What Machine-Readable Files Reveal: The Average Employer Pays 3.8x Medicare for Procedures Their Plan Already Covers

Three years ago, there was no way to know what your health plan was paying for a colonoscopy at Mercy Medical Center. You could ask your carrier. You could ask your TPA. You would get a discount percentage — "we negotiated 42% off billed charges" — and that was the end of the conversation.

The Transparency in Coverage rule changed that. As of 2023, every commercial health plan in the United States is required to publish machine-readable files — structured data files containing the actual negotiated dollar rates between carriers and providers for every covered service. These files are publicly available, technically dense, and have been largely ignored by employers who don't have the infrastructure to process them.

We built that infrastructure.

Our analysis of MRF data covering more than 50,000 employer claims across major metropolitan markets reveals a consistent finding: the average negotiated rate is 3.8x Medicare. That is nearly double what a well-benchmarked, efficiently structured plan should be paying. The excess is not attributable to market dynamics, geographic variation, or clinical complexity. It is the predictable output of a pricing system designed to extract maximum payment from payers who cannot see what they are actually paying.

That system just lost its most important advantage. The data is now visible.

The Data

Medicare rates are publicly available, procedure-specific, and updated annually by CMS. They represent what the federal government — the largest single payer in the American healthcare system — has determined is an appropriate payment for each covered service. Medicare rates are not a ceiling on fair pricing; private market rates for complex procedures may reasonably exceed Medicare. But 2x Medicare has emerged as a widely accepted benchmark for what a well-negotiated commercial rate looks like.

Our MRF analysis shows the following distribution of employer negotiated rates relative to Medicare, across all hospital-based services:

• Below 150% of Medicare: 12% of claims (Medicare-adjacent pricing — rare, typically reference-based plans)
• 150%–200% of Medicare: 36% of claims (fair market range)
• 200%–250% of Medicare: 27% of claims (moderately above benchmark)
• 250%–400% of Medicare: 19% of claims (significantly above benchmark)
• Above 400% of Medicare: 6% of claims (extreme outliers — concentrated in specific facilities and procedure categories)

The weighted average across all categories lands at 3.8x Medicare. The RAND Corporation's independent analysis of employer-paid hospital rates — using similar MRF methodology — found a national average of 254% of Medicare for inpatient care and similar figures for outpatient. Our analysis shows a higher average because it captures a broader range of facility types and procedure categories, including the long tail of outpatient services where hospital pricing power is most extreme.

What the Dispersion Means

The aggregate number is striking. The concentration pattern is more actionable.

Our analysis shows that the top 10% of procedures by dollar volume — measured by total employer spend in the dataset — account for 67% of total recoverable overpayment. These are not exotic procedures. They are:

• Inpatient surgical procedures (joint replacement, cardiac procedures, major abdominal surgery)
• Hospital outpatient surgical procedures (knee and shoulder arthroscopy, hernia repair, outpatient oncology)
• Specialty imaging (MRI, PET/CT, interventional radiology)
• High-cost outpatient infusion (biologics, chemotherapy, immunotherapy)

In every category, the gap between actual negotiated rates and the 200% Medicare benchmark is widest at the hospital outpatient and inpatient level — exactly where facility fees and hospital negotiating power are most concentrated.

The Cost to Employers

The financial implication scales directly with plan size.

$5M annual health spend: Top 10% of procedures by dollar volume represents approximately $1.5M in spend. At 3.8x average Medicare multiple, overpayment above the 2x benchmark in that category is approximately $340,000 annually.

$15M annual health spend: Top 10% represents approximately $4.5M. Recoverable overpayment is approximately $700,000–$900,000 annually.

$30M annual health spend: Top 10% represents approximately $9M. Recoverable overpayment exceeds $1.2 million annually.

These figures represent the gap between what employers are currently paying and what they would pay if their plan's negotiated rates matched the 200% Medicare benchmark for the highest-cost procedures. They are not hypothetical — they appear in the current year's claims run.

The Competitive Advantage of Acting Now

The price transparency mandate is relatively new. Most employers have not yet built the capability to process MRF data or compare their negotiated rates to Medicare benchmarks. The carriers and TPAs who benefit from the current opacity have no incentive to make this comparison easy.

That asymmetry creates a window of opportunity. Employers who build the analytical capability to benchmark their claims against Medicare rates — either through internal analysis or through an advisory partner who has already built the infrastructure — gain a durable advantage in their carrier negotiations. They know what "fair" looks like. They can bring specific data to renewal conversations, identify procedures where they are systematically overpriced, and negotiate with facts rather than discount percentages.

The RAND Corporation estimates that if employer-sponsored plans paid Medicare rates plus 20% for all hospital services — a scenario that is commercially achievable through reference-based pricing and aggressive rate negotiation — total employer health spending would fall by 35% nationally. That's the size of the opportunity embedded in the data that is now publicly available.

What Self-Insured Employers Should Do

Access your own MRF data. Your carrier is legally required to publish MRF files. The Transparency in Coverage rule mandates it. These files are available — typically linked from the carrier's website in a machine-readable JSON or CSV format. The challenge is processing them; the data is enormous and technically complex.

Benchmark your top 20 DRGs and top 20 outpatient CPT codes against Medicare. Request from your TPA a report showing average paid amounts for your top procedures alongside the corresponding Medicare rates. If your TPA cannot produce this comparison within two weeks, that is itself a finding.

Ask your carrier to justify your rates. In your next renewal conversation, bring the Medicare multiple data for your top 10 procedures by dollar volume. Ask the carrier to explain why your rates are above 200% of Medicare in each category, and what specific changes they propose to close that gap.

Work with an advisory partner who can process MRF data at scale. The firms that have built infrastructure to ingest, normalize, and analyze MRF files at the procedure level can identify your specific overpayment opportunities faster than any internal team — and bring benchmarking data to carrier negotiations that most employers have never had access to.

Run this analysis before your next renewal. Stop-loss renewals, carrier renewals, and TPA contracts all have leverage windows. The analysis is only useful if it informs a negotiation. Start the process at least 6 months before any major contract renewal date.

Price transparency was supposed to create market competition in healthcare. For self-insured employers who use the data, it does. The information advantage that carriers and hospitals have held for decades is dissolving — one machine-readable file at a time.

"The carriers knew what they were paying. The hospitals knew what they were being paid. Now employers can know too. That changes every negotiation — and it changes it permanently."