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Price transparency rule: What it is and what it means for employers

By Greg Morgan, Vice President Health and Wealth Solutions

What is the price transparency in coverage rule?

The “Transparency in Coverage” rule, a provision of the Patient Protection and Affordable Care Act, was finalized in late 2020 by the Departments of Labor, Treasury, and Health and Human Services (the “Departments”).1 The rule aims to lower healthcare costs by giving consumers access to health cost information. Consumers can then use the information to shop and compare costs between medical providers.

The rule requires group health plans and health insurance issuers to share price and benefit information to permit an honest review of medical costs and eventually contain the growth of health care costs.

Regardless of the benefit to consumers, the price transparency rule imposes complex and cumbersome tasks on employers who must collect the data, maintain the information monthly, and design and enhance a useful self-service tool in the next few years.

The rule requires compliance with most provisions by 2022 and extends certain deadlines to 2024. However, in recent guidance issued by the Departments, enforcement of various provisions has been delayed pending additional rulemaking. This requires employers to design and implement systems in the coming months that are flexible enough to accommodate requirements, including changes, in the long term.

Parts of the price transparency rule effective January 1, 2022 lay out new resources that must be made available to plan participants. The provision will not be enforced by the Departments pending additional rulemaking.  Nonetheless, the effective dates remain in place.2 The resources provide access to the cost of prescription drugs and medical services, including:

  • Machine-readable files, negotiated rates and historic net prices for prescription drugs and healthcare procedures
  • Internet-based self-service tools for pricing of covered services
  • Price comparison tools
  • Advanced explanation of benefits

Human Resource (“HR”) leaders will need to connect with carriers and third-party administrators to ensure that their organization is prepared to comply with the new price transparency rule. When reflecting on the current and future state of price transparency programs, organizations should consider the following questions:

1. Can participants navigate the new influx of health care information?

Participants will be flooded with healthcare cost details, not previously available, as providers and employers begin to post pricing information in various places. Currently, information is not comprehensive and maintained by different parties, so establishing a one-stop location for all the data can be challenging. It may be necessary to maintain data in different locations, which can comply with the rule but might be difficult for participants to track.

A valuable tool empowers participants to make informed, evidence-based medical decisions by reviewing in-network and out-of-network rates for upcoming tests and procedures and comparing different providers.

2. Can the organization build and maintain a compliant price transparency tool?

To meet the requirements of the price transparency rule, HR leaders will have to work with carriers and prescription drug management programs to gather and host all the necessary data. The rule’s most basic disclosure requirement mandates the posting of machine-readable data and requires searchable data to be posted outside of a password-protected interface. To remain compliant, the data files, including searchable data, must be updated every month. While a third-party provider may manage data and posting requirements, a trusted individual at the organization will need to understand and manage these obligations.

3. Can the price transparency tool evolve as legislation changes?

In addition to creating the public-facing searchable interface, plans and issuers must maintain the data monthly to ensure up-to-date data pricing. HR leaders should be ready to adapt as additional requirements are stipulated by the relevant agencies. For example, by January 1, 2023, the rule requires plan transparency related to participant contributions, searchable transparency websites, machine-readable pricing matrices and pricing information for a broader category of medical services.3

For plan years that begin on or after January 1, 2024, plans will need to disclose information regarding the entire range of all drugs, procedures, medical equipment and more.4 The plan pricing matrix cannot require a password-protected portal and will expand to include contracts and out-of-network prices for each insurance carrier.

4. Can the organization mitigate the negative impacts of the price transparency legislation?

The primary concern is there will be no view into the long-term cost of care. The required healthcare pricing information simply shows the transactional price of a particular current procedural terminology (“CPT”) code or diagnosis-related group (“DRG”), rather than a true view of the entire care episode. For example, if a participant was interested in the pricing for knee surgery, the current regulations (for employers and providers) only require individual CPT codes. However, most procedures involve a host of codes from a variety of providers. The rule would now require the disclosure of this additional information and participants may expect the information to lead to lower health care costs.

A truly holistic healthcare transparency experience (cost and quality of care) requires participants to obtain information related to the transactional cost, episodic cost, out-of-pocket cost and quality of care information (e.g., outcomes, risks, and dangers). The best view will also capture the extent to which providers pursue particular treatment paths. A provider with a slightly higher cost, but a lower tendency to order a given treatment, will on average be a more cost-effective provider.

As impacted plans outsource compliance requirements to vendors to satisfy the rule, third-party price transparency solutions enable health plans to achieve compliance without the burden. The right partner will work with a client’s health plan insurance carriers and pharmacy benefit managers to collect the required pricing information, aggregate data into the necessary files, create and maintain a required web-based, self-service user interface tool and carry employers forward as the legislation develops.

True healthcare navigation support is needed to supplement the basic requirements of the price transparency rule and employer participants to make fully informed healthcare decisions. When healthcare experts are paired with healthcare decision support and proactive messaging, an integrated experience is created that directly impacts the care journey of participants and overall health plan spend.

  2. While the Departments have issued FAQs that pend any enforcement action, the deferred enforcement only applies to the Departments of Labor, Treasury, and Health and Human Services. The FAQs also request state insurance departments to delay enforcement but cannot mandate such delays. 
    The Departments have issued a delay in enforcement pending additional rulemaking. In the meantime, the Departments will focus on compliance assistance.
  4. Enforcement by the Departments is delayed pending additional rulemaking. The provisions required under the rule will also be reviewed to ensure any duplicative requirement added by the Consolidated Appropriations Act (CAA) is met by complying with the rule. 

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