Rhode Island's Affordability Standards Led To Hospital Price Reductions And Lower Insurance Premiums

Beginning in 2010, Rhode Island's affordability standards capped hospital price growth for the fully insured commercial segment of the state's health insurance market. The long-term impact of the standards on hospital prices and insurance markets is unknown. We used a series of national data sources from the period 2006-22 to compare hospital prices and margins and insurer premiums and fees in Rhode Island and comparison states before and after the initiation of the standards in 2010. Our study found that the standards were associated with large relative reductions in hospital prices, averaging 9 percent over the course of the study period. Reductions were similar for both the fully insured and the self-insured segments. Hospital price reductions translated into substantial reductions in fully insured premiums relative to comparison states, reaching $1,000 per member by 2022. Yet the standards had a modest impact on overall commercial premiums in Rhode Island, likely because of premium increases in the self-insured segment that were not subject to the standards. Further, the standards reduced commercial revenue for Rhode Island hospitals by nearly $160 million annually, which exceeded premium reductions. Together, the affordability standards have benefited employers and members with fully insured plans at the expense of hospitals.