Benefits and Compensation

Final Transparency Rule Adds to Health Plans’ Disclosure Requirements

A new final rule aimed at promoting transparency in health care will impose potentially burdensome new disclosure requirements on many group health plans.

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The regulations issued by the U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury include public disclosure requirements that take effect on January 1, 2022, and plan participant disclosure requirements that will kick in on January 1, 2023. The final rule, published on November 12 (85 Fed. Reg. 72158), will not apply to health plans that remain grandfathered under the Affordable Care Act (ACA).

“Hidden healthcare prices have produced a dysfunctional system that serves special interests but leaves patients out in the cold,” says Seema Verma, administrator of HHS’s Centers for Medicare and Medicaid Services, in a statement announcing the final rule. “Price transparency puts patients in control and supports competition on the basis of cost and quality which can rein in the high cost of care.”

The rule was proposed in November 2019 in response to an executive order calling for healthcare providers, health insurers, and self-insured plans “to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” The agencies are also relying on ACA Section 1311(e) (42 USC 18031(e)).

Public Disclosures

For plan years beginning on or after January 1, 2022, a group health plan must make detailed pricing information available to the public in three separate machine-readable files. These files must detail the in-network rates the plan negotiates with network providers, the allowed amounts paid in the past to out-of-network providers, and the negotiated rates and historical net prices for prescription drugs, respectively. The information must be displayed in standardized format and updated monthly.

The requirement of a separate file for prescription drugs was introduced in the final version of the rule. “The Departments have made this change to ensure that prescription drug pricing information is produced in a manner that is most useful to the public,” DOL, HHS, and Treasury explained in the preamble.

Personalized Disclosures

For plan years beginning on or after January 1, 2023, plans and their insurers must make available to enrolled participants and beneficiaries personalized out-of-pocket cost information for all covered healthcare items and services through an Internet-based self-service tool, and in paper form on request.

In a change from the proposed version of the rule, these cost estimates will at first be required for only 500 of the most shoppable items and services, which are listed in the final rule. For the remainder, plans will have until January 1, 2024.

This disclosure must include these elements:

  • Estimated cost-sharing liability;
  • Accumulated amounts;
  • Negotiated rates, expressed as dollar amounts (not simply a formula, for example);
  • Out-of-network allowed amounts;
  • A list of items and services included in any bundled payment arrangement;
  • A notice of prerequisites (such as prior authorization), if applicable; and
  • A disclosure notice.

The final rule defines “cost-sharing liability” as the amount a participant or beneficiary is responsible for paying for a covered item or service under plan terms—including deductibles, coinsurance, and copayments, but not premiums, balance billing amounts by out-of-network providers, or the cost of noncovered services.

“Negotiated rate” is defined as the amount a plan has contractually agreed to pay an in-network provider, including an in-network pharmacy or other prescription drug dispenser, for covered items and services, whether directly or indirectly, including through a third-party administrator (TPA) or pharmacy benefit manager.

Assigning Compliance Duties

A fully insured group health plan can satisfy the final rules by obtaining a written agreement from the coverage issuer to provide the required information. If such an agreement is in place, then the plan will not be liable if the insurer fails to comply.

The same will not apply, however, to a self-funded plan that employs a TPA. The plan may contract with the TPA to provide the required disclosure, but still “must monitor the other party to ensure that the entity is providing the required disclosure,” according to the preamble to the final rule. The self-funded plan itself would still be directly liable for any violations.

Implications

“Compliance with the new transparency requirements will require significant preparation for both employers sponsoring self-funded group health plans and health insurance issuers,” observed Faegre Drinker attorneys Dawn Sellstrom and Elise Norcini in a blog post. “The election and possible legal challenges may impact the implementation of this final rule.”

David A. Slaughter, JD, is a Senior Legal Content Specialist. He focuses on providing, editing, and updating content related to employee benefits and privacy compliance, including the Thompson HR benefits products. Before coming to BLR, he was an employee benefits compliance editor with Thompson Information Services. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

Questions? Comments? Contact David at dslaughter@blr.com for more information on this topic.