Why don't all health plans work like Castlight?

A startup company takes claims data from employers and serves it up to employees in a “price transparency” tool. It then launches an initial public offering, which quickly rises to a valuation of more than $1 billion. Fiction? No. But baffling, yes, because any health plan in the U.S. could do exactly the same, and better, since the plan knows the price of each negotiated service with each provider in its network.

As such, every health plan could offer its members exact prices for an episode of care. Further, in states with all-payer claims databases, anyone with access to that database could establish transparent prices for healthcare services in that market. They could and should, but they don't. That's why many employers have gone to Castlight Health and are paying for something their health plans could and should do for free.

When you think about it, that a company with a few million dollars in revenue, which never turned a profit, can extract from claims data what every health plan could, but doesn't, and end up being valued so highly, is the most damning indictment of the healthcare market's opacity. It's also a measure of the thirst for solutions that lift the veil over what is otherwise known to buyers in other industries—the price of services and products.

Last year, Catalyst for Payment Reform and the Health Care Incentives Improvement Institute released the first Report Card on State Price Transparency Laws. States were graded on a curve and few got a passing grade. Overall, the report card showed that residents in most states simply don't have access to the price of a healthcare service in advance of purchase.

This year's report shows no progress. As we stopped grading on a curve and took a deeper look at the consumer-friendliness of state websites, no one gets an A. So has it gotten a lot worse? Fortunately, no. Many states have introduced good legislation to improve transparency and others have assembled all-payer claims databases to release price information. Some websites, including Maine's, deserve high honors and are good models.

Yes there's progress, but we have a long way to go. And if states were wondering if price transparency is worth the effort, just look at the market valuation of Castlight.

Francois de Brantes is executive director of the Health Care Incentives Improvement Institute.