The New Transparency Regulations: Will Consumers Finally Be Able to Shop for Healthcare? 

Last week two sets of regulations were issued that would make a lot more health care cost information publically available -- including rates negotiated by health plans and providers. One was the final rule specifying transparency requirements for hospitals, and the other was proposed regulations for group health plans and insurers. If the regs were to go into effect as written, they would seriously shake up business as usual. The key word here is “if,” though. Let’s look at what’s in the regs, the hurdles they face, and what employers need to know about them now. 

Final Rule: Hospitals will be required to make their “standard charges” publicly available beginning in 2021

The two main requirements are:

• Comprehensive machine-readable file. All of this pricing data will be online, in a file, which could then be accessed by apps or transparency tools. The data elements include gross charges, payer-specific negotiated rates, the amount the hospital will accept in cash from a patient, and the minimum and maximum negotiated charges for services. The file must include common billing codes and a description of the service.
• Display of shoppable services. Hospitals are required to display, in a consumer-friendly manner, 300 common services – 70 CMS-selected, and the other 230 hospital-selected. 

There is a penalty of $300 per day for hospitals that don’t comply. The four leading hospital groups have indicated they plan to file a lawsuit arguing the rules exceed the administration’s authority and violate their right to protect trade secrets. The administration has already seen its rule requiring drug prices to be disclosed in direct-to-consumer advertisements invalidated by the courts.

Proposed Rule: Transparency in Coverage Impacting Group Health Plans and Insurers  

The proposed rule would require health plans to provide members with out-of-pocket cost information for all covered health services before they receive care, and – in a surprise move that is drawing lots of attention -- the plan’s negotiated in-network rates as well as out-of-network allowable amounts. (This information must be available online and on paper if requested.) In an effort to encourage consumers to shop for better prices, the administration would encourage plans to share cost savings with enrollees when they choose less-expensive providers, offering relief from minimum loss ratio (MLR) rebates if savings are shared upfront.

The proposed rule allows for a 60-day comment period and would go into effect for plan years one year after being finalized, which probably means January 1, 2022 at the earliest for calendar year plans. This rule applies to non-grandfathered self-insured group health plans and individual and group insurance products – in other words, most health plans. 

What employers need to know now

Here are a few observations to help put this all in context:

• Quality -- Neither rule addresses quality of care. Quality matters, especially for more complex care – it means fewer complications, better outcomes and lower overall costs. The proposed rule for group plans and insurers does ask for comments on how quality information can be incorporated into the price transparency rule. The final rule for hospitals notes that nothing in the rule prevents hospitals from posting quality information along with standard charge information.
• Cost - Some economists expect that transparency would lead to price compression, with smaller providers demanding higher prices and larger providers getting squeezed.
• What is really shoppable? While currently only a small percentage of healthcare services are shoppable, with greater price transparency we can expect certain medical services to become increasingly shoppable. The final rule requires hospitals to disclose the rates for 70 CMS-selected shoppable services. Which begs the question: Is this the right list? That rule is limited to hospital and outpatient department charges, but the proposed rule for group plans and insurers would require disclosure of cost-sharing information for all covered services, including prescription drugs. Perhaps the best place to start is with a list of the services that are most appropriate for consumer decision-making. 
• Timing. The 60-day comment period for the proposed rule seems short for such an extensive – and significant – change. Stakeholders may ask the regulators to extend that period. For example, the regulators are asking for comments on whether group health plans and insurers should be required to use an Application Programming Interface (API) to comply with this new disclosure requirement. This would promote more standardized data exchange across the health care system (consistent with interoperability rules that the government is currently proposing for some public programs) – but would be very difficult to implement. Of course, the substance of the rule is very difficult as well – with many, many open questions.
• How hard is it? Both hospitals and insurers contend that the administration has greatly under-estimated the cost and burden of implementing these rules.
• We undoubtedly will be hearing more from the carriers, economists, and other stakeholders in the coming days. As much as we want to see greater transparency when purchasing health care services, these requirements take the most expansive view of disclosure -- all rates for all services –and are more than a little controversial. It’s as if we’ve suddenly run up to the edge of a cliff, where it’s both exciting and a little scary. Most likely, we’ll need to take some steps back – the question is, how many?  

Special thanks to Stephanie Henkenius, Cheryl Risley Hughes, Geoff Manville, Kaye Pestaina for their contributions to this blog post.