Federal Agencies Continue Push for Transparency in Health Care Costs (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

In response to the Trump Administration Executive Order regarding improving price and quality transparency in American health care, the Centers for Medicare and Medicaid Services (CMS), the Department of Labor (DOL), and the Treasury Department issued final and proposed regulations that impose transparency requirements on hospitals, health insurers, and group health plans as described below.

Proposed Rule – Transparency in Coverage

CMS, DOL and Treasury have issued a proposed regulation intended to give consumers real-time personalized information about cost-sharing and provide public access to negotiated rates for in-network providers as well as allowed amounts paid for out-of-network providers.

Specifically, the proposed rule will require health insurers and group health plans (including self-insured health plans) to make available to participants and enrollees personalized out-of-pocket cost information for any covered health care item or service through an internet-based self-service tool and in paper form upon request.  The agencies have modeled the proposed format for this price transparency tool on the explanation of benefits (EOB) that is currently provided after claims for benefits have been adjudicated since participants are accustomed to seeing the cost-sharing information presented in this format.  The seven required content elements that will be disclosed are:

  • Estimated cost-sharing liability based on the consumer’s specific plan design and health care provider
  • Accumulated amounts that have already been paid towards the plan’s deductible and out-of-pocket maximum as well as accumulated amounts towards treatment limits on certain items or services
  • Negotiated rates that are paid by the plan or insurer to an in-network provider if the amount impacts the individual’s cost-sharing liability, expressed as a dollar amount
  • Out-of-network allowed amounts showing the maximum amount the plan or insurer would pay for an out-of-network provider
  • Items and services content list for a bundled payment to show all items covered in a cost-sharing estimate for a bundled payment
  • Notice of prerequisites to coverage such as prior authorization or step-therapy that must be completed before the item or service is covered
  • Disclosure notice in plain language that informs the consumer about the possibility of balance billing that is not reflected in the cost estimate, states that actual cost-sharing may be different than the estimate and states the cost estimate is not a guarantee of coverage

The purpose of the tool is to allow participants to comparison shop for the best price for a particular medical service.  However, the tool will generally only be useful for non-emergency care and in situations where a consumer has an incentive to price shop for savings because the individual has not reached the plan’s out-of-pocket maximum.

The proposed rule will also require health insurers and group health plans to make available to the public the in-network negotiated rates with their network providers and historical payments of allowed amounts to out-of-network providers through two separate standardized regularly updated machine-readable files (such as JSON).  Amounts would be reflected in dollars (not formulas) and be associated with a provider’s National Provider Identifier.  The out-of-network file would include allowed amounts for covered items or services by a particular provider for the 90-day period beginning 180 days prior to the publication date of the file.  Group health plans and insurers that contract with a third party to provide this information will be permitted to report aggregated allowed amounts that reflect data from more than one plan or contract.

The agencies believe that making this information available to the public will drive innovation, support informed decision-making and promote competition in the health care industry.  However, health insurers will likely strongly oppose this rule, arguing that it undermines competitive and confidential price negotiations with providers, resulting in higher patient costs.

Finally, the proposed rule will allow health insurers to maintain a greater share of profits when they offer programs that encourage consumers to use lower-cost high-value providers.  They would be allowed to take credit for “shared savings” payments in the medical loss ratio (MLR) calculations and would not be required to pay rebates based on innovative plan designs that provide a benefit to consumers.  This provision would go into effect beginning with 2020 MLR reporting.

The agencies are seeking comments on all aspects of the proposed rule.   The effective date will be no earlier than one year after a final rule is issued.  The agencies have projected that the cost to develop the technology needed to provide the transparency tools could reach almost one billion dollars and cost millions more in ongoing updates and maintenance, which will likely lead to higher premium costs.

Final Rule – Hospital Price Transparency

Beginning January 1, 2021, CMS is requiring all hospitals to establish, update and publish a machine-readable file of their standard charges for all items and services offered by the hospital.  The charge list must include gross charge, payer-specific negotiated charge for each health plan and insurance carrier that patients use, discounted cash price, de-identified minimum negotiated charge and de-identified maximum negotiated charge.

In addition, hospitals will be required to publicly provide in a consumer-friendly manner payer-specific negotiated charges for 300 shoppable services, 70 of which are specified by CMS.  CMS defines a shoppable service as one that can be scheduled by a consumer in advance, such as lab and pathology services, radiology services and surgery.  The services selected for display should be commonly provided to the hospital’s patient population.  The information must be easily accessible (cannot require a user to register), searchable, updated annually and provided free of charge.

CMS may impose a monetary penalty of up to $300 per day if a hospital fails to provide the required transparency information.

The American Hospital Association has already announced that it will challenge this final rule in court, stating that the Administration has exceeded its authority and that the final rule will confuse consumers, encourage anticompetitive behavior and slow down innovation.

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