The Secret of Health Care Prices: Why Transparency Is in the Public Interest

In 2018, California lawmakers sought to design and create a state Health Care Cost Transparency Database, an all-payer claims database (APCD), which would collect information on the cost of health care in the state. The law tasks the Office of Statewide Health Planning and Development (OSHPD) with designing a database to best fit the needs of the state. California’s APCD may collect information about amounts paid for health care services, including data about negotiated rates between insurance plans and providers. Many health care providers and payers seek to maintain the confidentiality of these paid amounts as trade secrets, claiming their secrecy provides a competitive advantage.

This report examines the legal and economic implications of collecting and releasing this data, including:

• A review of trade secret statutes and case law regarding the protection of negotiated prices as trade secrets.
• Economic evidence about when disclosing negotiated rates is in the public interest.
• A comparison of the current and planned price dissemination practices for the 18 states with mandatory APCD data collection programs.

Recommendations for California Policymakers

In addition, recommendations are included for California’s policymakers about best practices from other states to ensure the effective use of increased transparency to control costs and increase access to health care services. The six recommendations are:

1. OSHPD should provide all data submitters with clear information and policies regarding data release prior to data collection.
2. OSHPD should create a data release committee and declare that all information submitted to the APCD will be released in accordance with data release guidelines at the discretion of the data release committee.
3. The data release committee should establish guidelines for data release that weigh competitive effects and public interest.
4. The data release committee should implement a tiered data release policy, which would base oversight and access to data on the data requested and the nature of the requester.
5. The data release committee should establish a data use agreement that provides requirements for accessing data.
6. OSHPD or its designee should monitor annual claims data for anticompetitive behavior.