Erin Trish, PhD

 This study investigates a sample of the pricing data released by hospitals under the price transparency law effective January 2021 to better understand the prices paid by health insurance exchange (HIX) plans relative to commercial group and Medicare Advantage plans.

 Cross-sectional analysis of hospital pricing data.

 We compared allowed amounts for 25 common inpatient services and 56 common outpatient services across 22 hospital-insurer dyads, selected by the availability of plan-specific pricing data from the top 100 hospitals by bed counts and the top 100 hospitals by gross revenue based on 2017 CMS data.

 Insurers in our sample generally negotiated allowed amounts for their HIX plans that were lower than their commercial group rates and well above their Medicare Advantage contracts within the same hospital.

 Allowed amounts for HIX plans were generally lower than commercial group rates and higher than Medicare Advantage rates. Better information on HIX pricing is needed as the federal government and states consider additional ways to expand health care coverage, such as public options or expanded Medicaid or Medicare eligibility.

Allowed amounts paid by insurers for their health insurance exchange (HIX) plans are typically lower than their commercial group rates and higher than their Medicare Advantage rates for the same service at the same hospital.

Insurers appear to negotiate allowed amounts for HIX plans that are tethered to the rates of their commercial group or Medicare Advantage plans.

Policy makers considering policies to improve affordability in the HIX market should not assume that plans pay providers the same prices as they do for their commercial plans.

State and federal policy makers seek to expand insurance access and enhance affordability through premium subsidies and public option plans on the health insurance exchanges (HIXs) established by the Affordable Care Act.

 Achieving these aims requires an understanding of the prices that HIX plans pay providers, but data have been limited. We leveraged hospitals’ public price data sets, which were recently made available under the federal hospital price transparency law effective January 2021, to compare the allowed amounts paid by HIX and non-HIX plans offered by the same insurer at the same hospital.

 On average, for their HIX enrollees, the 16 insurers in our sample with both HIX and commercial group plans pay providers prices that are 88.6% and 88.9% of their commercial group rates for inpatient and outpatient services, respectively. The 19 insurers with both HIX and Medicare Advantage (MA) plans pay providers higher prices for HIX enrollees than for MA enrollees, with HIX prices averaging 143.3% and 243.6% of their MA prices for inpatient and outpatient services, respectively.

We searched for hospital price transparency data on the websites of the top 100 hospitals by bed count and the top 100 hospitals by gross revenue based on CMS Hospital Cost Report data (excluding children’s hospitals)—a total of 133 hospitals. Among these hospitals, 115 had a machine-readable file with procedures and prices, 31 had insurer-specific pricing information, and 8 had plan-specific prices where the insurer had at least 1 plan offered on the HIX and at least 1 other commercial group or MA plan for comparison. A list of these hospitals is provided in 

). Two of these hospitals are in Indiana, and there is 1 hospital each in Connecticut, Florida, Massachusetts, Michigan, Ohio, and Pennsylvania. We analyzed price data for 22 hospital-insurer dyads, of which 16 have commercial group plans and 19 have MA plans. The files of these hospitals varied significantly in format and content; we combined all usable data into a single file for analysis.

We sought the allowed amounts for 25 common inpatient services (according to diagnosis-related groups [DRGs]) and 56 common outpatient services (according to Current Procedural Terminology [CPT] codes) (

). Pricing data availability for specific services varied across hospitals and plans (

). We found 19 inpatient and 13 outpatient services with available pricing information among the hospital-insurer dyads in our sample (as designated in eAppendix B), and we calculated the ratio between the HIX price and the commercial group and/or MA price for each service within each hospital-insurer dyad.

We applied Laspeyres price index methods, building on modifications by Neprash et al, to construct sentinel service and market basket ratio price indices for inpatient and outpatient services.

 We selected sentinel services to represent several types of care provided in inpatient and outpatient settings, including inpatient lower extremity joint replacement (DRG 470), vaginal delivery (DRG 807), and septicemia (DRG 871) stays, as well as outpatient chest x-ray (CPT 71046), complete blood count (CPT 85025), and high severity emergency (CPT 99285) services. We computed the mean ratio of HIX to commercial group and MA prices across hospital-insurer dyads for sentinel services. For the inpatient and outpatient market baskets, we calculated mean ratios across hospital-insurer dyads weighting by service market share (see 

For both sentinel service and market basket price indices, the ratios of the HIX to commercial group price indices are less than 100%. In our market basket analyses, the HIX inpatient and outpatient prices are 89% of commercial prices (

). Among sentinel services, the ratio of HIX to commercial group prices ranges from 82.1% to 93.2% for inpatient services and from 82.1% to 90.6% for outpatient services. At the hospital level, HIX price indices are less than or equal to commercial group price indices for all hospital-insurer dyads in our sample, with the exception of 1 hospital-insurer dyad’s outpatient prices and 1 hospital-insurer dyad’s inpatient prices (

). Of the 16 hospital-insurer dyads in our sample with an HIX to commercial group comparison, 2 dyads at 2 hospitals have HIX market basket price indices that are the same as commercial group market basket price indices for inpatient services, and 6 dyads at 2 hospitals have HIX market basket price indices that are the same as commercial group market basket price indices for outpatient services. Among dyads with unequal prices, the ratio of HIX price indices to commercial group price indices ranges from 59.4% to 122.7.% of commercial group prices for inpatient services and 33.2% to 144.6% of commercial group prices for outpatient services.

HIX plan price indices were greater than or equal to MA price indices for all insurers in our sample that had an MA plan (eAppendices E and F). The HIX inpatient market basket is 143.3% of the MA inpatient market basket, and the HIX outpatient market basket is 243.6% of the MA outpatient market basket. For the selected sentinel services, the ratio of HIX price indices to MA price indices ranges from 130.8% to 151.4% for inpatient services and from 208.3% to 234.4% for outpatient services. Within hospitals, the ratio of HIX price indices to MA price indices ranges from 98.7% to 211.4% for inpatient services and 97.4% to 482.1% for outpatient services.

Some insurers appear to use a consistent multiple of either their commercial group or MA provider prices across each service we evaluated. This strongly suggests that the negotiation for HIX prices is a simple discount or inflation of the prices negotiated with providers under these other non-HIX contracts. Among the 22 hospital-insurer dyads in our sample, 10 appear to have negotiated HIX prices as a discount off their commercial group prices and 6 as a multiple of their MA prices, as shown in 

. Five have prices that are not consistently aligned with either commercial group nor MA prices. For 1 dyad, HIX prices are consistently aligned with both commercial group and MA prices, suggesting that all 3 contracts are negotiated off a common source, such as the Medicare fee schedule or a chargemaster.

In our analysis of a convenience sample of hospital price transparency, we observe that the prices insurers pay hospitals for their HIX enrollees are lower than or equal to what they pay those same hospitals for their commercial group enrollees but higher than what they pay for their MA enrollees, with wide variation in relative generosity across insurers, hospitals, and settings of care. The lower prices we observe among HIX plans may be reflective of narrow network plan design, as prior studies have attributed cost savings in this market to narrow networks.

 Hospitals may also be willing to accept lower rates for insurers’ HIX plans, considering that many HIX enrollees would otherwise be uninsured and unable to pay hospital bills—73% of HIX enrollees in 2021 had a household income at 100% to 250% of the federal poverty level.

 Although hospitals receive lower reimbursement for HIX enrollees than other commercial plan enrollees, the HIX plan payment level is still preferable to the uncompensated care burden hospitals faced before the Affordable Care Act established the HIXs.

The heterogeneity in HIX plans’ payment generosity suggests that local market trends should be evaluated when policy makers are considering introducing a public option in the HIX market with the goal of reducing premiums. For example, assuming that HIX plans pay hospitals the same prices as commercial group plans could actually result in higher premiums if typical HIX plans instead typically pay less. The lack of clarity around relative provider prices in the HIX market may have contributed to the public option plan recently introduced in Washington state’s HIX having premiums approximately 5% higher than average.

 Better information on HIX provider prices is also relevant for policy makers as they consider trade-offs of other policy proposals to expand coverage to other populations, such as expanding Medicaid or Medicare eligibility, including the relative costs of doing so through HIXs compared with alternative options.

Our findings are also relevant to policies addressing surprise medical billing. Under rulemaking for the federal No Surprises Act, historical contracted rates will be used to calculate qualifying payment amounts (QPAs) as arbitration reference points for out-of-network payment disputes between insurers and providers.

 The rulemaking specifies that payers should calculate these QPAs separately for individual and group markets.

 The divergence between HIX and non-HIX commercial group plans that we observe in this study suggests that bifurcating the markets when calculating QPA measures is appropriate.

Our findings suggest that insurers and hospitals may negotiate rates for HIX plans that are tethered to, and sometimes equal to, the rates of their commercial group or MA plans. Prior studies demonstrate that MA plan payments align closely with the traditional Medicare fee schedule,

 and commercial prices are typically negotiated as a multiple of the traditional Medicare fee schedule or the hospital’s chargemaster.

 This study extends this body of literature to the HIX market.

Additionally, our efforts to study HIX plan hospital prices highlighted challenges with accessing comprehensive pricing data (despite the newly implemented CMS hospital price transparency rule) and challenges in analyzing nonstandardized file formats, as other investigators have reported.

Over time and with further compliance from hospitals, and therefore more data completion, this study could be expanded to elucidate HIX pricing and hospital pricing transparency, as well as health care pricing broadly. More robust hospital price transparency data, made available as legislated, would enable investigators to evaluate longitudinal trends in contracted rates, compare payment generosity across insurers, and assess the association between prices and market competition.

The limitations of this study come primarily from the limited plan-specific pricing data available. We chose the top 100 hospitals by revenue and beds, which may limit the generalizability of our findings, as these larger hospitals may command greater bargaining leverage than smaller hospitals in price negotiations with insurers. It is possible that data from smaller hospitals would reveal larger HIX price discounts relative to commercial prices, but additional research is needed because many factors beyond just size can affect hospital-insurer bargaining dynamics. Within this group, there were few hospitals with insurer-specific pricing information, and fewer still with data provided for at least 1 HIX plan and at least 1 commercial group or MA plan comparator. As only 8 hospitals fit our inclusion criteria, our sample is small and may not be representative of prices overall.

At the hospitals in this study, insurers pay prices for their HIX enrollees that are typically less than what they pay those same hospitals for their commercial group enrollees but more than what they pay for their MA enrollees, with notable heterogeneity in relative generosity. Local market variation in the relative magnitude of HIX and commercial prices should be considered as policies are developed to expand access to insurance, such as state public option plans through the HIXs. 

 USC Schaeffer Center (SR, ELD, SG, ET), Los Angeles, CA.

 Dr Trish has received consulting fees from Centene related to litigation for out-of-network services and from Cedars-Sinai Health System related to value-based care and health care policy; has served as an expert witness for Varian Medical Systems, Mallinckrodt, and Guardian Pharmacy; has received compensation from Cornerstone Research for her work as an expert; is the principal investigator on a grant from Arnold Ventures that supported this work; and has received grant support from the Commonwealth Fund and Arnold Ventures outside the scope of this project. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

 Concept and design (SR, ELD, ET); acquisition of data (SR); analysis and interpretation of data (SR, ELD, SG, ET); drafting of the manuscript (SR); critical revision of the manuscript for important intellectual content (SR, ELD, SG, ET); statistical analysis (SR); provision of patients or study materials (SR); obtaining funding (ET); programming (SG); and supervision (ELD, ET).

 Erin Trish, PhD, USC Schaeffer Center, 635 Downey Way, Verna & Peter Dauterive Hall (VPD), Los Angeles, CA 90089-3333. Email: etrish@usc.edu.

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Articles

Hospital price transparency data suggest that health insurance exchange (HIX) plans get lower negotiated rates than commercial group plans and higher negotiated rates than Medicare Advantage plans.

Insurers Negotiate Lower Hospital Prices for HIX Than for Commercial Groups

 Anesthesiology services are a focal point of policy making to address surprise medical billing. However, allowed amounts and charges for anesthesiology services have been understudied due to the specialty’s unique conversion factor (CF) unit of payment and complex provider structures involving anesthesiologists and certified registered nurse anesthetists (CRNAs). This study compares payments for common outpatient anesthesiology services by commercial health plans, Medicare Advantage (MA), and traditional Medicare.

 Analysis of 2016-2017 claims from Health Care Cost Institute.

 We derived allowed amount and charge CFs for commercial and MA claims using the base units assigned to each procedure code, time units, and modifiers. We computed the ratio of the allowed amount and charge CFs relative to the traditional Medicare CF. We described these payment measures by provider structure and network status.

Mean in-network commercial allowed amount CFs for anesthesiology services ($70) are 314% of the traditional Medicare rate ($22), whereas mean commercial charge CFs ($148) are 659% of the Medicare rate. Commercial payments vary widely and are higher to anesthesiologists than to CRNAs and higher out of network than in network. MA plan payments align with traditional Medicare with payment parity between anesthesiologists and CRNAs, both in network and out of network.

Common payment measures for anesthesia services—commercial allowed amounts, charges, or traditional Medicare—are highly divergent. MA plans’ relatively low payments likely reflect the cost-containing influence of competition with traditional Medicare and MA’s prohibition on balance billing. Out-of-network benchmarks for anesthesia services, such as the “qualifying payment amount” used in the No Surprises Act as a guidepost for arbitrators, may benefit from considering commercial payment differences across independent anesthesiologist, independent CRNA, or anesthesiologist-CRNA dyad provider structures.

This study of 2016-2017 administrative claims compares payments for common outpatient anesthesiology services by commercial health plans, Medicare Advantage (MA), and traditional Medicare.

Mean in-network commercial allowed amounts ($70) and charges ($148) per anesthesia conversion factor are 314% and 659% of the traditional Medicare rate ($22).

Commercial allowed amounts are higher for anesthesiologists than for certified registered nurse anesthetists (CRNAs) and higher out of network than in network.

MA plans pay on par with traditional Medicare for anesthesiologists and CRNAs, both in network and out of network, likely reflecting the cost-containing influence of competition with traditional Medicare and MA’s prohibition on balance billing.

Anesthesiology service providers are a common source of surprise out-of-network bills.

 Although there is widespread agreement that these surprise bills are unfair to patients, consensus around what is a reasonable payment standard for out-of-network services is lacking. The new federal surprise billing law, the No Surprises Act, addresses this question by creating an arbitration process to adjudicate disputes over out-of-network payment, with guidance to consider an issuer’s median in-network allowed amount among other (less concrete) factors.

 Therefore, current in-network allowed amounts are important for regulators, stakeholders, and researchers to understand. However, systematic data on the magnitude of commercial payments for anesthesia are limited due to the unique and complex attributes of payment and service provision in this specialty. Using a multipayer claims database, we find that mean in-network commercial allowed amount conversion factors (CFs) for anethesiology services ($70) are 314% of the traditional Medicare rate, and mean charge CFs among commercial claims ($148) are 659% of the traditional Medicare rate (

). Unlike traditional Medicare—which uses the same CF regardless of whether the service is provided by an anesthesiologist or a certified registered nurse anesthetist (CRNA)—we find that private insurer payments tend to vary across provider delivery structures for commercial but not Medicare Advantage (MA) enrollees (

We analyzed 2016 and 2017 commercial and MA claims data from the Health Care Cost Institute (HCCI), comprising claims from 61 million commercial and 8.9 million MA covered lives in 3 of the 5 largest US insurers: UnitedHealthcare, Aetna, and Humana.

 Our analytic sample includes claims for the 10 most common professional anesthesiology services among commercial payers in outpatient hospital and ambulatory surgery center (ASC) settings. We excluded claims with anomalies that affect payment rates in ways that we could not reasonably address (detailed exclusion criteria in 

Traditional Medicare reimbursement for anesthesia is not determined by the typical physician fee schedule based on relative value units. Rather, payments for anesthesia are calculated using base (start-up) units that are assigned according to the complexity of different procedures and time units accounting for procedure length.

 Traditional Medicare converts these units to an allowed amount based on a CF that is set annually. For example, anesthesia for an eye lens surgery (procedure code 00142) is assigned 4 base units. If an anesthesia provider spends 30 minutes performing this service on a Medicare beneficiary, then that provider would be reimbursed for the 4 base units plus the two 15-minute time units. These 6 units would be multiplied by the traditional Medicare allowed amount CF, which was approximately $22 in the years 2016 and 2017, with modest variation between years and across geographic areas. The total allowed amount reimbursed to the provider would, therefore, be approximately $132. Commercial payers also tend to negotiate anesthesia reimbursement at the CF level, and this unique billing structure adds complexity to claims-based analyses comparing commercial reimbursement for anesthesia with traditional Medicare rates.

Some anesthesiology services are provided by physicians, whereas others are provided by CRNAs, either with or without medical direction by a physician. When a physician supervises the CRNA (ie, a supervisory dyad), the anesthesiologist supervisor and CRNA supervisee each receive half of what they would be paid if they independently provided the service, and anesthesiologists can medically direct several services simultaneously.

 Additional units are also added to base and time units if a patient is less healthy.

 Therefore, a simple comparison of total allowed amounts across commercial and MA plans would not be an accurate measure of differences in negotiated rates due to confounding differences in provider structures, procedure times, and patients’ underlying health status.

To address this complexity, we derived allowed amount CFs and billed charge CFs for commercial and MA claims using the base units assigned to each procedure code, time units, and modifiers indicating provider type (detailed methods in 

 For each claim, we also computed the ratio of the allowed amount CF and charge CF relative to the traditional Medicare allowed amount CF, which averaged $22.31, accounting for year and geographic variation. We also calculated the 20th percentile, median, and 80th percentile of the distribution of allowed amount CFs and charge CFs among commercial and MA plans in dollars and as ratios to traditional Medicare CFs.

We stratified our analyses by provider type because, whereas traditional Medicare uses the same CF regardless of provider type, that is not necessarily the case among commercial and MA payers (detailed methods in 

). To facilitate comparison, for anesthesiologist-CRNA supervisory dyads we report full allowed amount CFs separately for the supervising anesthesiologist and CRNA supervisee, although we note that in practice these amounts are generally halved by commercial and MA plans as well. We could not derive the charge CF for these dyads because of inconsistency in whether the magnitudes of reported charges are halved. We also categorized services by provider network status according to claim-level indicators in the HCCI data.

We excluded inpatient anesthesia services because unreliable or inconsistent reporting of time units on the majority of inpatient claims in our data set prohibited us from accurately deriving allowed amount CFs and charge CFs. We also excluded claims with modifiers for unhealthy patients due to potential inconsistency in whether additional units for a patient’s health were incorporated into the reported units on the claims. All dollar values presented reflect nominal 2016 and 2017 US$.

Our analytic sample included 3.59 million commercial claims and 1.87 million MA claims for the 10 most common professional anesthesiology services in outpatient hospital and ASC settings in 2016-2017 HCCI data. These 10 services represent 62% of anesthesiology services in these settings.

Among commercial claims, independent anesthesiologists provided the highest volume of procedures (43.5% of procedures), followed by independent CRNAs (38.2%) and anesthesiologist-CRNA supervisory dyads (18.2%). Among MA claims, independent CRNAs were the most common (48.2%), followed by independent anesthesiologists (27.5%) and anesthesiologist-CRNA supervisory dyads (24.3%) (

Out-of-network anesthesiology services were much more common among MA (41.2%) than commercial (8.3%) patients, but similar across provider structures within plan type (

Although the overall mean commercial in-network allowed amount CF for anesthesia services in our sample for all provider types was $70 (314% of traditional Medicare), we found that the commercial in-network allowed amount CF varied across provider structures, averaging $82 for independent anesthesiologists and $57 for independent CRNAs (Figure 2). Commercial allowed amount CFs for supervisory dyads averaged $65 and $60 for supervising anesthesiologists and CRNA supervisees, respectively (Figure 2). Because the traditional Medicare rate is flat across these different provider structures, these mean commercial allowed amount CFs ranged from 259% to 360% of traditional Medicare rates for independent CRNAs and independent anesthesiologists, respectively (

). In contrast, for MA patients, mean in-network allowed amount CFs were relatively consistent across all provider structures ($20-$21) (Figure 2).

Within each provider structure, commercial out-of-network allowed amount CFs were higher than in-network allowed amount CFs (Figure 2). Commercial allowed amount CFs paid to out-of-network providers were highest to anesthesiologist-CRNA supervisory dyads ($101 and $100 for supervising anesthesiologists and CRNA supervisees, respectively, compared with $93 and $78 for independent anesthesiologists and CRNAs, respectively). In contrast, mean MA allowed amount CFs were relatively consistent across in- and out-of-network providers for all provider structures.

Distributions of Allowed Amounts and Charges

There is much greater variation in the allowed amount CF paid by commercial plans than MA plans (

). The 20th to 80th percentile range for commercial payments is $57 to $106 (255%-469% of traditional Medicare) for anesthesiologists and $39 to $76 (178%-349% of traditional Medicare) for CRNAs (data shown in 

). However, the 20th to 80th percentile range of MA allowed amount CF is $16 to $23 (72%-100% of traditional Medicare) for anesthesiologists and $17 to $22 (80%-100% of traditional Medicare) for CRNAs. Notably, the allowed amount CF distributions are nearly equivalent between anesthesiologists and CRNAs for MA plan payments.

Median commercial charge CFs are much higher than allowed amount CFs at $149 and $108 for anesthesiologists and CRNAs, respectively. The 20th to 80th percentile range of commercial charge CFs is skewed higher for independently performed anesthesiologist services ($104-$231; 466%-1009% of traditional Medicare) than CRNA services ($73-$169; 330%-772% of traditional Medicare).

Anesthesiology’s unique CF payment methodology and provider delivery structure make it difficult to reliably compare claim-level charges and allowed amounts across payers and populations. This complicates regulatory efforts to benchmark service prices or set out-of-network payment limits for anesthesiology services when addressing surprise billing (whether through a simple benchmark or arbitration). Whereas prior studies of administrative claims analyzed total allowed amounts

 for anesthesia services, ours is the first (to our knowledge) to derive and compare anesthesia payments per CF to inform policies addressing surprise billing for anesthesiology services and the arbitrators adjudicating out of network payment disputes under the new No Surprises Act. We found that commercial plans pay a mean allowed amount CF of $70 for anesthesia services across all provider types and structures combined, which is 314% of the traditional Medicare rate. Our observed commercial markups over Medicare for anesthesia services are on par with the markups estimated by prior studies of payment to anesthesiologists

 and other hospital-based physician specialties that commonly surprise bill, such as radiology, pathology, and emergency medicine.

 For example, in an analysis of 2016 commercial claims from multiple insurers, Song observed average in-network commercial payments for procedures commonly performed by radiologists (chest x-ray Current Procedural Terminology [CPT] 71020), pathologists (examination CPT 88305), and emergency medicine physicians (visit CPT 99285) to be 260%, 360%, and 250% of Medicare, respectively.

 These markups are much higher than those of other specialties, as an analysis of 2017 HCCI commercial claims estimated that professional allowed amounts averaged 122% of Medicare allowed amounts across all specialties nationally.

Additionally, we found that anesthesia providers’ mean charge CFs ($148) are more than double the mean commercial in-network allowed amount CF and 659% of the traditional Medicare allowed amount CF. A prior study of the ratio of charges to Medicare allowed amounts across specialties estimated that mean charges among specialties that do not typically surprise bill patients are 260% of Medicare allowed amounts, whereas charges relative to Medicare rates are much higher among diagnostic radiology (400%), pathology (350%), emergency medicine (540%), and anesthesiology (670%).

 This finding suggests that the ratio of charges relative to Medicare rates is much higher for anesthesia services than for other specialties, even in comparison with the other specialties that are often associated with surprise billing.

We observed that out-of-network allowed amounts are higher than in-network allowed amounts for commercial plans, suggesting one reason why providers might not be strongly incentivized to come in-network. This trend is not unique to anesthesia, as a prior study showed commercial payments to be higher out of network than in network for professional services across several specialties, including orthopedics, cardiology, gastroenterology, radiology, and pathology.

 Many specialties performing elective services rely on network participation for higher patient volume and are therefore willing to accept lower in-network payments from health plans in exchange for a higher volume of the health plan’s enrollees. However, ancillary specialists such as anesthesiologists are less dependent on network status for patient volume because they are not typically preselected by patients. Therefore, anesthesiologists may be less inclined to move in network when they would face lower allowed amounts upon contracting with health plans. This may be a driving factor of the trend reported in prior studies that anesthesiologists are more commonly out of network than other specialties.

Due to wide variation in payment measures, policy makers addressing surprise billing should choose out-of-network payment benchmarks prudently. For example, based on our analyses, an out-of-network payment benchmark for anesthesiologists practicing independently set at the median ($79) or mean ($82) commercial allowed amount per CF would be approximately 350% or 360%, respectively, of the traditional Medicare rate ($22) (Figures 2 and 4 and eAppendix 5). Benchmarks of the median ($149) and 80th percentile ($231) of anesthesiologists’ commercial charges CF would be approximately 652% and 1009% of the traditional Medicare rate, respectively (Figure 5 and eAppendix 5). Thus, both the source—commercial allowed amounts, charges, or traditional Medicare—and the distributional point employed in out-of-network payment benchmarking will substantially influence the magnitude of payments to anesthesiology providers. Further, our findings suggest that out-of-network benchmarks for anesthesia services, such as the “qualifying payment amount” (in general, an issuer’s median in-network rate locally) used in the No Surprises Act as a guidepost for arbitrators, may benefit from taking into account commercial payment differences across independent anesthesiologist, independent CRNA, or anesthesiologist-CRNA dyad provider structures.

We also found that MA plans track CMS’ payment level per CF for anesthesia services, consistent with prior studies of hospitals and other professional specialties that found MA provider payment levels often follow traditional Medicare rates.

 This payment parity exists for in-network and out-of-network services despite the high prevalence of out-of-network anesthesia services in MA (41.2%) (eAppendix Exhibit 4.1). This suggests that the threat of remaining out of network has little effect on in-network prices paid to anesthesia providers by MA plans, in contrast to what evidence suggests to be the case in the commercial market.

 This is likely driven by a combination of 2 factors. First, providers participating in Medicare are prohibited from collecting more than the traditional Medicare allowed amount for out-of-network services provided to MA enrollees, and most professionals participate in Medicare.

 Nonparticipating providers are also prohibited from collecting more than 109.25% of the traditional Medicare allowed amount for out-of-network services provided to MA enrollees.

 This strictly limits total out-of-network reimbursement to providers and patients’ liability for balance bills in MA plans. Second, MA plans compete with traditional Medicare for enrollees and therefore need to keep costs sufficiently low to maintain affordable premiums and be actuarially viable.

 This cap on total reimbursement regardless of network status and the limited liability for patients receiving out-of-network services reduces the incentive to contract on the part of both providers and health plans.

Inclusion of advanced practice nursing specialists (eg, nurse practitioners) has been shown to reduce costs in some settings by increasing labor supply and competition, and more directly by augmenting or substituting for physician services at a lower cost.

 Such savings are realized in the commercial market for anesthesia services, where we observed that plans paid lower allowed amounts CF to CRNAs than to anesthesiologists. However, traditional Medicare does not vary pricing per CF across anesthesiologists, CRNAs, and supervisory dyad provider structures, and we found that MA plans share this payment parity across provider types. More work is needed on the benefits of CRNAs practicing independently and under the supervision of anesthesiologists, but our study suggests that expanding the inclusion of CRNAs in anesthesia services may yield direct cost savings for commercial plans. There may also be indirect effects of CRNA practice on reducing costs not captured in our analysis, such as increased labor supply and competition.

Limiting our analysis to a subset of procedures in the outpatient and ASC settings and applying other exclusions strengthened the accuracy of CF estimates within our sample but may reduce generalizability. Findings may not be generalizable to health plans beyond our sample.

Anesthesia CF commercial allowed amounts, traditional Medicare rates, and charges differ substantially in magnitude. MA plans’ relatively low payments likely reflect the cost-containing influence of competition with traditional Medicare and MA’s prohibition on balance billing.Policy makers addressing surprise billing for commercial enrollees should choose out-of-network payment benchmarks prudently to avoid inflationary out-of-network benchmarks. Additionally, out-of-network benchmarks for anesthesia services, such as the “qualifying payment amount” used in the No Surprises Act as a guidepost for arbitrators, may benefit from considering commercial payment differences across independent anesthesiologist, independent CRNA, or anesthesiologist-CRNA dyad provider structures.

The authors acknowledge the assistance of the Health Care Cost Institute and its data contributors, Aetna, Humana, and UnitedHealthcare, in providing the claims data analyzed in this study.


 Leonard D. Schaeffer Center for Health Policy and Economics at University of Southern California (ELD, BL, ET), Los Angeles, CA; USC-Brookings Schaeffer Initiative for Health Policy (ELD, LA, ET), Los Angeles, CA; Brookings Institution (LA, ET), Washington, DC.

 Arnold Ventures supported this work through a grant to University of Southern California and the Brookings Institution.

 Dr Trish is a consultant to Cedars-Sinai Health System and for a capital management firm, both outside the specific issue of this paper; has performed expert witness work for the Blue Cross Blue Shield Association, Premera, and Varian Medical Systems, outside the specific issue of this paper; and has received speaking fees from MultiPlan. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

 Concept and design (ELD, BL, LA, ET); acquisition of data (LA, ET); analysis and interpretation of data (ELD, BL, LA, ET); drafting of the manuscript (ELD, BL); critical revision of the manuscript for important intellectual content (ELD, LA, ET); statistical analysis (BL); obtaining funding (LA, ET); and supervision (ET).

 Erin L. Duffy, PhD, MPH, University of Southern California, 635 Downey Way, Los Angeles, CA 90089-3333. Email: Erin.Duffy@usc.edu.

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Mean in-network commercial allowed amounts and charges per anesthesia conversion factor are 314% and 659% of traditional Medicare rates, respectively. Medicare Advantage payments align with traditional Medicare prices.

Commercial and Medicare Advantage Payment for Anesthesiology Services

 To quantify the proportion of health plan spending on services for which surprise billing is common—provided by radiologists, anesthesiologists, pathologists, emergency physicians, emergency ground ambulances, and emergency outpatient facilities—and estimate the potential impact of proposed policies to address surprise billing on health insurance premiums.

 Analysis of 2017 commercial claims data from the Health Care Cost Institute, comprising 568.5 million claims from 44.8 million covered lives in 3 large US insurers: UnitedHealthcare, Aetna, and Humana.

 We calculate the share of total health plan claims spending attributable to ancillary and emergency services. Next, we estimate the premium impact of proposed federal policies to address surprise billing, which, by removing provider leverage stemming from the ability to surprise-bill, could reduce in- and out-of-network payments for these services, in turn affecting premiums. Specifically, we model the premium impact of reducing payment for these services (1) by 15% and (2) to 150% of traditional Medicare payment rates.

More than 10% of health plan spending is attributable to ancillary and emergency services that commonly surprise-bill. Reducing payment for these services by 15% would reduce premiums by 1.6% ($67 per member per year), and reducing average payment to 150% of traditional Medicare rates—the high end of payments to other specialists—would reduce premiums by 5.1% ($212 per member per year). These savings would reduce aggregate premiums for the nation’s commercially insured population by approximately $12 billion and $38 billion, respectively.

 Addressing surprise billing could substantially affect commercial insurance premiums.

Proposed surprise-billing legislation would not only protect patients from unexpected out-of-pocket expenses, but also likely affect negotiated payments for the ancillary and emergency services that generate most surprise bills.

More than 10% of commercial health care spending is attributable to services for which surprise billing is common: those provided by radiologists, anesthesiologists, pathologists, emergency physicians, emergency ground ambulances, and emergency outpatient facilities.

Eliminating provider leverage stemming from the ability to surprise-bill could reduce commercial insurance premiums by as much as 5.1%, or $212 per member per year. This could reduce aggregate premiums by approximately $38 billion for the nation’s commercially insured population.

Surprise medical bills, which can occur in emergencies or when patients at in-network facilities are treated by out-of-network professionals, have drawn increasing public and policy attention. Although the main focus has been protecting patients from receiving these unfair—and potentially large—surprise bills, policies addressing surprise billing may affect health insurance premiums more broadly.

Most surprise bills are generated by emergency and ancillary providers, such as radiologists, anesthesiologists, pathologists, emergency physicians, emergency ground ambulances, and emergency outpatient facilities.

 Unlike most medical services, for which patients have an opportunity to seek in-network providers, patients generally are not able to choose these emergency and ancillary providers. As a result, these providers can often remain out of network without significantly reducing their patient volume. Not only can this lead to patients receiving surprise bills, but evidence suggests that the ability to surprise-bill creates leverage that enables these providers to obtain higher in-network payments.

 For example, in a letter to Congress, the CEO of TeamHealth, a large emergency physician staffing company, plainly acknowledged that “balance billing…is a contract leveraging tool.”

The expense of these high in-network payments is passed on to consumers and taxpayers through the cost of health insurance premiums. Therefore, although the surprise bills themselves are burdensome to individual patients, the higher in-network payments resulting from this leverage have a broader impact on total health care spending for consumers.

A federal policy eliminating surprise bills would influence in-network payments for this subset of providers and, in turn, influence health insurance premiums. To assess the impact of a federal surprise billing law on premiums, it is critical to quantify the share of total health plan medical claims spending attributable to the subset of services most likely affected, for which only partial estimates are available in the existing literature (to our knowledge).

In this study, we evaluate the proportion of total medical health plan spending on ancillary and emergency services with the highest prevalence of surprise billing. This includes services performed by emergency medicine professionals, radiologists, anesthesiologists, and pathologists (ERAP), as well as emergency outpatient facilities and emergency ground ambulance services. Then, we estimate the impact that potential changes in payments for these services would have on health insurance premiums.

We analyze 2017 commercial claims data from the Health Care Cost Institute (HCCI), comprising 568.5 million claims from 44.8 million covered lives (equating to 36 million member-years) in 3 of the 5 largest US insurers: UnitedHealthcare, Aetna, and Humana.

 More than 90% of observed claims were in network, although there is variation across these provider types (

]). We compute total plan-paid spending on professional, facility, and pharmaceutical services per member per year. We then calculate plan-paid spending attributable to ERAP professional services, identified using 2 methods: (1) HCCI provider categories and (2) Current Procedural Terminology (CPT) codes generally billed by these specialties.

 We also calculate the share of total plan-paid spending per member per year on outpatient emergency facility claims and emergency ground ambulance services identified by CPT codes, as recent evidence suggests that these services would be affected by surprise-billing legislation.

 Then, we estimate the impact of 2 potential changes in payments for ERAP, outpatient emergency facility, and emergency ground ambulance services on insurance premiums. We assume a baseline medical loss ratio of 90% in these estimations to align with the average ratio among large group plans, and that nonmedical spending is unchanged by policies.

First, we analyze the impact of a 15% reduction in average payments for these services, in line with the Congressional Budget Office–estimated effects of surprise-billing legislation proposed by the Senate Health, Education, Labor, and Pensions Committee.

 This proposed legislation would prohibit surprise billing and require minimum out-of-network payments equal to a health plan’s median in-network payments for similar services in the same geographic region.

Second, we estimate the effects of a policy that would have the effect of reducing payment rates for ERAP professionals and emergency service providers to 150% of Medicare’s reimbursement rates for the same service. We choose this level because it is roughly the upper bound of average markups for specialists not commonly involved in surprise billing.

 In contrast, multiple studies estimate average in-network payments at roughly 300% of Medicare for emergency physicians, 200% of Medicare for radiologists, and 350% of Medicare for both anesthesiologists and pathologists.

 Medicare payments are intended to reflect the relative cost of providing care, and excess commercial markups observed among ERAP professionals and emergency service providers may be driven by their ability to surprise-bill. Therefore, we expect that a policy such as network matching

—by eliminating provider leverage stemming from the ability to surprise-bill—could result in negotiated payments with markups over Medicare more similar to these other types of specialists. Although it is impossible to predict the precise magnitude of prices resulting from these policies, we estimate the premium impact of reducing average payments for these services to 150% of Medicare payments.

In this analysis, we do not compute payments as a fraction of Medicare’s payment rates for each service in our data but, rather, use estimates from the literature described previously. For example, we assume that such a policy would reduce spending on radiology services by one-fourth, from 200% to 150% of Medicare’s rates. For emergency ground ambulance services, we estimate that commercial plans currently pay approximately 170% of Medicare’s rates (

). We assume that emergency facility payments would face the same reduction as emergency physician payments.

We find that ERAP professional services account for 7.0% to 8.6% of total plan spending in 2017, depending on the definition (

). Outpatient emergency facility claims account for an additional 3.1% of plan spending, and emergency ground ambulance services comprise 0.3% of plan spending. Average annual plan spending per member-year is $4161 among plans in our data set, with approximately $290 to $357 spent on ERAP professional services, $127 spent on emergency facilities, and $13 spent on emergency ground ambulances.

We estimate that a 15% reduction in payments to ERAP professionals corresponds to a 0.9% to 1.2% (approximately $37-$50 per member-year) reduction in annual premiums per enrollee (

). If average in-network payments for ERAP professionals declined to 150% of Medicare rates, premiums would decline by 3.1% to 3.6% (approximately $129-$150 per member-year), all else staying equal.

Including emergency facilities and emergency ground ambulance services, the estimated premium reduction would increase to 1.4% to 1.6% (approximately $58-$67 per member-year) under the 15% payment reduction scenario and 4.5% to 5.1% (approximately $187-$212 per member-year) if payments declined to 150% of Medicare. Applying these premium reductions to the US commercially insured population (approximately 177 million individuals),

 we estimate that 1.6% and 5.1% reductions in insurance premiums would yield a total savings of $12 billion and $38 billion, respectively.

The financial burden of surprise bills for individual patients has captured public attention, but this study illustrates that provider leverage derived from the ability to surprise-bill has broader effects on health care spending—resulting in commercial health insurance premiums as much as 5% higher than they otherwise would be in the absence of this market failure. Our estimates are roughly in line with others in the literature.

This growing body of research indicates that policies to address surprise billing would address an important market failure that has enabled emergency and ancillary services providers to command high payment rates. Removing the ability to surprise-bill patients reduces leverage for this subset of providers in their payment negotiations with health plans. Several federal proposals employ payment standards or arbitration processes that additionally require insurers to make a minimum payment to out-of-network providers. Other policy approaches would instead address surprise medical bills by imposing “network matching” requirements, whereby emergency, ancillary, and similar professional services delivered through in-network facilities could no longer be billed on an out-of-network basis; in turn, providers of such services would have to negotiate payment with the facility and/or health plans that the facility accepts, with the ability to surprise-bill now eliminated.

The net premium impact of any proposal would depend on the regulatory approach and generosity of any required minimum payments from health plans to out-of-network providers. If a policy were to base payment standards on something that is generally higher than payment rates today, such as provider charges, it could actually increase health insurance premiums.

These findings may not be generalizable beyond the 3 insurers we study, and we do not describe variation in effects across local markets. We may misattribute services to ERAP professionals, although consistent findings using 2 approaches suggest robustness. We analyze only 2 potential policy scenarios within a wider range of approaches.

Although economic theory lends some intuition to the effect that different policies might have, the precise effects of different approaches on provider prices are highly uncertain and we do not account for potential secondary effects such as provider consolidation. There is also some uncertainty surrounding status quo commercial payment levels. Additional specialties may be affected by surprise-billing legislation, which would further magnify premium impacts. For example, legislation may affect inpatient facility spending incurred by patients admitted through the emergency department, but we conservatively exclude such spending from our calculations.

Providers affected by surprise-billing regulation—ERAPs, emergency outpatient facilities, and emergency ground ambulances—comprise more than 10% of total plan spending. Policies addressing surprise billing can meaningfully influence commercial insurance premiums. A well-designed policy to address this market failure could therefore reduce consumer health care spending.


 Leonard D. Schaeffer Center for Health Policy and Economics at University of Southern California (ELD, BL, ET), Los Angeles, CA; USC-Brookings Schaeffer Initiative for Health Policy (ELD, LA, ET), Los Angeles, CA, and Washington, DC; Brookings Institution (LA, ET), Washington, DC; University of Southern California School of Pharmacy (ET), Los Angeles, CA.

 This work was funded by Arnold Ventures. The funding source had no involvement in the collection, analysis, and interpretation of data; in the writing of the manuscript; or in the decision to submit the article for publication.

In addition to protecting patients from receiving unexpected bills, policies to address surprise billing could reduce health insurance premiums by 1% to 5%.

Erin Trish, PhD

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