Trump Administration Finalizes Transparency Rule For Health Insurers

On October 29, 2020, the Departments of Health and Human Services (HHS), Treasury, and Labor issued the “transparency in coverage” final rule. The rule imposes new transparency requirements on group health plans and health insurers in the individual and group markets. HHS also released an accompanying fact sheet,  press release, and summary of the Trump administration’s transparency accomplishments.

Under the final rule, plans and insurers must disclose cost-sharing estimates at the request of an enrollee and publicly release negotiated rates for in-network providers, historical out-of-network allowed amounts and billed charges, and drug pricing information. The rule’s goal is to enable enrollees to estimate their cost-sharing before receiving health care to encourage shopping and price competition amongst providers. HHS also amends its medical loss ratio (MLR) methodology to allow insurers to claim credit for “shared savings payments” made to an enrollee who selects a lower-cost, higher-value provider. In response to comments, HHS significantly increased its cost estimates for the final rule and delayed the rule’s applicability dates, which vary by provision.

The rule relies entirely on legal authority under the Affordable Care Act (ACA), including Section 1311(e)(3) of the ACA and Sections 2715A and 2718 of the Public Health Service Act (enacted by the ACA). These provisions, the preamble notes, show that transparency is a “key component to [the ACA’s] comprehensive framework for regulating private health coverage.” This is yet another example of the Trump administration leveraging provisions of the ACA to achieve some of its major health care priorities, while simultaneously arguing that the entire law is invalid in California v. Texas.

Insurer stakeholders quickly panned the new rule, arguing that it is unnecessary and will lead to higher (not lower) health care prices. It remains unclear if the rule will be challenged in court: the preamble includes an extensive legal justification after commenters questioned the Departments’ statutory authority and raised questions about the rule’s constitutionality. The rule also newly includes a severability clause.

Background

Increased price transparency has been a long-standing priority of the Trump administration. HHS solicited comment on ACA transparency requirements in its 2020 payment rule; commenters generally supported efforts to increase price transparency. HHS also hosted a series of listening sessions on price transparency throughout 2018. HHS has also promoted transparency in various Medicare rules, prescription drug initiatives, and interoperability rules (including its recent insurer interoperability rule). Much of the debate over the effects of transparency is summarized by Harris Meyer here.

The insurer transparency rule stems from an executive order on health care price and quality transparency that was issued by President Trump in June 2019. The executive order directed the Secretaries of HHS, Treasury, and Labor to, within 90 days, solicit comment on how providers, insurers, and group health plans could be required to disclose information about expected out-of-pocket costs before a patient receives care. The executive order technically directed the agencies to issue an advance notice of proposed rulemaking (such as a request for information); the agencies opted for full rulemaking instead.

The Departments issued the proposed insurer transparency rule in mid-November 2019. Comments were originally due on January 14, 2020, but HHS announced a 15-day extension of the comment deadline to January 29, 2020 (insurers had requested a 90-day extension in early December). The Departments received more than 25,000 comments, which can be found here.

The insurer transparency rule complements a similar hospital transparency rule issued earlier by HHS. That rule, which was also required under President Trump’s executive order, directed HHS to require hospitals to post standard charge information based on negotiated rates for common or shoppable items or services. HHS finalized the hospital transparency rule in November 2019. The rule was quickly challenged in court by the American Hospital Association and upheld by the district court. The hospitals appealed to the D.C. Circuit Court of Appeals; oral argument in that lawsuit was held earlier this month. If not set aside by the D.C. Circuit, the hospital transparency rule will go into effect on January 1, 2021.

The Final Rule

Even with rising deductibles and other out-of-pocket costs, the Departments note a lack of incentive for consumers to comparison shop for health services. The goal of the final rule is to enable informed health care decisions by providing consumers with more reliable information on health care costs. With more information about health care costs, consumers can make cost-conscious decisions; face fewer out-of-pocket surprises; and potentially lower overall health care costs. This rule complements the hospital transparency rule by extending to items and services provided by other health care providers, such as physicians. (On this point, the Departments cite the ACA’s legislative history and quote former Sen. Max Baucus (D-MT); the ACA’s legislative history is cited at various points throughout the preamble.)

The Departments believe better access to cost information will increase competition and demand for lower prices. They cite studies showing the value of health care price transparency tools and initiatives, discuss state-level transparency initiatives and disclosure requirements, and highlight voluntary efforts by insurers and employers (such as cost tools) to advance price transparency. Despite these efforts, the Departments note continued gaps in consumers’ ability to access price information and shop for health care services. The final rule, they believe, complements existing efforts but is particularly needed to require disclosures by self-insured group health plans.

Relative to the proposed rule, the Departments newly focus on how the rule will help address surprise bills and reduce prescription drug costs. The Departments believe that transparency will help reduce (though not solve) the potential for surprise medical bills since public information on pricing for in- and out-of-network services could improve regulatory oversight and enable patients to avoid surprise bills. The preamble also includes an extended discussion of on the Trump administration’s prescription drug policies.

Overall, the final rule requires group health plans and health insurers in the individual and group markets to comply with new transparency requirements. First, they must provide cost-sharing information to enrolled individuals through an online tool on their website and in paper form (if necessary). This part of the rule will be phased in and in full effect beginning in 2024.

Second, they must disclose pricing information in three machine-readable files for 1) rates for in-network providers; 2) billed charges and allowed amounts for out-of-network providers during a specified period; and 3) prices for prescription drugs during a specified period. This part of the rule will go into effect beginning in 2022.

Third, insurers can claim credit towards their MLR for “shared savings” when an enrollee selects a lower-cost, higher-value provider. This provision applies beginning with the 2020 MLR reporting year.

While the Departments continue to expect savings of about $154 million per year due to lower medical costs for insurers and consumers, they dramatically increased their estimates of compliance costs. For both the online self-service tool and the machine-readable files, the Departments estimate the total three-year average annual burden of compliance costs and burdens to range from $5.7 billion to $7.9 billion. Prior estimates were in the millions, not billions. Further, consumers will receive $120 million less in MLR rebates each year, and the rule will lead to higher premiums in the individual market. Higher premiums will potentially harm unsubsidized consumers and increase federal premium tax credits by about $1 billion in 2022, $623 million in 2023, $216 million in 2024, and $218 million in 2025. (The Departments previously estimated higher premium tax credits by only $12 million per year.)

The Departments acknowledge the potential for price transparency to impact network breadth and lead to higher costs in some markets. But they reject concerns about anti-competitive behavior, asserting that health care stakeholders will instead be driven to improve competition and lower prices. And they believe sunlight will help prevent arbitrary or unreasonable price increases, noting that providers that raise prices will damage their reputation and competitive position. Insurers and providers may need to remove gag clauses and other restrictions from their contracts going forward, but the Departments leave it to those parties to address contract language that complies with the final rules. The Departments also cite the potential for an increase in reference pricing and the use of network data to aid the review and approval of health insurance rates.

HHS asked for comment on whether to incorporate quality reporting data and require the development of a publicly available, standards-based application programming interface (API). It declines to do both in the final rule but will evaluate future actions to promote access to quality information and an API.

Application Of Disclosure Requirements

Section 1311(e)(3) of the ACA imposes transparency, reporting, and disclosure requirements on qualified health plans. Qualified health plans must disclose, for instance, data on enrollment and disenrollment, denied claims, and out-of-network cost-sharing and payments. HHS points particularly to Section 1311(e)(3)(C) on cost-sharing transparency: under that provision, individuals must be permitted to learn the amount they should expect to owe in cost sharing in a timely manner upon request of the individual. At a minimum, this information must be made available online and through other means for those without internet access. Section 2715A of the Public Health Service Act generally extends Section 1311(e)(3) to group health plans and insurers offering group or individual health insurance coverage.

Under this authority, the new disclosure requirements would apply to non-grandfathered group health plans and health insurers in the individual and group markets as well as “grandmothered” plans. This includes level-funded arrangements for group health plans, multiple employer welfare arrangements, and plans with alternative contracting and payment model structures (such as health maintenance organizations (HMOs) and accountable care organizations). The Departments estimate that about 2,000 entities will be responsible for implementing the final rule and opted to apply the rule broadly so insurers could not shift costs to other markets where transparency requirements did not apply. The rule does not apply to grandfathered health plans, excepted benefits (including limited scope dental or vision benefits), short-term limited duration insurance, health care sharing ministries, or health reimbursement arrangements or other account-based group health plans.

Insured group health plans can enter into a written agreement with an insurer or other third party (such as a health care clearinghouse) to provide the necessary information. In those circumstances, the insurer or third party (not the plan sponsor) will be responsible for a failure to provide full or timely cost-sharing information. This same protection does not apply to self-insured group health plan sponsors that contract with a third party; the sponsor (not the third party) will be liable for failure to comply. Plans and insurers can contract to provide a third-party tool (from, say, a pharmacy benefit manager) to meet prescription drug cost-sharing disclosure requirements but will still be responsible for any violations.

The Departments confirm that state insurance regulators will be the primary enforcers of the transparency rule for fully insured plans and policies since both Sections 1311(e) and 2715A are subject to the enforcement scheme in Section 2723 of the Public Health Service Act. The Department of Labor will enforce the final rules for group health plans subject to ERISA, Treasury will oversee certain church plans, HHS will oversee non-federal governmental plans, and the Office of Personnel Management will oversee the Federal Employees Health Benefits Plans.

The Departments adopt a good faith safe harbor for when a plan or insurer, acting in good faith, makes an error or omission so long as it corrects the information as soon as possible. The same is true if the plan or insurer’s website is temporarily inaccessible. Plans and insurers must replace the incorrect information and may need to notify those affected by the error and the correction (including posting an online notice of how long it will take to correct the error). Plans and insurers that rely on information from a third party will be held harmless for errors unless the plan or insurer should have known that the information from the third party was incomplete or inaccurate. Though commenters pushed for a series of expanded safe harbors, the Departments rejected these requests.

Disclosure Of Cost-Sharing Information

Upon request, plans and insurers must disclose estimates of cost-sharing for covered health care items and services from a particular provider. Items or services include encounters, procedures, medical tests, supplies, drugs, durable medical equipment, and fees (including facility fees). The goal of this requirement is to enable enrollees (or their representatives), participants, or beneficiaries to obtain an estimate of out-of-pocket expenses in advance and then shop for covered items and services.

This requirement will be phased in over time: cost-sharing information must be available for 500 items and services beginning in 2023 with information for all items and services available beginning in 2024. The Departments identify the 500 items and services (along with a plain language description and CPT code) in the preamble along with an explanation of how they identified those items and services.

The Departments adopt a model based on current explanation of benefits (EOB) notices. EOBs—provided to patients after services have been delivered—disclose a wide array of information including the amount billed, the in-network negotiated rate, allowed amounts for out-of-network providers, and the individual’s cost-sharing obligations. Because plans and insurers will be providing this information in advance, the cost-sharing data is only an estimate and will not necessarily reflect the amount that the patient is ultimately charged. Even so, the Departments believe that an EOB-style system will be the most analogous and effective way to present cost-sharing estimates in advance of care.

Plans and insurers will be required to disclose real-time cost-sharing estimates in two ways: 1) through a “user-friendly” online self-service tool; and 2) on paper. Plans and insurers can provide a mobile application version in addition to an online tool but doing so is not required. These tools are only available to current enrollees (rather than prospective enrollees) or their authorized representative. Thus, the tool will not be available to those shopping for coverage or providers to, say, look up a patient’s owed cost-sharing (although a patient can appoint a provider as their authorized representative or share the information with their provider).

Plans and insurers have flexibility to create these tools, but the tool should enable users to search for cost-sharing information from a specific in-network provider or all in-network providers using a billing code (such as a CPT code) or a descriptive term (such as “rapid flu test”). The tool should be able to account for different cost-sharing based on multi-tier provider networks, dosages, and place-based settings (such as an outpatient facility versus a hospital setting). In-network providers should also be easily filtered based on geographic proximity and estimated cost-sharing liability. The tool should also enable searches for out-of-network services and providers. All of this information can be requested in paper form, limited to information for up to 20 providers per request, and mailed (or shared by phone or email) within two business days of the request.

The final rule outlines seven content elements that a plan or insurer must disclose, upon request, to an individual. Plans or insurers can disclose additional information, such as quality information or other metrics, and alert consumers searching for one service (e.g., surgery) to the potential need to search for another service (e.g., anesthesia or pathology). All information must be disclosed in “plain language,” meaning it can be understood by the average enrollee. The content elements are:

Estimated Cost-Sharing Liability

This is an estimate of the amount that the individual would be responsible for paying under the plan’s specific deductible, coinsurance, and copay structure. The estimated liability must be based on actual rates, allowed amounts, and individual-specific cost-sharing limits (rather than a methodology or analytics tool). It should also reflect any cost-sharing reductions. This estimate does not include premiums, balance billing amounts for out-of-network providers, or the cost of non-covered items or services. In addition to the enrollee-specific cost-sharing estimate, plans and insurers may provide low and high range estimates of what a consumer might pay based on other needed services or the complexity of a procedure.

For bundled arrangements, plans and insurers can provide one overall estimate of cost-sharing liability if that is the only liability a patient is expected to face. But, if the bundled payment arrangement imposes cost-sharing separately for each unique item or service, plans and insurers must disclose the estimated cost-sharing liability for each item. Plans and insurers can provide a bundled estimate of cost-sharing (even when not through a bundled payment arrangement) for an entire episode of care when doing so could be relevant to enrollees. But they must still disclose information about each item or service individually as well. The same applies to other alternative payment arrangements (such as direct primary care).

Although the ACA requires specified preventive services to be covered without cost-sharing, some patients may have out-of-pocket costs if that service is needed more frequently than recommended or for diagnostic purposes. A plan or insurer will not know in advance if a colonoscopy, say, is needed for preventive or diagnostic purposes. Thus, if an individual requests cost-sharing information for an in-network colonoscopy, the tool must display the cost-sharing for a diagnostic colonoscopy (rather than assuming it is a preventive colonoscopy for $0). Alternatively, the plan or insurer can allow the individual to request cost-sharing information by specifying whether the service is preventive, non-preventive, or diagnostic.

Accumulated Amounts

This is the amount of cost-sharing that the individual (or, in the case of family coverage, the individual and family) has already paid towards the plan’s deductible or out-of-pocket maximum. The accumulated amount should also reflect any progress towards reaching a treatment limit (such as providing cost-sharing information based on the number of physical therapy visits already used relative to the plan’s cap on the number of visits for physical therapy that could be covered). The Departments acknowledge that the future visits are subject to a determination of medical necessity but believe this information is important for enrollees.

In-Network Rates

This is the amount that a plan or insurer has contractually agreed to pay (whether directly or indirectly through a third party administrator or pharmacy benefit manager) to an in-network provider (including an in-network pharmacy or other prescription drug dispenser) for a covered item or service. This information is based on the negotiated rate and underlying fee schedule rate but expressed in a dollar amount. In a shift from the proposed rule, the Departments will require the disclosure of an in-network rate even if that rate does not impact the individual’s cost-sharing liability. Thus, negotiated rates and underlying fee schedule rates will always be disclosed with cost-sharing liability estimates even if not used to determine cost-sharing. If the plan or insurer has no negotiated rates or underlying fee schedule rates, this element does not apply.

The Departments specifically asked for comments on what amount should be disclosed for prescription drugs (and how to account for rebates and dispensing fees). After consideration of many options for displaying drug cost information, the final rule requires plans and insurers to disclose the negotiated rate of the drug. But, in general, plans and insurers will generally not have to disclose discounts, rebates, or price concessions for a drug. The Departments will consider requiring access to the APIs used by pharmacies in future rulemaking.

Out-Of-Network Allowed Amounts

This is the allowed amount that a plan or insurer would pay for a covered item or service furnished by an out-of-network provider—or any other calculation that provides a more accurate estimate of the amount the plan would pay (such as usual, customary, and reasonable rates). This definition was modified from the proposed rule in response to comments that the maximum allowed amount may not be an accurate reflection of what a plan or insurer might pay to an out-of-network provider. Regardless of the metric used, the plan or insurer must still disclose information regarding enrollee cost-sharing. The Departments extend this requirement to HMOs (even though HMOs generally do not cover any out-of-network services) but notes that HMOs can list the amount as $0.

Items And Services Content List For A Bundled Payment

This is a list of all covered items and services reflected in the cost-sharing estimate for a bundled payment. Plans and insurers do not have to list cost-sharing information separately for each covered item or service in the bundle.

A Notice Of Prerequisites To Coverage

Plans and insurers must inform individuals that they may need to satisfy certain medical management techniques before the item or service will be covered. This list is limited to concurrent review, prior authorization, and step-therapy or fail-first protocols. The Department rejected requests for disclosing additional prerequisites, such as medical necessity determinations and clinical coverage policies.

A Disclosure Notice

This plain language notice must include specific disclosures to inform individuals 1) about the possibility of balance billing that is not reflected in the cost-sharing estimate; 2) that actual cost-sharing may differ from the estimate; 3) that a cost-sharing estimate is not a coverage guarantee; 4) whether copay assistance and other third-party payments count towards cost-sharing limits; and 5) that a recommended preventive service may be subject to cost-sharing if not billed as a preventive item or service. The balance billing statement is only required if balance billing is permitted under state law (it is banned in state-regulated plans in many states and the rule does nothing to preempt those laws). Plans and insurers can include any additional information, including other disclaimers), so long as the information does not conflict with the rule. The Departments provide model language for plans and insurers to use if they choose.

The rule’s requirements are in addition to other disclosure requirements for qualified health plans. The Departments acknowledge that some disclosed data may be subject to privacy, security, and breach notification rules. However, nothing in the rule is intended to alter or otherwise affect these standards. Plans and insurers are expected to comply with data privacy and security responsibilities under federal and state law.

Disclosure Of Negotiated In-Network Rates And Out-Of-Network Allowed Amounts

Plans and insurers must publicly post three machine-readable files: one on all applicable rates (including negotiated rates, underlying fee schedules, or derived amounts) with in-network providers for all covered items and services (the “in-network rate file”); one on billed charges and allowed amounts for covered items and services provided by out-of-network providers (the “allowed amount file”); and one on negotiated rates and historical net prices for prescription drugs furnished by in-network providers (the “prescription drug file”). This information must be updated monthly and made publicly available on an insurer’s or plan’s website free of charge.

Individuals should be able to access the files without having to log-in or otherwise submit identifying information. Plans and insurers do not have to submit their files or websites directly to HHS. Unlike the cost-sharing disclosures noted above, the Departments did not adopt a phased-in implementation approach, and the machine-readable files must be made available beginning in 2022. The agencies expect that IT developers, researchers, industry experts, and plans and insurers—with an emphasis on web and mobile app developers—will further innovate once this price information is available.

The rule identifies specific requirements for each file, which are not discussed here in detail. In general, each file must include plan and insurer identifier information, billing or other codes to identify items or services, and applicable rates or out-of-network allowed amounts. Amounts must be reflected in dollars and associated with a provider’s National Provider Identifier alongside a Tax Identification Number and a Place of Service Code. Plans and insurers must include plain language descriptions for each billing code, and the machine-readable files must use a non-proprietary open format that will be outlined in future technical guidance.

For the allowed amount file, plans and insurers must include billed charges and allowed amounts for covered items or services furnished by an out-of-network provider over a 90-day time period beginning 180 days prior to publication of the file. (Thus, a file published on June 30, 2021 should include data for the 90-day period beginning on January 1, 2021.) The Departments clarify that the file is intended to include out-of-network care received at an in-network facility (such as by an out-of-network anesthesiologist during an otherwise in-network surgery). This requirement only applies to out-of-network providers where the plan or insurer has adjudicated claims and determined it will pay an allowed amount. Plans and insurers do not have to disclose this data if doing so would violate health information privacy laws or if there are fewer than 20 different claims for a provider.

The Departments had not proposed to require a separate prescription drug file but did so in the final rule in recognition of “the unique pricing attributes of prescription drug products.” The preamble includes significant detail about this new file. This file can only use National Drug Codes to identify drugs (unlike non-prescription services where plans and insurers have flexibility regarding billing codes). Historical net prices for prescription drugs should reflect any rebates, discounts, chargebacks, fees, or other price concessions. Similar to the allowed amount file, plans and insurers must include the historical net price over a 90-day time period for dates of service within 180 days prior to publication of the file and need not be disclosed if doing so would violate health information privacy laws or if there are fewer than 20 different claims for payment.

Shared Savings In The MLR

Under Section 2718 of the Public Health Service Act, insurers that fail to spend a certain percentage of premium revenue on health care claims or quality improvement expenses must rebate the difference to enrollees. The MLR methodology, as certified by HHS, must be designed to account for special circumstances of “smaller plans, different types of plans, and newer plans.” HHS noted that it has used this authority in the past to increase the MLR numerator for mini-med plans, expatriate plans, student health insurance plans, certain qualified health plans, smaller plans, and grandmothered plans.

The final rule changes the MLR methodology to accommodate plans with benefit designs that encourage enrollees to shop for lower-cost, higher-value providers. If these designs result in savings, insurers can share in those savings by taking credit for “shared savings” in the numerator of their MLR calculation. Insurers will not be required to pay MLR rebates based on a plan design that provides a benefit to consumers that is not currently captured in any existing MLR revenue or expense category. This provision will go into effect with the 2020 MLR reporting year (i.e., for reports filed by July 31, 2021). HHS believes this change will help create incentives for consumers to seek lower-cost providers.

As examples of shared savings programs, HHS points to “right to shop” legislation and state employee health plan programs in states that include in Kansas, Maine, Nebraska, New Hampshire, and Utah. Shared savings can be the difference between the rate charged by the selected provider and the average negotiated rate for that procedure across all providers in the insurer’s network. Other plans offer shared savings as a flat dollar amount or offer consumers gift cards, lower cost-sharing, or a premium credit. HHS believes that giving insurers flexibility to include shared savings in the numerator of the MLR will increase their willingness to implement these plan features that could lead to lower health care costs.

Many commenters supported this proposal. Others urged additional clarifications, asking for a uniform standard and a formal definition of “shared savings” to help prevent fraud and abuse. Others encouraged sub-regulatory guidance on operational issues, such as how insurers will report shared savings and how to prevent double counting. HHS rejected these requests, noting that its goal is to encourage innovation and that it will defer to the judgment of state legislators and regulators. Double counting of shared savings should not be an issue because each expense can be reported in only one category or pro-rated between categories for the MLR. HHS also rejected a request to include the costs of implementing the rest of this rule in the MLR numerator as a quality improvement activity.

Still others were opposed to the proposal, arguing that it fails to ensure that savings are used for health care or quality improvement and that it boosts insurers’ profits while diminishing accountability. HHS acknowledges that “shared savings” does not qualify as an incurred claim or a quality improvement act under Section 2718 (i.e., the numerator of the MLR calculation). Others noted that shared savings program could compromise the quality of care by incentivizing choices based on cost, not quality. HHS disagrees and points to its authority in Section 2718(c) to design MLR standardized methodologies that account for different and newer plans and the fact that the MLR allowance is only for shared savings programs that incentivize care from “a lower-cost, higher-value provider.”

HHS assumes that this option will only initially be used by larger insurers or insurers that operate in states that already support such plan designs. These insurers will share, on average, 50 percent of the savings with consumers (increasing the MLR numerator) or retain their portion of the savings to lower premiums (reducing the MLR denominator). HHS estimates that the change will reduce MLR rebate payments from insurers to consumers by about $120 million per year (nearly double from the proposed rule’s estimate of $67 million per year) while enabling savings from lower medical costs of about $154 million per year for insurers and enrollees.