Skip to main content

Recent State Actions Could Help Contain Commercial Health Care Costs

Rising spending has more to do with increasing fees and service prices than with greater use of services, research suggests.

By Samantha Scotti  |  December 14, 2023

The steady rise in health care costs increasingly affects Americans’ everyday decisions. About 40% of U.S. adults say they have delayed or gone without medical care due to cost.

New data from the Health Care Costs Institute shows that spending per person increased about 20% (from $5,334 to $6,467) from 2017-21. Research attributes rising spending to increases in prices for services and fees, rather than greater use of services. “The increase in spending was driven by rising average prices, which grew close to 14% over 2017-21. In that period, there was a cumulative 7.1% increase in use,” the institute says.

While considering the emerging research and resources, states are exploring various polices addressing commercial health care prices.

Health Insurance Affordability

Policymakers are looking to ensure affordability of insurance coverage, including marketplace plans and state employee health plans, and through state department of insurance authority. A recent resource from the Center on Health Insurance Reforms assesses the authority of the 50 states’ insurance departments to conduct rate reviews. By looking at factors such as benefits in relation to premiums, previous premium rates, a carrier’s reserves and more, the departments can determine whether premium rate increases are “unreasonable” or “excessive.” 

Most states use some form of rate review to assess premium rates. Rhode Island, for example, uses “affordability standards,” including minimizing price increases for inpatient and outpatient services in provider-insurer contracts to no more than the annual inflation rate plus 1%. The standards include other cost containment strategies, such as primary care investment and alternative payment models. 

Assessing Health System Consolidation and Competition

Studies suggest increased consolidation can lead to higher health care prices. Some providers, however, maintain that consolidation enhances the quality of care and the financial stability of health facilities, particularly for smaller providers.

Policymakers are considering options related to health system mergers and acquisitions, as well as actions to bolster competition in health care markets. An Oregon measure, for example, established an enhanced merger review process for “material change transactions” between certain entities. The state can approve, disapprove or conditionally approve transactions based on various criteria, such as the effect on health care cost growth. Texas recently prohibited providers from including contract terms considered anticompetitive, such as anti-steering, anti-tiering, gag clauses and “most favored nation” clauses.

Addressing Health Facility Fees

Hospital facility fees, which are often imposed on inpatient and emergency services to cover operating or administrative expenses, are becoming increasingly common (in amount and frequency) in non-hospital settings, such as a physician office acquired by a larger health system. Recent research indicates that the fees can increase the overall costs of care for consumers and payers.

Many states have recently enacted bills to protect consumers from unknown or costly facility fees. Specifically, states are bolstering facility fee disclosure requirements, increasing state oversight of fees, limiting the instances when providers can charge facility fees, and prohibiting facility fees for telehealth visits. For example, Indiana required hospitals to provide information on facility fee revenues, along with other revenue sources, in annual financial filings to the state. Colorado established a committee to study the effects of facility fees on patients, employers and payers and to describe overall trends related to the fees.

As national health spending is projected to rise at an average annual rate of 5.4% growing more rapidly than gross domestic product and reaching $6.2 trillion by 2028—health care costs will continue to be a priority for state lawmakers.

Samantha Scotti is a project manager in NCSL’s Health Program.

  • Contact NCSL

  • For more information on this topic, use this form to reach NCSL staff.