Why is Price Transparency a Smurfy Idea?

I recently bought a new blue car. Yes, I followed the herd and got a Subaru. Yes, I’ve christened it The Papa Smurf. And yes, the car has lots of nifty features – like a system that warns me if I’m about to back into a Dumpster -- that often make me wonder if my car is smarter than I am.

I happened to be thinking about The Papa Smurf before today’s Senate Finance Committee hearing on Senate Bill 3 — the repeal of the state’s health insurance marketplace, Connect for Health Colorado. [Update: SB 3 passed the committee on a 3-2 vote.] Something occurred to me as I thought about the goals and challenges facing the marketplace: the ability to select the nifty features on one model over another — and stay within my budget — was much like what Connect for Health Colorado aims to achieve.

Love it or hate it, one thing that the Affordable Care Act (ACA) achieved was the creation of greater price transparency within the individual health insurance market. It accomplished this in three basic ways. First, it standardized the benefits that all ACA-compliant plans had to include. Second, it guaranteed that insurers could not deny a consumer coverage based on pre-existing health conditions. Finally, it required that prices be available upfront to allow comparison shopping on the exchanges.

So why is this revolutionary?

Under the pre-ACA system, someone wanting to purchase insurance directly from an insurer had to fill out paperwork — and mention all pre-existing health conditions — to get a quote on how much it would cost. Each insurance product covered a different set of benefits, so it was difficult to make apples-to-apples comparisons without a broker or someone who could assist with shopping.

Losing this price transparency may be an unintended consequence of repealing the ACA.

Case in point: There has been a lot of brain power invested within the past two years figuring out why health insurance is so costly in Colorado’s I-70 mountain corridor — and trying to find solutions. Insurance was probably costly in these communities prior to the ACA. But newfound price transparency allowed us to realize these communities had the most expensive health insurance in the entire country.

Allowing consumers to compare prices is essential for functioning markets. I want to be clear that there may still be ways to do this even without Connect for Health Colorado. If successful, SB 3 would revert to the national exchange, Healthcare.gov, assuming it’s not repealed by Congress. And private exchanges are showing promise – particularly for some workers able to select among plans available through their employer.

There is also the possibility that Connect for Health Colorado would stick around if the ACA itself is repealed. CEO Kevin Patterson recently discussed the idea of expanding the marketplace to other surrounding states.

Regardless of how you feel about Obamacare, the need for greater transparency seems to be one of the rare issues that both Republicans and Democrats agree on. For example, recent legislation introduced by Republican Senator Kevin Lundberg calls for greater transparency of prices that health care providers charge self-pay patients for common medical procedures. The bill passed unanimously out of committee.

Obviously, the decision to purchase health insurance carries greater weight than purchasing a car. As proposals for repeal move forward at the state and national levels, lawmakers should consider these implications. Will losing this transparency hinder our ability to find market-based solutions to problems? Are there new innovations that could offer transparency in lieu of an exchange? And will consumers retain the ability to comparison shop for their coverage?

Stay tuned for updates from CHI on what happens with SB 3 and other legislation concerning the marketplace and health care transparency in Colorado.

Jeff Bontrager is the director of research on coverage and access at CHI.