Do Price Shopping Opportunities Justify the Hype Around Price Transparency?

Since at least 2013, most private insurance enrollees have had access from their insurer to a personalized price transparency web tool, which newly enable enrollees to compare out-of-pocket cost estimates for many providers in one place for services with price estimates. A critical mass of price-conscious enrollees would theoretically induce providers to compete on price, thereby reducing prices for all enrollees. However, few enrollees use available tools, which implies the circumstances of potential shopping opportunities are somehow unfavorable for shopping with a tool. Prior research has not studied the circumstances of potential shopping opportunities prior to utilization.

Objectives: To describe how favorable observable circumstances of shopping opportunities are for price shopping and to explore how circumstance favorability may affect outcomes related to provider choice.

Methods: I study potential shopping opportunities and their utilization outcomes by combining referral authorizations, claims, benefits, and related data from adult private insurance enrollees from 2012-2019 from one Washington State insurer. I identify potential shopping opportunities evidenced by a referral authorization for 114 services with price estimates in the insurer’s transparency tool*. Referral authorizations enable studying shopping opportunities prior to utilization including cases where enrollees do not obtain referred services and cases where enrollees reassign a referral with a second provider perhaps after shopping. I will parameterize observed circumstances in my data that influence the feasibility of and incentive for price shopping, e.g., the urgency of a service need affects shopping feasibility, and an enrollee’s remaining deductible at the point-in-time of the referral authorization affects the incentive for shopping.

To describe how favorable circumstances are, I will compute, by service categories, how frequently circumstances exceed thresholds for judging a circumstance as favorable for price shopping. I set three thresholds for each continuous circumstance parameter to have easily satisfied, moderate, and stringent criteria for favorability. I will compute how circumstance favorability varies across policy and practice-relevant subgroupings of shopping opportunities, e.g. by practitioner clinical specialty and by patient sociodemographic characteristics. I will compute the dollar value and proportion of spending that had favorable shopping circumstances.

To investigate the potential effects of shopping circumstances, I will next fit regression models to identify the drivers of variation in several outcomes related to provider choice: referral reassignments; whether a service was referred to another provider in the same provider business entity; shoppable services utilization (following through with a referral and obtaining the service); service spending; and the maximum savings vs. the expected cost of the chosen provider. To derive maximum savings, I will construct choice sets of provider options near enrollees and determine the most patients could have saved with the least expensive provider.

*specialist office visits, radiology/diagnostic testing, outpatient procedures, and inpatient procedures

Conclusions: This study will elucidate how often the stars align to have favorable circumstances for price shopping and the influence of shopping circumstances on utilization and spending. The findings will help better understand the limits and possible areas for expansion of using price transparency to contain growth of health care prices.