No, “The 500” isn’t a sequel to the film where a small Spartan platoon bravely faces an entire army. But it could eventually become the stuff of legend — when the curtain was finally peeled back to reveal the true cost of United States health care.
After years of remaining buried beneath red tape, the final Transparency in Coverage Rule seeks to allow Americans to more accurately predict their health care costs by helping them find and filter care providers within their network and location, and with respect to the amounts paid toward their deductible and out-of-pocket maximum.
With effective dates staggered across a three-year period, the new regulation confidently and steadily marches toward a day when the personal and macro-economics of health care are considerably more transparent.
Rules of Engagement
Published jointly by three federal agencies (Health, Labor and Treasury), the final Transparency in Coverage Rule requires group health plans and insurance issuers to make two key types of disclosures:
1. Disclosures to the public. For plans with effective dates beginning on or after Jan. 1, 2022, plans and issuers must publicly disclose health care pricing online and update it monthly. The pricing information must include:
- In-network provider negotiated rates for covered items and services.
- Historical data of billed and allowed amounts for covered items or services furnished by out-of-network providers and pharmacies.
- Negotiated rates and historical net prices for in-network prescription drugs.
2. Disclosures to plan participants. Plans and issuers must provide certain personalized cost-sharing information to participants and beneficiaries in advance and upon request through an online self-service tool related to:
- 500 of the most “shoppable” health care services and items (effective Jan. 1, 2023)
- All covered health care services, items and prescription drugs (effective Jan. 1, 2024)
Whether it’s a knee surgery, a tonsillectomy, or a mammogram, most people understand the importance of shopping around when time permits. Like any other purchase, we want the right provider to deliver the right service at the right value.
But with health care, this has never been easy. For even the most empowered health care consumers, calculating their remaining deductible, double checking their out-of-pocket max and calling various providers takes time and energy. Oftentimes, they simply settle for the one with the earliest availability, which does a disservice to both patient and plan.
Given these barriers, regulators compiled a list of 500 “shoppable” health care services and items. In developing the list, researchers considered:
- Non-urgent (i.e., planned) procedures.
- The most frequently performed services and items.
- Services with the most significant cost variability.
Examples include X-rays, endoscopy, cesarean delivery, colonoscopy and hernia repair.
Fortunately, the effective dates for the varying degrees of transparency and technological implications outlined in the rule are staggered for plan years beginning on or after:
- 1, 2022. Publicly disclose negotiated rates for in-network providers, historical allowed amounts for out-of-network providers, and prescription drug costs.
- 1, 2023. Disclose to participants via an online self-service tool personalized cost-sharing information and negotiated rates for the identified 500 ‘shoppable’ services.
- 1, 2024. Disclose to participants via an online self-service tool all covered health care items and services.
A Call to (Self) Service
When the first part of the rule goes into effect on Jan. 1, 2022, the public disclosure of previously proprietary information will likely result in healthier competition among plans and health care providers. That’s good, but the truly exciting part is the availability of a self-service tool slated for plans with effective dates of Jan. 1, 2023 and later.
In helping employees make the most optimal health care decisions based on their unique circumstances, the second part of the rule — the disclosures to plan participants — represents the biggest employee engagement opportunity employers have had in decades.
According to the rule, group health plans and issuers must provide their employees with an online self-service tool that:
- Allows plan participants to look at costs on a code-by-code and provider-by-provider basis.
- Includes real-time cost accumulators, such as how much members have accrued toward their deductible, out-of-pocket maximum, etc.
- Distinguishes between in-network negotiated rates and out-of-network allowed amounts.
- Makes these details available online whenever the member needs them.
Duty or Opportunity?
Benefits professionals are well-versed in compliance issues and often regard them as obligations that yield few, if any, opportunities to improve benefits’ cost-effectiveness or overall benefits strategy. And yes, the new rule outlines the penalties for non-compliance. Group health plans and issuers who fail to adhere to these disclosures can face a fine or an excise tax of $100 per person per day per violation.
But this is one mandate where the potential opportunities far outweigh the burden of the obligation.
Considering current benefits utilization trends, any move toward fully transparent self-service is a step in the right direction. Consider that:
- Encouraging employees to seek in-network care can reduce employers’ health care spend by 3%.
- Up to 27% of U.S. emergency room visits can be managed in physician offices, clinics and urgent care centers, saving $4.4 billion
- Nearly 1 in 5 inpatient admissions includes a claim from an out-of-network provider.
- Nearly 45% of Americans have received a “surprise bill” for services they were unprepared for.
While the Transparency in Coverage Rule may seem burdensome, it doesn’t take a mathematician to see the value this regulation will bring to both consumers and employers.
No Sneak Attacks
The No Surprises Act, introduced in late 2020, generated a lot of buzz among benefits professionals. Aimed at protecting patients from surprise medical bills in situations where they have little or no control over who provides their care (e.g., services provided by out-of-network providers at in-network facilities or special services like air ambulances), this rare piece of bipartisan, bicameral legislation was a long time in the making.
In the context of cost transparency, the No Surprises Act is critical to the new rule’s success. Disclosing costs to plan participants by itself means little if they can still get surprise-billed for thousands more than they were expecting. With the two regulations combined, participants can be confident they won’t receive bills beyond those amounts, as long as they go to in-network facilities.
The implication for employers with self-funded plans is two-fold:
- Those who provide easy access to cost transparency information can better educate their employees and build confidence in their benefits selections prior to annual enrollment.
- Those who start educating their employees now about the transparency tools that will be available to them between 2022 and 2024 make a strong case for retention, financial security and employer empathy.
While compliance with the transparency rule may seem daunting, employers can get a head start by breaking down the requirements and delegating compliance responsibilities among their various service providers. To learn about the six most important things you need to do, check out the short e-book Cost Transparency: 500 Ways Benefits Will Get More Personal.
About the Author
Bruce Gillis is the Strategy Practice Leader for Health, Welfare, and Compliance at Businessolver.