Transparency Rule Means Requirements for Health Plans
On November 12, 2020, the Departments of Treasury, Labor, and Health and Human Services (the Departments) published a final rule requiring insurers and health plans to publicly disclose pricing information for covered items, in order to provide participants with the ability to estimate cost-sharing liability for health care goods and services.
The Transparency Rule (Rule) is intended to assist consumers in making healthcare decisions by providing estimates of covered services. Employers with self-insured plans may also benefit from having direct access to cost data, useful in plan design and when contracting with TPAs, networks, PBMs, and other service providers.[1]
Overview
The Rule applies to health insurance companies and employer-sponsored group health plans. The Rule does not apply to:
- account-based group health plans, such as HRAs (including individual coverage HRAs), and health FSAs;
- excepted benefits, such as stand-alone dental and vision plans;
- short-term limited duration insurance; and
- grandfathered insurance policies. The Rule does apply to grandmothered policies.[2]
Insurers and plans must disclose:
- in-network negotiated provider rates;
- historical out-of-network allowed charges and associated billed charges[3];
- negotiated rates for prescription drugs; and
- individualized cost-sharing information.
Plans and insurers are required to disclose this information without charge (and if requested, in paper form), and in “real time” via an internet website. The Rule includes detail related to functional capabilities of the website and the scope and standardization of these disclosures.
The Rule has two facets: the first requires insurers and plans to make required rate disclosures available to the public. The second adds the obligation to provide cost-sharing information specific to individual health plan participants.
Group Health Plan Compliance
Fully Insured
A fully insured plan satisfies the Rule by entering into a written agreement with its insurance company, obligating the insurer to provide required information.
Self-Insured
Self-insured plans, however, are not so fortunate. They may enter into agreements with TPAs or health care clearinghouses[4] to provide the information; however, the plan remains liable if the contractor fails to perform its obligations. The Departments note that nothing in the Rule prevents the plan or plan sponsor from seeking indemnification from its TPA or clearinghouse; they also note the plan has an obligation to monitor the contractor’s performance.
Effective and Applicability Dates
The Rule is effective 60 days after publication in the Federal Register,[5] but plans do not have to comply until staggered applicability dates:
January 1, 2022: Plans must comply with requirements for public disclosure of rates, out-of-network allowed amounts, billed charges, negotiated rates, and historical prices for prescription drugs.
January 1, 2023: Plans must provide individual participants with cost-sharing information specific to the participant for a limited set of 500 items as specified in the Rule.
January 1, 2024: Plans must provide individual participants with cost sharing information for all items outlined in the Rule.
Action Items for Plan Sponsors
Fully Insured
Sponsors of fully insured plans must secure a written agreement with their insurance company obligating the latter to provide information as required by the Rule.
Self-Insured
Sponsors of self-insured plans that use TPAs must also secure a written agreement with their TPAs obligating the latter to fulfill the plan’s disclosure obligations. Plan sponsors may wish to address matters such as:
- Implementation of systems to meet various compliance effective dates.
- Means to permit the plan to monitor compliance.
- Indemnification.
- Confidentiality of service provider data now requiring disclosure. Contracts with TPAs, networks, and PBMs often contain confidentiality provisions protecting information such as network rates and reasonable and customary allowances. Such provisions require review and possible modification.
Similar considerations apply if a plan uses a clearinghouse or other third-party to fulfill Rule obligations.
Penalties for Non-Compliance
Typically, plans are subject to a daily tax of $100 for each individual involved in a compliance failure[i]. The Rule provides a safe harbor to plans making reasonable, good faith efforts to comply. A plan will not be deemed “out of compliance” if:
- it makes an error or omission in a required disclosure, provided such error is corrected as soon as practicable.
- it makes an error based on misinformation received from a third party, unless the plan knows or should have known such information was incorrect.
- its website is temporarily inaccessible if the plan provides information as soon as practicable.
ComplianceDashboard will continue to track this legislation and provide updates as they become available and implementation dates near.
[1] The Rule modifies the medical loss ratio calculation (for insurers to provide credits for the cost-savings anticipated from consumers’ use of the required disclosures). Discussion of these modifications is outside the scope of this article.
[2] Grandmothered policies are certain non-grandfathered policies in the small group and individual markets that the government permits without compliance with some provisions of the ACA.
[3] Often referred to as reasonable and customary allowances.
[4] A clearinghouse is an entity that works with health care providers and health plans to convert claims and claims- related data between standard and non-standard formats for purposes of compliance with HIPAA electronic transactions rules.
[5] Currently projected for publication on November 12, 2020.
[i] Subject to various limitations.