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Healthcare Costs: Why Price Transparency Isn't Enough.
1 Nov
Summary
- Price transparency alone doesn't lower costs for most employers.
- Third-party administrators' fees can significantly inflate claims.
- New rules for PBMs need enforcement beyond mere disclosure.
For ten years, the federal government's strategy to control rising employer healthcare costs has relied on improving price transparency, assuming businesses could use this information to negotiate lower prices. However, interviews with employers, consultants, and experts reveal this approach is insufficient. Even large self-insured employers, who directly cover two-thirds of employer-sponsored insurance for Americans, often struggle to leverage price data.
This difficulty stems from their reliance on third-party administrators (TPAs) who manage networks and process claims. Misaligned incentives can lead to TPAs charging significant fees, such as "shared savings fees," which experts cite as a major cost driver. In one example, a $100,000 bill was negotiated down to $1,500, but the TPA charged the employer $30,000, reporting the total claim at $31,500.
Recent regulations enacted in 2026 aim to address transparency for pharmaceutical benefit managers (PBMs), requiring disclosures and limiting some fee practices. However, experts caution that these rules need robust enforcement mechanisms. Without strong oversight and realistic alternatives for employers, simply mandating disclosure may not be enough to curb escalating healthcare expenditures across the industry.
