Answering myself, apparently it is a fight between administrators on the hospital end and the administrators on the insurance company end.
The insurance administrators are fighting to provide as less reimbursement as possible and the hospital administrators are fighting to provide as much reimbursement as possible. The administrators are probably doing compliance work, negotiations.
I wonder whether regulations can be used to cap the role of administrators at the expense of slightly less efficient market - this might work if administrators are just adversarially interacting and reducing their scope can help the overall picture.
The actual problem here is the regulations that restrict insurance options to comprehensive ones and eliminate the option of getting catastrophic only insurance. This effectively leads to overconsumption of insurance. The other big problem is tax incentives that encourage people to get insurance through their employer.
To elaborate on that, when one gets health insurance from their employer, they effectively get a tax cut, and this in turn leads to larger proportion of employment compensation being paid through health insurance benefits than it needs to be, which translates to extravagant health insurance plans for those who are employed.
When people don't rely on insurance and pay out of pocket, generally prices go down over time and the industry as a whole becomes more efficient. The opposite trend has been in place in healthcare, with a growing percentage of healthcare spending being through insurance. And the result is the opposite of what's seen in more market-based industries: prices going up over time.
The insurance administrators are fighting to provide as less reimbursement as possible and the hospital administrators are fighting to provide as much reimbursement as possible. The administrators are probably doing compliance work, negotiations.
I wonder whether regulations can be used to cap the role of administrators at the expense of slightly less efficient market - this might work if administrators are just adversarially interacting and reducing their scope can help the overall picture.