More Transparency For Network Negotiated Prices

When Jay had an MRI on his knee last month, we were charged $1200. The EOB tells us that the Vail Valley Medical Center in Vail, Colorado, charges $1600 for the procedure. Our Humana health insurance has a negotiated rate of $1200, which is what we paid (we hadn’t met the deductible yet, so we were responsible for the whole amount). So we paid $400 less than someone without health insurance would have paid. But I wonder what someone with Anthem Blue Cross Blue Shield would pay? Or someone with United HealthCare or Aetna? I don’t know, because negotiated rates are proprietary. Whatever secret dealings that go on between health insurance companies and providers are not public knowledge.

When we help our clients shop for health insurance, we look at price, coverage options, and provider networks, especially if the client has a particular doctor in mind. But we can’t know how well each health insurance company has negotiated pricing on specific procedures with various providers. I understand the economics behind network negotiated rates. Providers can give a better rate when they know they’ll get more volume, and health insurance companies send volume. It’s sort of like buying in bulk – I pay less for my oats because I buy them in 50 pound bags. The store knows they’re going to sell all 50 pounds at one time, so they can charge me less per pound than if they have to make 50 separate sales to sell the whole bag.

But the secret nature of the pricing seems to be to the detriment of the patient. If I call the health food store and ask them how much they charge for a pound of oats, and what the discount is for buying 50 pounds at one time, they will give me both numbers. But try calling a hospital and asking for the network negotiated rates for an MRI for five different health insurance carriers. Could get tricky. Most people find out what the negotiated rates are after they have a procedure done and get the EOB in the mail. Makes it tough to comparison shop for health care procedures and for health insurance.

Network negotiated rates need to be much more transparent. They should be available to any interested consumer, not just someone who already has a particular health insurance policy. Health insurance carrier websites should have detailed pricing lists with billing codes and allowable amounts for a wide variety of procedures. Then consumers – especially people who are interested in high deductible health insurance policies – could really compare apples to apples.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for,, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.


  1. A related issue has to do with transparency of network discounts between two different in-network hospitals. There is sometimes a huge difference — Hospital A may only give a 5% discount and Hospital B may give a 40% discount. So for the same procedure, even though both hospitals are “in network”, the patient could pay much more at Hospital A, than Hospital B. If there is a major difference in quality of care, outcomes, etc. that’s one thing. But otherwise the patient is missing out on some important information.

    Insurance companies should disclose to their covered patients if a particular network provider has a discount that is significantly less than the average discount.

  2. Susan Viet says:

    I had the same thought/experience last year pertaining to a $6300 PET scan. The CO Surgeon General’s office said that neither party was required to share the negotiated rate. They noted that they get “several calls a day” asking about this. Maybe we should start a site where people can list the quoted cost, the actual cost, the place of service, and the insuarnce compamy? That way we could choose where we have the procedure done and which insurance company might be best for our specific needs?

  3. Susan,
    I was thinking of starting up an engine like that last year, but noticed there were already other sites starting that same thing. The best one I know of so far is, but it still doesn’t have that big of a database yet.

  4. Heather Ellis says:

    For two years now, I’ve been trying to help my son decipher medical estimates (Vail Medical Center and Steadman Hawkins) and insurance responses (BCBS), for surgeries and aftercare he has needed since someone rear-ended his vehicle. (Don’t you love the move back to the “tort” system?) I completely agree with the sentiment that it’s so very hard to acquire, let alone argue with determinations. I have the patience and knowledge, and I’m the advocate. But what about a patient in pain, or someone young, elderly, or otherwise ignorant of the system? Regarding rates, though: I have found it very interesting how many providers are willing to offer discounts to patients who don’t have the full amount covered. One therapist’s office actually had a sign stating that they offered a 40% discount for uninsured. I think it speaks to both the exorbitant charges for procedures and the amount of time even providers have to spend to get money out of the insurance companies.

  5. J. Martin says:

    Your understanding of the economics of “negotiated rates” in the medical community is too kind to the insurance industry. The insurance industry has succeeded in making the medical services industry an inefficient marketplace.

    In an efficient marketplace, the laws of supply and demand tell us that as demand for goods increase, so do prices; and conversely, as the demand for goods decrease, so do prices. As prices decrease, more people come into the market; and conversely, as prices rise, some people will exit the market. In efficient markets, supply and demand are trying to reach equilibrium whereby all of the supply is consumed at a given price.

    The way I see it, there is nothing the insurance companies would like more than everybody having to buy health insurance. They can achieve this by at least one of two ways. First they can manipulate prices via coercion or secondly they can lobby government for mandatory health insurance.

    When they manipulate prices via coercion, they go to a doctor and tell them that if he wants to be in their list of health care providers, the doctor has to set an artificially high “list price” for his services and has to give the insurance company’s insured a discount. For the discount to be a real discount, others have to pay a higher price. Those others are the uninsured … usually the young and the poor. The message being sent is, “if you want affordable health care, you better buy health insurance.” For the ones selling health insurance to also be the ones manipulating prices is unconscionable.

    Why do we see different prices in other products such as oats? You said it, bulk buying and selling. Said another way, the price is influenced by “economies of scale.” If you want to buy one pound of oats, you go to the grocery store and buy a one pound box of oats. Built into the price of the one pound box of oats is the cost of the oats, the cost of transportation, marketing, display, and the cost of the cashier that has to scan one pound boxes of oat at a time. If you want to buy 50 pounds of oats, at a grocery store, the cashier would need to scan 50 boxes one at a time. You are paying for her time, the marketing, the display, etc. If you want to achieve any savings, you have to go to the animal feed store and buy 50 pound bags. But if you have a stable of 50 horses, you would buy oats by the tractor trailer load. In other words, as the vendor achieves savings via economies of scale, some of those savings are passed on to you.

    In the medical community however, there are no economies of scale to speak off. The doctors have to see each patient individually, one at a time. Doctors can not spend more time with patients that pay full price (list price) for his/her services and less time with patients that get a discount. If they could, that would be an example of economies of scale. There would be a reason for the price difference. Currently, the only reason for price differences in an individual doctor’s pricing scheme is the undue influence of the insurance industry.

    For your oats example to more closely represent what is going on in the medical/insurance industry it would have to be modified as follows. The thoroughbred horse association has decided to promote the buying and selling of thoroughbred horses. They have used the power of the association to coerce oats vendors to offer a better price to Thoroughbred owners than to owners of other horse breeds. You, the owner of a Thoroughbred, can buy the 50 lbs bag of oats cheaper than the owner of a mule.

  6. With all due respect to J. Martin, his continuanc of the unhelpful oats example give no further understanding the complexities of the problem we have here in the U.S., much less a solution to those problems. Providing a service does have a certain amount of “economy of scale” in play. But the main factor in mandatory coverage is the need to spread the risk. This need applies in all markets, large or small. Whether there are economies of scale in the medical community is almost a non-issue. I believe the real need is to produce a single billing code system. If this were done by a third party agency, it would remove the influence of the insurers. This has been done in other countries. With the playing field leveled, insurers found that the only way to keep their clients was to offer better “service” – what an idea that is! Doctor who found they were being paid less per service, found they were saving time and money on the billing side. I discovered several years ago, that almost every provider (doctor/clinic/hospital), when told that the patient will self-pay, will offer a discount. This tactic can be used by anyone. It simply means you pay and then process the insurance rebate yourself. I have found I am a far better arbiter of my cause than the provider, who would come back at me in any case should the insurer not pay. The discounts I have received have been anywhere from 25%-40%. By their own admission, this indicates the cost of the burdensome claim service.

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