learn more:
- read the Wall Street Journal editorial
- here's the Journal of Patient Safety survey

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