As hospitals across the United States have been actively preparing to comply with the Centers for Medicare & Medicaid Services’ (CMS) Price Transparency Final Rule—which took effect January 1, 2021—a new Transparency in Coverage Final Rule (Final Rule, or Rule) was released by the Department of Health and Human Services (HHS). This Rule, however, is not directed towards hospitals and health systems. Instead, it introduced requirements to group health plans and health insurance issuers in the individual and group markets (Payers) in an effort to further address price transparency challenges in healthcare.
Background
In 2010, the Patient Protection and Affordable Care Act (PPACA) introduced the concept of price transparency to healthcare consumers. It restructured and added to the Public Health Service (PHS) Act, requiring Payers to comply with section 1211(e)(3) of the PPACA which imposed certain reporting and disclosure requirements for health plans seeking certification as qualified health plans (QHPs) to be offered on an Exchange. Plans not offered through an Exchange were required to submit the same information to the Secretary of HHS and the relevant state’s insurance commissioner and make that information publicly available.
Since then, the federal government has sought ways to empower the patient with cost information while simultaneously removing the mystery surrounding the price of healthcare services. In June 2019, President Trump signed an executive order which resulted in the Price Transparency Final Rule. The overall idea is that if healthcare consumers are equipped with pricing information, they will shop around for the best price and make a fully informed decision, ultimately driving down healthcare costs. While the idea is simple, the execution is not.
One of the greatest challenges in increasing transparency in the healthcare industry is the charge for a service is rarely the amount paid by the healthcare consumer. Factors that may affect a consumer’s actual price include the presence and type of patient health insurance, in-network vs. out-of-network status, the type of insurance plan (i.e., high-deductible, Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), etc.), and individual plan benefits. Often, the cost for the services received is disclosed to the consumer only after the care is provided. These factors are unique to healthcare and result in a challenge for all healthcare consumers, regardless of their familiarity with the industry. The Final Rule, together with CMS’ Price Transparency Final Rule, will be a two-pronged approach to increase the accessibility of price information.
Who will be affected?
Parties affected by the Final Rule include all “group health plans and health insurance issuers offering group or individual health insurance coverage.”[1]
What will be required?
Public Disclosure Requirements: Over the course of a three-year period, using a phased-in approach, Payers will be required to disclose cost-sharing information and negotiated rate information. Pricing information must be disclosed to the public through three machine-readable files further described below. The applicability date for these provisions to plan years (or policy years) will begin on or after January 1, 2022.
- In-Network Rate File
- Description: File will disclose negotiated payment rates between plans or issuers and providers for all covered items and services.
- Must include: Name and identifier for each coverage option offered by a group health plan or health insurance issuer, billing codes[2], and in-network applicable amounts.[3]
- Out-of-Network Allowed Amount File
- Description: File will disclose the unique amounts a plan or issuer allowed for covered items or services for out-of-network providers during a specified time period.
- Must include: Name and identifier for each coverage option offered by a group health plan or health insurance issuer, billing codes, and out-of-network allowed amounts.[4]
- Prescription Drug File
- Description: File will disclose pricing information for prescription drugs.
- Must include: Name and identifier for each coverage option offered by a group health plan or health insurance issuer, billing codes, and negotiated rates and historical net prices.[5]
Disclosures to Plan Participants, Upon Request: Beginning on or after January 1, 2023, plans and issuers must make cost-sharing information available for 500 items and services identified by the Departments of Labor, HHS, and the Treasury (Departments), and as outlined in Table 1 of the Final Rule, for plan years (or policy years in the individual market). Cost-sharing information for all items and services for plan years (or policy years) must be made available beginning on or after January 1, 2024.
Additionally, upon request from a participant, beneficiary, or enrollee for a covered item or service, the Final Rule states that the Payers must disclose each of the following:
- Estimated cost-sharing liability;
- Accumulated amounts;
- Negotiated in-network rates;
- Out-of-network allowed amounts;
- A list of items and services subject to bundled payment arrangements;
- A notice of prerequisites to coverage; and
- A disclosure notice.
Each of these elements is generally included in the Explanation of Benefits (EOB) after a healthcare service is provided. The Payer must disclose actual data relevant to an individual’s cost-sharing liability when satisfying each of these elements. The Final Rule states that cost-sharing information must be disclosed in plain language through (1) an Internet-based self-service tool that meets certain standards, and (2) in paper form if requested. Plain language is defined to mean “written and presented in a manner calculated to be understood by the average participant, beneficiary, or enrollee.”1
The Departments believe that through creating minimum uniform standards, consumers will benefit and receive more reliable and personalized estimates. Payers are encouraged to innovate around the baseline standards and include information not required by the Final Rule (i.e., quality information) that would aid in a consumer’s ability to make a well-informed decision.
What does this mean?
There has been much ambiguity regarding CMS’ Hospital Price Transparency Final Rule, but the Transparency in Coverage Final Rule makes one thing clear: price transparency in healthcare will be a continual process that will take the participation of the healthcare industry as a whole. Healthcare consumers who have struggled to understand the cost of their care can be hopeful that the introduction of these new resources will allow for increased access to pricing data and therefore the opportunity to make informed choices in regard to their personal healthcare services.
[1] 85 Fed Reg. 72158.
[2] Per the Final Rule, billing codes include a CPT code, a Healthcare Common Procedure Coding System (HCPCS) code, a DRG, a National Drug Code (NDC), or another common payer identifier used by a plan or issuer, such as a hospital revenue code, as applicable, and a plain language description for each billing code.
[3] Per the Final Rule, in-network applicable amounts include negotiated rates, amounts in underlying fee schedules, and derived amounts.
[4] Per the Final Rule, out-of-network allowed amounts include allowed amounts and historical billed charges during the 90-day period that begins 180 days prior to the publication date of the file.
[5] Per the Final Rule, historical net prices include those associated with the 90-day time period beginning 180 days prior to the publication of the file for each provider-specific historical net price.
