Insights on the Price Transparency Final Rule

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Last week, the Department of Health and Human Services, the Department of Labor, and the Department of Treasury released the final version of their Price Transparency rule.  The rule requires most private health plans (self-insured, ERISA), including group and individual health plans, to not only provide easy-to-understand personalized information on enrollee cost-sharing for healthcare services, but they must also publicly disclose the rates they actually pay healthcare providers for specific services.

What does this mean for Health Plans?

Starting on January 1, 2023, the rule will require health plans to offer an online shopping tool that will allow consumers to see the negotiated rate between their provider and their plan, as well as a personalized estimate of their out-of-pocket cost for 500 of the most shoppable items and services. Then starting on January 1, 2024, these shopping tools will be required to show the costs for the remaining procedures (list will be all-inclusive), drugs, durable medical equipment and any other item or service consumers may need.

In addition, by January 1, 2022, this rule will require plans to make publicly available standardized and regularly updated machine-readable data files.  The idea is that these new data files will open new opportunities for research and innovation to drive improvements within the healthcare market.  The rule envisions technology companies creating additional price comparison tools and portals that will further incentivize competition, as well as allow for research studies and data analysis into how healthcare prices are set.

What are the industry implications?

While these mandates will likely be challenged and evolve, it is essential to consider the impact on network management.

  1. Like the interoperability rules requiring plans to provide members with access to their provider data directories, price transparency will significantly disrupt the playing field for both payers and providers in the commercial market. Now more than ever, tools that provide organizations with the ability to manage their network adequacy and accuracy where payers can better understand a particular provider’s value and cost are critical.
  2. The rule requires ALL commercial plans to publish in-network rates per provider in a machine-readable format, meaning the plan’s commercial network makeup will be exposed. This level of transparency has a variety of potential implications for our industry:
    • Health Plans:
      • Smaller plans which reimburse less may have difficulty meeting network adequacy requirements as providers choose to contract with higher paying plans. This could also mean the consolidation of provider networks, which could harm small insurers.
      • Safety net health plans may be in jeopardy because it will expose their more favorable rates. Further, this could impact the sustainability and affordability of QHPs offered through the Exchanges by placing upward pressure on rates and placing provider participation in networks at risk.
      • All Plans may want to renegotiate provider rates as they become public and. We could see increasing administrative costs for health plans that would need to contract separately with each participating provider.
    • Self-insured employers (SIEs):
      • Price transparency could improve provider networks and allow SIEs to make more informed decisions about plan offerings, thereby helping steer enrollees to higher-quality, lower-cost providers and more meaningfully implement value-based payment designs. If nothing else, this enables SIEs to access and use in-network rate data to negotiate lower rates.
    • Providers:
      • Providers may be unwilling to give a discount to plans and issuers when that discount will be made public, creating a disincentive for plans and providers to establish a contractual relationship (including in narrow networks).
    • Members:
      • Members could experience higher out of pocket charges when plans and issuers switch to a reference pricing structure. Under this structure, participants, beneficiaries or enrollees who select a provider charging above the reference price (or contribution limit) must pay the entire difference. These differences do not typically count toward that individual’s deductible or out-of-pocket limit.
      • Shared savings when shopping for and receiving care from lower-cost, higher-value providers via group or individual health insurance coverage via credit from the Medical Loss Ratio (MLR) calculations.

Machine-Readable File Requirements

The final rule requires three machine-readable files updated monthly and published on the insurer’s website in a location at the insurer’s discretion.

  1. In-Network Rate File – negotiated rates for all covered items and services between the plan or issuer and in-network providers
  2. Allowed Amount File – historical payments to, and billed charges from, out-of-network providers
  3. Prescription Drug File – in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level

CMS Price Transparency Fact Sheet: https://www.cms.gov/newsroom/press-releases/cms-completes-historic-price-transparency-initiative

Final Rule: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS-Transparency-in-Coverage-9915F.pdf