WASHINGTON, September 25 — In the United States, most people with private health insurance rely on a system in which hospital prices are not set by the government but are negotiated between hospitals and insurers, largely out of public view. Those negotiations determine how much an insurer will pay for care, and the resulting contracts shape which hospitals are considered in-network and what patients ultimately owe. The arrangement is a defining feature of US health care, which relies heavily on private insurance for the non-elderly population.
According to the US Census Bureau, in 2022 about 65.6% of the US population had private health insurance, while 8.0% were uninsured. For most working-age Americans, private coverage is obtained through employers, though the Affordable Care Act, signed into law in 2010, created health insurance marketplaces where individuals can buy subsidized plans.
Two sides, one contract
Hospitals, especially large systems, seek higher reimbursement rates to cover their operating costs. Insurers aim to keep premiums competitive by holding down what they pay. When the two sides cannot agree, contracts can lapse, temporarily leaving patients to face higher out-of-network costs or to seek care elsewhere.
Such disputes have become more frequent and public in recent years, and similar standoffs have occurred across the country. These conflicts often end with multi-year agreements that include rate increases, the costs of which are typically passed on to employers and patients through higher premiums and cost-sharing.
The opacity of these negotiations has drawn scrutiny from policymakers and researchers. A 2019 study published in the journal Health Affairs found that hospital prices for privately insured patients varied widely across the country and were often much higher than Medicare rates for the same services. In some regions, private insurers paid hospitals more than twice what Medicare paid.
The study also noted that hospital market concentration — where a few large systems dominate a region — was associated with higher prices.
Transparency rules and their limits
The federal government has taken steps to increase transparency. In 2019, the Centers for Medicare & Medicaid Services finalized a rule requiring hospitals to post their negotiated rates with insurers publicly, starting in 2021. A similar rule for insurers took effect in 2022.
Compliance has been uneven, however, and the data can be difficult for consumers to use. The No Surprises Act, which took effect in 2022, protects patients from certain surprise medical bills, such as those from out-of-network providers during emergencies, but it does not directly address the underlying negotiated rates.
Patients and families continue to face the consequences. When a hospital and an insurer are in a contract dispute, patients may receive care at a facility they believe is in-network, only to later find that it is not covered. Even when contracts are in place, high negotiated rates contribute to rising premiums and deductibles.
According to the Kaiser Family Foundation, the average annual premium for employer-sponsored family health coverage reached $22,221 in 2022, with workers contributing $6,106 on average. Deductibles have also risen; the average general annual deductible for single coverage in employer plans was $1,763 in 2022.
These costs are borne by employees and their families, often forcing difficult choices about care. The system is further complicated by the fact that hospitals and insurers are not required to disclose the details of their negotiations to the public, though the new transparency rules aim to shed light on them. As health care costs continue to rise, the dynamic between hospitals and insurers remains a central and contentious issue in American health policy.
What to watch next is whether the posted-rate data becomes usable enough for employers and patients to compare prices, and whether future contract standoffs are resolved before coverage lapses. The encouraging part is that the rules now exist; the work ahead lies in compliance and clarity. Consult your doctor for medical advice.
