Price transparency and why patients don't shop

Employers and plan sponsors have been told for years that price transparency would change behavior. Show patients the price, the thinking goes, and they’ll shop. Some do.

And then their plan punishes them for it.

Here’s how. When a member pays cash for a covered service at a price below their plan’s in-network rate, that payment usually doesn’t count toward their deductible or out-of-pocket maximum. The member saved the plan money by finding a cheaper option. The plan pockets the savings and keeps the member’s deductible untouched. The member is worse off for having shopped.

That’s the current system. It discourages the exact behavior employers and carriers claim they want to encourage.

So working with the Employer Working Group at NABIP, we drafted a model bill to fix it. The Consumer Recognition for Eligible Direct Insurance Transactions Act — the CREDIT Act — would require carriers to credit direct member payments toward deductible and out-of-pocket maximum when the amount is at or below the Median In-Network Allowed Amount for the service. Medical and Rx.

Whether the provider is in-network or out-of-network.

The bill doesn’t require carriers to pay anything. It requires them to recognize what the member already spent. HDHP/HSA designs stay compliant. Self-funded plans can adopt voluntarily (any time btw).

In NJ, we’re working with Dale Florio at PPAG (Princeton Public Affairs Group) to advance the bill in Trenton. We’ve met with key stakeholders in industry to request feedback ahead of seeking sponsorship.

I’m presenting the legislative update at the Coastal NJ NABIP meeting today.

For plan sponsors: this is the kind of narrow, surgical fix that unlocks the behavior your wellness and cost-containment programs are supposed to encourage. Employees who shop don’t get penalized for it. Deductibles still mean something. Carriers benefit from consumer action. Everyone’s interests line up.

Texas and Tennessee have similar laws on the books. Ours takes those lessons learned and includes Rx so consumers can benefit from things like Mark Cuban Cost Plus Drug Company, PBC pricing or GoodRx coupons without sacrificing their deductible accumulation.

I’ll share updates as we make progress.