New TN & TX Price Transparency Laws Prevent Patients From Getting Ripped Off

Insured Americans have been getting ripped off for years. Fortunately, Americans in two states have new resources to protect themselves.

New state laws in Tennessee (effective July 1) and Texas (effective September 1) now provide insured Americans on individual, small business plans the option to save money when they pay cash for more affordable services, while still getting deductible credit. Tennessee also extended this offer to public employees. These reforms knock down barriers preventing patients from accessing the most cost-effective care, while simultaneously laying the foundation of a real market within the state healthcare systems.

We recently made some phone calls in Nashville and found we could pay $541 in cash for a colonoscopy, far less than the $2,400 average rate the three largest insurers in the state negotiated. In fact, we found at least four providers in downtown Nashville that would charge less if we paid cash instead of using our insurance card. In other words, many Americans are often overpaying for services when they use their insurance. Under this new state law, people are free to access the $541 option and not be penalized by their insurer for going out-of-network.

Of course, it’s not the insurance companies overpaying, it’s the patients. Around 94 percent of Tennessee employees have an insurance deductible, which means they pay 100 percent of most non-preventative health care costs up to their deductible. Only after that does the insurance company start paying. For many patients, a $2,400 colonoscopy comes directly from their wallets and bank accounts, leaving less money for food, mortgage payments, and family expenses.

Under the new law, if a patient negotiates a lower price for a service covered by their insurance, and if the negotiated price is less than the average amount paid by their plan, the patient can submit a receipt to their insurer. The insurer “shall count the full amount that the covered person paid out-of-pocket toward the covered person’s deductible, coinsurance, copayment, or other cost-sharing amount.” In short, a patient is free to use any provider that offers more affordable care, and their insurance company cannot discriminate against them for doing so.

Under the status quo, patients tend to use providers who have contracts with their insurers, often called “in-network” providers. This can mean big bills whilst paying a deductible. The new reform allows patients to decide, with their doctors, the best care option at a price that won’t break the bank. Currently, about 40 percent of patients are skipping needed care because they fear how many zeros will appear on their patient portal balance.

This new self-pay law is a step forward in empowering high-cost folks with chronic conditions to see who they want without potentially needing to empty their wallet on insurance every year.

These new laws were major successes, but the fight to make price transparency work for all patients will require more work. The next step is to create insurer incentives that reward patients who keep seeking more affordable care post-deductible.

As more insured patients and employees are given reasons to seek out affordable care, more small businesses will thrive with savings and provide benefits amid inflation.

Health professionals like these laws because they will get paid right away, instead of spending weeks or months fighting over payment with insurance companies. And if enough patients use consumer-friendly tools to find better deals, then everyone benefits as insurance premiums can be lowered the next year.

Speaker Cameron Sexton (TN), Senator Shane Reeves (TN), and Representative Tom Oliverson (TX) along with others who worked on the new self-pay reform deserve a lot of credit. Pushing for a reform that adds this new option for patients over the objection of those who benefit from the status quo takes gumption. Tennessee and Texas stepped up to become national leaders on price transparency, and many patients will benefit as a result.

This piece was cowritten with Tanner Aliff the Policy Director for the Right on Healthcare at the Texas Public Policy Foundation.