On October 29, 2020, the Departments of Health and Human Services, Labor, and the Treasury (“the Departments”) issued a final rule requiring private-sector health insurers and self-insured health plans to disclose treatment prices and cost-sharing information with consumers. The Transparency in Coverage rule comes in response to President Trump’s executive order aiming to increase transparency in the healthcare industry. It is slated to become effective on January 11, 2021.
The final rule contains three main parts: (1) requirements for plans and issuers to disclose estimated costs associated with covered items or services furnished by a particular provider; (2) requirements for plans and issuers to publicly disclose reimbursement rates; and (3) amendments to the medical loss ratio program rules to allow issuers to receive credit for enrollees’ savings. Each part is discussed below.
First, insurers and employer-sponsored health plans will be required to provide price estimates, including in-network and out-of-network negotiated rates, for health care items and services upon request. The regulation requires these estimates beginning in 2023 for the 500 most “shoppable” items and services on an internet-based self-service tool (and in paper form, if requested by the participant, beneficiary, or enrollee). Among the 500 “shoppable services” are mammograms, physician visits, colonoscopies, and various blood tests, biopsies, and X-rays, and the full list is specified in the regulations. Then, beginning in 2024, price estimates for all remaining items and services offered, including procedures, drugs, durable medical equipment, must be disclosed. The price transparency requirements include disclosure of the following:
- Cost-sharing liability. Cost-sharing liability is defined as the amount a participant, beneficiary, or enrollee is responsible for paying for a covered item or service under the terms of the plan or coverage. This includes any deductibles, coinsurance requirements, and copayments, but excludes premiums, any applicable balance billing amounts charged by out-of-network providers, or the cost of non-covered items or services. The Departments emphasized that the price estimates required under this rule are “not required to reflect the actual or final cost of a particular item or service,” noting that unforeseen factors during the course of treatment (which may involve additional services or providers) can result in higher actual cost-sharing liability following receipt of care than the estimate provided in advance.
- Accumulated amounts. The amount of financial responsibility that a participant, beneficiary, or enrollee has incurred at the time the request for cost-sharing information is made, with respect to a deductible and/or an out-of-pocket limit.
- In-network rates. The negotiated rate and underlying fee schedule rate, reflected as a dollar amount, for an in-network provider or providers for a requested covered item or service must be disclosed, with cost-sharing liability estimates (even if it is not used to determine cost sharing).
- Out-of-network amount. The out-of-network allowed amount for the requested covered item or service, along with any cost-sharing liability, based on that allowed amount, that the participant, beneficiary, or enrollee would be responsible for paying.
- Items and services content list. A list of those covered items and services for which cost-sharing information is being disclosed for items or services subject to a bundled payment arrangement.
- Notice of prerequisites to coverage. A notification, whenever applicable, informing the individual that a specific covered item or service for which the individual requests cost-sharing information may be subject to a prerequisite for coverage.
- Disclosure notice. A notice that communicates certain information in plain language, including several specific disclosures.
Negotiated Rate Disclosures
Second, beginning in 2022, insurers are required to disclose pricing information in three separate machine-readable files.
- In-Network Rate File. The first, “in-network rate file,” must include all applicable rates (including negotiated rates, underlying fee schedules, or derived amounts) with in-network providers for all covered items and services.
- Allowed Amount File. The second, the “allowed amount file,” must include billed charges and allowed amounts, including historical amounts, for covered items and services provided by out-of-network providers. Plans and issuers are only required to include in this file those covered items and services furnished by an out-of-network provider for which the plan or issuer has adjudicated claims and determined it will pay an allowed amount. Plans and insurers do not have to disclose this data if doing so would violate health information privacy laws or if there are fewer than 20 different claims for a provider.
- Prescription Drug File. The third, the “prescription drug file,” includes negotiated rates and historical net prices for prescription drugs furnished by in-network providers. This file can only use National Drug Codes to identify drug. Historical net prices for prescription drugs should reflect any rebates, discounts, chargebacks, fees, or other price concessions. Similar to the allowed amount file, plans and insurers must include the historical net price over a 90-day time period for dates of service within 180 days prior to publication of the file and need not be disclosed if doing so would violate health information privacy laws or if there are fewer than 20 different claims for payment.
Shared Savings via MLR Calculations
Third, insurers that encourage consumers to shop for services from lower-cost, higher-value providers, and that share the resulting savings with consumers are eligible to take credit for such “shared savings” payments when calculating their medical loss ratios (“MLR”). According to the Departments, this will ensure that issuers would not be required to pay MLR rebates based on a plan design that would provide a benefit to consumers that is not currently captured in any existing MLR revenue or expense category. These changes are effective beginning with the 2020 MLR reporting year (for reports filed by July 31, 2021).
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Responses to the final rule have been mixed. Consumer advocacy groups laud the Departments’ efforts at increasing price transparency, and see this rule as a necessary step to enable consumers to make more price-conscious decisions, increase competition, and prevent arbitrary or unreasonable price increases. Insurer stakeholders, on the other hand, caution that disclosing privately negotiated rates will reduce incentives to offer lower rates, resulting in higher costs in some markets.
The Departments’ estimates for the immediate regulatory compliance costs of the rule wildly outstrip the estimates for the rule’s potential savings. The Departments estimate the final rule will yield savings of approximately $154 million per year due to lower medical costs for insurers and consumers, and estimate the total three-year compliance costs to range from $5.7 billion to $7.9 billion. The Departments acknowledge that some of these costs to plans, issuers, and plan administrators will trickle down to consumers in the form of higher premiums or changes in the cost-sharing structure of plans.
The final rule complements the hospital transparency rule that CMS promulgated in November 2019 (the substance of which is discussed here),which requires hospitals to post pricing information based on negotiated rates for standard items or services. The hospital transparency rule is currently on appeal before the D.C. Circuit Court of Appeals; among the issues raised on appeal include whether HHS’ statutory interpretation of Section 2718(e) of the Affordable Care Act, on which it relied for authority to finalize the rule, was reasonable, and whether the required disclosure of confidential pricing information under the rule violates the First Amendment. Pending any imminent decision, the rule is scheduled to go into effect January 1, 2021.