I'll take a real world insurance event. A friend of mines' ceiling on the 2nd floor began to fall off. The original builder used nails instead of screws and the drywall just fell off. The insurance company said it only costs $400 to replace the dry wall and mud and tape it. The cheapest, out of 5 bids, was $1,000. None of them were remotely close to the actual cost to hire someone to replace.

In your scenario. I see the insurance company going screw you, we are only allowing $200. Where every single doctor goes, hmm, they get $200 from insurance, I'll just jack it up and finally get paid what I'm worth.

And no, people are not really going to do a lot of shopping around for their doctor.