Prices for U.S. healthcare services have long been opaque. But with new price transparency laws for hospitals and health plans taking effect, as well as the No Surprises Act that expands billing protections for consumers, the industry must now adapt to these regulations.

To discuss the challenges and opportunities this creates, Milliman Principal and Consulting Actuary Mike Gaal spoke with Chris Severn, cofounder and CEO of Turquoise Health, a startup focused on simplifying healthcare reimbursement through price transparency. What follows are highlights from their conversation during Milliman Labs, a virtual event series exploring the future of insurance technology.

(Note that this exchange was edited for clarity, context, and length.)

Mike Gaal: There’s such a large amount of healthcare pricing data now available, and a recent article even suggested that it is so overwhelming that it may render the data unusable. Help our audience understand your perspective on the size and usability of the data.

Chris Severn: I like to give this analogy: Imagine every restaurant and grocery store in the United States, and there's a price on every unique item of food. You’d get into the billions of prices if you think about all the different types of foods available.

With healthcare, it might seem like the same big data problem: You've got about 30,000 to 40,000 different healthcare services that can be administered. You can calculate the number of providers. But it’s actually more complicated, because you’ll have a different price depending on your insurance coverage, so for any given provider there might be 50 different prices for the same service. That means you get this compounding, big data problem of all the different product or service codes, and all the different payment methodologies, and you end up with trillions of healthcare prices in the United States.

This means that it’s very hard for someone to deal with natively in Excel or for two people in a garage to start a small business looking at healthcare prices. You really need to invest resources, capital, and human capital to make sense of this new pricing data. It's a pretty unique challenge we face, but the good news is there are incentives for companies to invest and get those resources to make use of the new healthcare data that’s available.

Risks to making healthcare data usable

Mike Gaal: You’ve built a business around being able to use this data. Playing devil’s advocate, what do you see as the biggest risk to making all this data usable and actionable?

Chris Severn: Enforcement. It’s one thing to have these laws—you've got a hospital price transparency law, you've got a price transparency law geared toward payers, and then you have the No Surprises Act that brings all this together in the best interest of consumers—and what we've seen with each of these laws is they face lawsuits and they face appeals in federal courts. While a lot of these hurdles have been overcome, each of these laws has been delayed at different points or had different pieces of the legislation delayed. The hospital rule that was initially slated for January 1, 2020, got delayed by a year. The payer rule was delayed by six months. And we just saw a delay in enforcement come out for the No Surprises Act.

For price transparency to really work, you've got to have teeth. You have to know that if you're not following the law, you will face fines, and that these laws will actually exist and have an effective date versus being delayed indefinitely. That’s the biggest “devil’s advocate” risk, existentially, affecting price transparency for patients.

Enforcing healthcare price transparency laws

Mike Gaal: In the first year of data transparency requirements for hospitals, uptake was very slow. But we saw a couple of fines come through for two hospitals in Georgia in 2022, and since then I think we’ve seen increasing compliance with hospital data. What's your take on the payer side of data compliance right out of the gate?

Chris Severn: With payers, the implied fine per member is pretty high, so for some of the large payers, if they hadn’t been compliant on July 1, 2022, when a lot of this became effective, they would have faced a massive fine. That meant most payers in the United States had their ducks in a row for July 1. There were a few hiccups in the first couple of weeks, but we've seen almost ubiquitous compliance starting this past summer for payers, which is a totally different scenario from what we observed with hospitals.

What does that mean for the average patient? Not all healthcare services happen within a hospital. Before July of 2022, we only knew the prices for hospital-based services. With the new payer rule, we now know the price of care for all items and services outside the hospital, things like therapy, durable medical equipment, surgery centers. That's a really big boost for all our efforts.

Healthcare data access for consumers

Mike Gaal: We know that the ultimate intent of this regulation is to put information in the hands of consumers and lower the cost of healthcare. But do you think consumers will ever be able to access this data in a meaningful way?

Chris Severn: We are seeing a very scrunched adoption cycle. Healthcare moves slowly, and it’s a very big challenge to get all these trillions of prices into the cloud, to clean up the data, and then to layer on meaningful consumer experiences. Eventually, you may see companies use the price transparency data to create Kayak-style or Expedia-style price-comparison websites. You may visit your primary care doctor and see this information embedded in the medical record software at the time they’re making a referral. You may log into your employer’s benefits app to review your insurance benefits and see the price of the services you need. This price data will start to make its way to consumers throughout 2023 in these ways; it just takes time to distill this data in the software development life cycle.

And that’s great, but then the big question is: As a consumer, I see these prices and they’re called “estimates,” and they have asterisks near them. Can I actually bank on them? Is this exactly what I'll be billed? Does this colonoscopy estimate include the anesthesiologist’s fee?

I think we’ll start to see better consumer experiences evolve throughout 2023 and into 2024 and 2025. And that’s where we will start to see the system change around this, such as how do I provide pricing or design benefits to lock in a price. Eventually, we’ll start to see something like the Amazon Prime symbol that assures the patient that this is the all-in price, not just an estimate. We’ll also see quality ratings and the option to schedule the service—it’ll be that familiar consumer experience. But that still needs time to develop.

Adding competition, changing healthcare infrastructure

Mike Gaal: How could this data potentially transform the overall business of healthcare, and what does that look like?

Chris Severn: There’s two big aspects to dig into here. One, we've never seen healthy price competition in healthcare like we have in other industries. And so the theory is you get data out there to all the stakeholders—including some entrepreneurs, savvy providers, and upstart insurance plans—and there’s a realization that there's an opportunity to compete on price and value. Because it's not just price that drives the healthcare decision, it's quality, it's accessibility, it’s convenience. Basically, if you free the data, you can create price competition or value competition in healthcare. I think that creates a lot of opportunities for startups, a lot of opportunities for new providers, for new types of insurance, and for employers.

The second area, which is a big focus of Turquoise, is in some ways a more difficult problem to solve: How does this affect the infrastructure of healthcare? Right now, by some accounts, 30 cents on every dollar are spent on administrative costs—the cost of medical billing and coding and collections and contract adjudication, claims adjudication, all that. But with all this new transparency data, there's a huge push toward standardization and simplicity. It’s a chance for us all to look at how we conduct the business of billing and collecting and negotiating the price of healthcare. The price transparency laws can help facilitate simplicity and standardization and reduce the admin costs. In the United States, we spend about 20% of our gross domestic product on healthcare. We can make a dent in that number by improving the admin burden. If we look at this in a few years, it would be great to track U.S. spending by region and service category and see where we’ve made progress.

What lies ahead for healthcare price transparency

Mike Gaal: In 2022, we marked year two of a five-year journey. What are some of the key markers for years three and four that will lead us down the path toward the ultimate goal of price transparency?

Chris Severn: I'd say that the pacesetters are really important. Who are the health systems that are going to take a stand and standardize their contracting methodologies? Who are the payers that are going to make copay-based plans where everybody knows the price of shoppable services and preventive care ahead of time? Who are the startups that are going to create unforgettable member or patient or consumer experiences, because once you get spoiled by that one great experience that's what you come to expect.

What I really hope for 2023 and 2024, and that Turquoise is a part of this, is that we help create that experience, both on the business-to-business and business-to-consumer sides, where the user says, “Wow, that was really easy and pretty simple to navigate to find the cost of that colonoscopy, so I think I'm going to just do this every time.” Or, “I'm going to use this plan now.” That's what we'll really have to look for: Who's setting the pace?

Watch the full conversation and more Milliman Labs sessions at labs.milliman.com.