Members Only | March 21, 2023 | Reading Time: 4 minutes
The White House should include education and health care in its fight against hidden fees
They warp whole sectors of the economy, writes Noah Berlatsky.
If you are a Comcast cable customer, your bill probably includes a Broadcast TV fee and a Regional Sports Fee. Together, these may add up to $18-$20 a month or more, according to a 2019 Consumer Reports analysis.
What is a Broadcast TV fee?
It’s a fee to help the cable company pay for obtaining programming. In other words, a fee for providing you the service you signed up for.
The Regional Sports Fee is supposed to offset the cost of providing sports programming. But usually it’s bundled in with the basic package; you can’t really opt out of it. And when sports stopped broadcasting during the pandemic, the cable companies didn’t rescind the fee.
The fees, in other words, are really just part of the cost of paying for cable. They’re presented as additions in order to fool you into thinking the cable price is less than it is.
Consumers pay around $450 a year in hidden fees on their cable bills, garnering cable companies some $28 billion.
The Biden administration is currently encouraging states to use standing consumer protection law to crack down on hidden fees.
It’s also urging Congress to pass a Junk Fee Protection Act to regulate fees in entertainment, travel and hospitality industries.
This is an important initiative that could save consumers money and make many purchasing experiences less of a nightmare.
But Biden should also make it clear that the most egregious examples of hidden pricing aren’t in entertainment and leisure, but in health care and education.
Giant purple people eaters
Deceptive pricing in those industries has contributed to a full-blown crisis, which has eroded the living standards and increased precarity, anxiety and misery across the economy.
Hidden fees are an anticompetitive practice. They prevent consumers from making informed decisions about purchases and make comparison shopping difficult or impossible.
Biden has ramped up antitrust enforcement after a long term erosion of government oversight of concentration. The effort to regulate hidden fees can be seen as part of that initiative.
The exact provisions of the Junk Fee Protection Act are still unclear, but Biden has focused on four kinds of hidden fees.
First, he wants to crack down on fees for event ticket sales. Fees can add up to more than half the cost of the ticket in some cases.
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Second, he wants to prevent airlines from charging fees to select a seat in advance, a practice that effectively charges parents who need to sit next to their young children.
Third, Biden targets early cable, television and phone termination fees. Companies write into contracts a set term of service and if people wish to switch providers earlier, they may be charged as much as $200.
The White House says this practice is anti-competitive, because it charges people for switching companies, reducing competition and disadvantaging new, innovative providers.
It also targets “people when they’re most vulnerable.” If you lose a job and cut back on entertainment, for example, you’re suddenly hit with a huge cancellation fee when you can least afford it.
Finally, Biden wants to end surprise resort fees or destination fees, which are tacked on to a bill at the end of the reservation process.
These fees at $50 or more a night affect as many as one-third of consumers when they are attempting to make hotel reservations.
These initiatives are important. But they are nickel and dime compared to the giant purple people eaters of hidden cost — health care and higher education.
In higher education, one study found that 36 percent of college acceptance letters did not actually tell students how much they would need to pay in tuition and fees.
Another study found that fully half did not disclose the full cost of attendance, including housing, meals, books, supplies and transportation.
Some 15 percent of colleges didn’t make a clear distinction for students between loans and scholarships. One student was informed that they owed $351 a semester. The college did not explain that that involved borrowing $47,000 a year.
Medical billing is even more byzantine than higher education. Consumers rarely know how much insurance will pay, especially in emergency situations. You can’t comparison shop for ambulances when you’re having a heart attack.
Ambulance and anesthesiologist charges for out of network providers could notoriously result in surprise medical fees after an emergency totaling thousands of dollars.
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In 2020, under Donald Trump, Congress passed the No Surprises Act which requires private insurers to cover emergency services at in network prices, preventing these kinds of emergency charges.
Initial studies of the law suggested it was effective in preventing millions of “surprise” bills, and may have protected 12 million consumers in 2022.
But the lack of transparency in medical billing still makes it difficult for consumers to compare prices or make informed decisions.
That’s probably an important reason that the US spends about twice as much per person on health care as comparable countries.
Similarly, between 1980 and 2020, the yearly cost of a four-year undergraduate college jumped from $10,231 to $28,775 adjusted for inflation, a 180 percent increase.
Biden’s efforts to address student debt and surprise emergency health care fees have been laudable. And his initiative on other hidden fees is welcome.
Still, junk fees or hidden costs can seem like a relatively minor issue when you focus on hotels or cable — things that seem like luxuries.
It’s important to recognize that lack of price transparency, and deceptive consumer practices, are endemic.
They have created huge distortions in sectors that directly affect the wellbeing and the future of every family.
Congress should address ticket sales and cable disconnect fees.
But they should also force universities to stop deceiving students about college costs. And they should recognize that our for profit medical system, routed through insurance and layers of confusing bureaucracy, is not working.
Noah Berlatsky writes about the political economy for the Editorial Board. He lives in Chicago. Find him @nberlat.
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