Final Ruling Issued on Transparency in Coverage for Health Insurers

The Transparency in Coverage final rule was released with some fanfare by the Departments of Labor, Health and Human Services (HHS), and Treasury on October 29, 2020. According to the Fact Sheet published by HHS, “this final rule is a historic step toward putting health care price information in the hands of consumers and other stakeholders.” This rule is intended to act in conjunction with the rule issued in November 2019 requiring greater hospital transparency. And, although transparency is critical in controlling the cost of healthcare, the final rule is just one step in the process. It will take a good deal of time and administrative work by employers, health insurers and third-party administrators (TPA) to fully implement the new requirements.

What the Final Rule Does

The final rule applies broadly to all group health plans and health insurance issuers in the group and individual markets. The new transparency and reporting requirements are implemented in three phases beginning in 2022:

Plan years beginning on or after January 1, 2022

In 2022, health plans must provide public access (via website or paper upon an enrollee’s request) to information disclosing:

  • In-network negotiated rates between the plan and providers for all covered services
  • Historical out-of-network allowed amounts and billed charges
  • Drug pricing information

Information must be provided in machine-readable files updated monthly.

Plan years beginning on or after January 1, 2023

In 2023, health plans must make cost-sharing information available to participants through an internet resource providing real-time responses to cost inquiries, based on the plan’s current cost-sharing information, for a list of 500 items and services. These items and services include encounters, procedures, medical tests, supplies, drugs, durable medical equipment and facility fees, to name a few.

The regulators describe this as an EOB-style system, providing similar information to what is currently on an Explanation of Benefits after claims are adjudicated, but providing it in advance so that consumers can shop for lower prices in advance of receiving care.

Plan years beginning on or after January 1, 2024

Building on the initial 500 items and services subject to disclosure, in 2024 disclosure of the same information is required for all items and services provided under a group health plan or health insurance policy.

It’s important to note that insured group health plans can enter into agreements with the insurer or another third party to meet the disclosure requirements. Doing so shifts liability for any compliance errors to the insurer, letting the insured policyholder off the regulatory hook.

Unfortunately, self-funded group health plans do not have the same option. Although self-funded plans will likely need to rely on their TPA to access and share the required cost information, liability remains with the self-funded plan sponsor to ensure compliance with the final rule.

To limit compliance risk, the regulators included a good faith safe harbor for errors and omissions in published data or access to the website that are corrected as soon as possible. Also, plans and insurers can reasonably rely on pricing information obtained from a third party unless the plan or insurer should have known that the information was incomplete or inaccurate.

What the Final Rule Doesn’t Do

It’s safe to say the jury is out on whether net savings will be realized from this new agreement. Although the regulators expect significant healthcare cost savings once the rule takes full effect, they also anticipate significant compliance costs, both for the required online self-service tools and for development of the machine-readable files required for compliance. Without a solution for these compliance costs, health plan administrative costs and insurance premiums will inevitably increase. As is always the case, these increases will ultimately be borne by employers and plan participants. Only time will tell whether the savings garnered by transparency will outweigh the cost of compliance.

Also absent from the language of the final rule is a specific penalty for noncompliance. Because the justification for rulemaking authority comes from both the Affordable Care Act (ACA) and the Public Health Service Act mandates, penalties provided under those laws could apply. Failure to comply with those mandates could lead to a penalty of $100 a day per violation for each affected individual.

What’s Next?

Similar to the hospital transparency rule, this final rule will likely face legal challenges prior to its implementation date of January 1, 2022. Moreover, with a new Presidential administration taking office in January of 2021, all federal regulations are likely to be reviewed and could be repealed or replaced. In the meantime, employers and advisors will need to take swift and early action in 2021 to work with insurers and TPAs to ensure the systems are in place for compliance by the 2022 effective date.

First Person will share updates on this important rulemaking as they develop. In the meantime, please reach out to your advisor or a member of our compliance team for more information.