A proposed rule, released jointly through the Departments of Health and Human Services (HHS), Labor, and Treasury (“The Departments”) on November 15, 2019, seeks to fulfill the Trump Administration’s Executive Order on Improving Price and Quality Transparency, first issued in June of 2019. The Executive Order directed The Departments to develop “price and quality transparency initiatives to ensure that healthcare patients can make well-informed decisions about their care” and to implement various internal strategies such as preparing reports, proposing regulations, and issuing guidance to meet that end.
The ultimate goal of the rule, if finalized, is to make the healthcare industry less opaque when it comes to providing pricing information for services to consumers on an up-front basis, effectively eliminating any potential mystery that may surround the fees associated with a medical bill. The proposed rule will require hospitals to fully disclose their fees for 300 “shoppable” services, including any rates they have negotiated with third-party payers, and will also call on most group health plans (non-grandfathered fully-insured and self-funded) and health insurers to divulge price and cost-sharing specifics to plan participants, enrollees, beneficiaries, and to the public at large. Hospitals that do not comply with the rules would in turn face fines of up to $300 per day. Smaller or more specialized hospitals would be required to disclose their fees for as many of the services that they offer within the “shoppable” category, a characterization that is inclusive of such areas as medical surgery, radiology, laboratory and pathology, and evaluation and management services. Grandfathered health plans will not be affected by the proposed rule.
The Affordable Care Act (ACA) added Section 2715A to the Public Health Service Act (PHSA), requiring fully-insured and self-insured “group” health plans to disclose, among other things, information on cost-sharing and payments with respect to any out-of-network coverage. PHSA section 2715A also requires fully-insured and self-insured “group” plans to help their participants learn about the amount of cost-sharing the participants would be responsible for through an internet website. In addition, PHSA section 2715A gives HHS the authority to determine “other appropriate information” that could – and should – be disclosed to “group” health plan participants through an internet website. Note that PHSA section 2715A accomplishes all of this by cross-referencing the requirements under ACA section 1311(e)(3), which is a “certification” requirement for “individual” market plans sold through an ACA Exchange (so “individual” market plans are picked up here too).
The previous Administration never implemented these requirements but the current Administration is now using this statutory language as the basis for requiring self-insured plans, as well as fully-insured “individual” and “group” plans, to disclose to participants – through an on-line “self-service tool” – specific cost-sharing information for medical items and services covered under the plan. In addition, in accordance with HHS’s authority to determine “other appropriate information” that could – and should – be disclosed to participants, the Departments determined that it would be appropriate to require self-insured plans, as well as fully-insured “individual” and “group” plans, to disclose their negotiated in-network rates and their historical payments to out-of-network providers on public websites.
The hope here is that consumers will no longer be surprised by the medical bill that arrives after they obtain services since they would have access to the data that they need to make an informed financial decision regarding their share of the costs at the outset. This level of consumer empowerment will also give customers the ability to shop around for the best rates, as plans and issuers would be responsible for making their negotiated rates for in-network providers and historical data showing allowed amounts paid for out-of-network providers available to the public via their websites.
HHS has also proposed a portion of the rule that seeks to “preserve the statutorily-required value that consumers receive for coverage under the MLR program, while encouraging issuers to offer new or different value-based plan designs that support competition and consumer engagement in health care.” In short, HHS intends to go about this by essentially encouraging innovation in plan design and allowing insurers to avoid paying MLR rebates if these innovative plan designs result in a “shared savings”.
While discussing the impact of the proposed rule, HHS Secretary Alex Azar commented that this “may be a more significant change to American health care markets than any other single thing we’ve done.” Not surprisingly, a certain level of push-back from the healthcare industry against the Trump Administration is expected here, as insurers and hospitals are likely not overly eager to create such a high level of transparency when it comes to privately negotiated contracts. As such, some prominent hospital networks including the American Hospital Association, Children’s Hospital Association, Association of American Medical Colleges, and the Federation of American Hospitals, have already begun to speak out against the proposed rule, threatening lawsuits against the Administration in the process. Should legal challenges such as these ensue (from a plan, hospital, carrier, vendor, or others) it seems likely that HHS would counter with some common-sense facts and factors—namely that this information must be disclosed under the regulation, and is currently included in an Explanation of Benefits (EOB) and/or a Summary of Benefits and Coverage (SBC) that is already being distributed. HHS will likely argue that all they are doing here is merely requiring that this same information be disclosed in a different way and format.
The Trump Administration is currently seeking additional comment and has extended this period out to 60 days from the initial release of the proposed rule. Under further consideration is whether or not plans and health insurance issuers should have to make data available through a standards-based application programming interface (API) and the precise ways in which healthcare quality information can be folded into the price transparency rules.
What Disclosures are Required under the Proposed Regulations?
First content element – Estimated cost-sharing liability – all applicable forms of cost-sharing, including deductibles, coinsurance requirements, co-payments, out-of-pocket limits (the Second content element), etc. The “types” of medical items or services mean all encounters, procedures, medical tests, supplies, drugs, durable medical equipment, and fees (including facility fees), for which a provider charges a patient in connection with the provision of health care.
Third and Fourth content elements – Insurers and self-insured plans would also be required to disclose the “negotiated rate,” (3rd element) and in some cases the “allowed out-of-network rate,” (4th element) because these costs are necessary for determining the participant’s cost-sharing responsibilities. The “negotiated rate” means the amount an insurer, the plan, or a third-party administrator (TPA) on behalf of a plan has contractually agreed to pay an in-network provider for a covered item or service pursuant to the terms of an agreement between the provider and the insurer, plan, or TPA. Some provider contracts express negotiated rates as a formula (for example, 150% of Medicare), and in this case, the proposed regulation would require disclosure of the rate that results from using such a formula, which must be expressed as a dollar amount.
Fifth element – with respect to obtaining cost-sharing information for prescription drugs, participants may request this information by billing code (e.g., a CPT code) or by descriptive term (e.g., the name of the prescription drug), thus allowing the participant to learn the estimated cost of a prescription drug obtained directly through a provider, such as a pharmacy or mail order service. Participants would also be allowed to learn about the cost of a set of items or services that include a prescription drug or drugs that is subject to a bundled payment arrangement for a treatment or procedure, although HHS recognizes that there may be some difficulties obtaining accurate cost-sharing information when prescription drugs offered outside of a bundled arrangement are based on un-discounted list prices.
The Sixth element (notice of prerequisites to coverage) and Seventh element (disclosure notices) are quite straightforward and will be the subject of future updates, regulations and guidance.
Insurers/Self-Funded plans must create their own on-line tools for participants to request the “cost sharing information” described above. Many claims paying TPAs, carriers, vendors already offer some of these services on their sites—so wider adoption and dissemination may be required.
The Proposed Regs include an RFI (Request for Information)—seeking all comments on how the (1) cost-sharing information, (2) negotiated in-network rates, and (3) historical payments to out-of-network provider can more easily be assessed by various third parties through a API (Application Program Interface). Patients and providers could have real-time access to data and could learn more about their potential for costs, charges and balance billing should they stay from their “in network” providers.
When will this take effect? First, the regulations need to be finalized. Then, they are expected to take effect 1 year after the “effective date of the final rule”.
Should you have additional questions about how this may begin to impact your plans, please contact your Sales Executive or Account Manager.