How do provider/insurer negotiations affect health costs?

Negotiations between providers and insurers have significant healthcare cost implications–just look at California as an extreme example of this. And the variation is not just on a state-by-state basis. An article in today’s Dallas Morning News clarifies this dynamic:

Average health care costs for Texans with insurance are higher in two midsized markets — Lubbock and Tyler — than in the big urban centers, according to Houston actuary Tim Lee.

In Lubbock and Tyler, there are two dominant hospital systems “that can leverage higher fees” from insurance companies, said Lee, principal and consulting actuary with Milliman Inc., a large national actuarial firm. He spoke at a panel at an Association of Health Care Journalists meeting in Chicago.

In Dallas, Fort Worth, Houston and San Antonio, “they have more systems competing,” which drives down the prices that big hospital networks can negotiate with insurers, he said.