On November 15, 2019, the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury (collectively, the Departments), unveiled a proposed rule (scheduled to be published on November 27, 2019) that, if finalized, would impose new transparency requirements on group health plans and health insurers in the individual and group markets. The proposed rule was developed in response to President Trump’s Executive Order issued in June 2019.
Also in response to that executive order, the Department of Health and Human Services recently released a final rule that will require hospitals to disclose their standard charges, including negotiated rates with third-party payors. Together, the proposed rule and the final rule are intended as part of a broader push to improve price and quality transparency in American healthcare markets. This article focuses on the proposed rule. For a discussion of the final hospital transparency rule, read this recent alert written by our healthcare attorneys.
Proposed Rule Promotes Transparency Regarding Healthcare Costs
The proposed rule, “Transparency in Coverage,” would subject group health plans (including self-insured plans) and health insurers in the individual and group markets to several new transparency requirements. Despite rising deductibles and other out-of-pocket costs, the Departments note a lack of incentive (and information) for consumers to comparison shop for healthcare services. The goal of the proposed rule is to shed light on healthcare costs and ultimately result in more informed healthcare decisions, increased industry competition and innovation, and demand for lower prices. However, the Departments also acknowledge that price transparency may lead to higher costs in some markets.
New Disclosure Requirements for Health Plans
If finalized, the proposed rule would impose two new disclosure requirements designed to make healthcare price information accessible to consumers. The new disclosure requirements would only apply to non-grandfathered (for Affordable Care Act purposes) group health plans and health insurers in the individual and group markets, as well as “grandmothered” plans. The rule would not apply to grandfathered health plans, excepted benefits (e.g., limited-scope vision or dental benefits), short-term limited-duration insurance, health reimbursement arrangements, or other account-based group health plans.
- Disclosure of Cost-Sharing Information. Upon request, health plans and insurers would be required to provide participants personalized estimated cost-sharing information for all covered healthcare items and services through an online tool on their website and in paper form (in some cases). The goal of this requirement is to enable participants to obtain an estimate of their anticipated out-of-pocket expenses in advance and then shop between specific providers before receiving care. The information would need to be disclosed in “plain language” that can be understood by the average participant.
- Disclosure of Negotiated In-Network Rates and Out-Of-Network Allowed Amounts. Health plans and insurers would be required to publicly disclose negotiated rates for in-network providers and historical out-of-network “allowed amounts” (defined in the rule as “the maximum amount a group health plan or [insurer] would pay for a covered item or service furnished by an out-of-network provider”) in two machine-readable files posted on their website. This information would need to be updated monthly and be available on a plan’s or insurer’s website free of charge.
The proposed disclosure requirements would be in addition to existing disclosure requirements for health plans and insurers. Further, nothing in the proposed rule is intended to alter or otherwise affect any data privacy or security responsibilities currently required under federal or state laws. These new disclosure requirements are proposed to go into effect one year after the rule is finalized.
Credit for Shared Savings in Medical Loss Ratio
Another aspect of the proposed rule is a provision intended to encourage health insurers to offer innovative plan designs that incentivize consumers to shop for lower-cost, higher-value providers. Under the proposed rule, insurers could offer new or different plan designs and take credit for “shared savings” payments in their medical loss ratio (MLR) calculations when an enrollee selects a lower-cost provider. Insurers would not have to pay MLR rebates based on a plan design that would provide a benefit to consumers that is not currently captured in any existing MLR revenue or expense category. If finalized, the MLR provision of the rule would go into effect with the 2020 MLR reporting year.
Requests for Comments on Additional Efforts to Improve Price and Quality Transparency
The Departments requested public comments on all aspects of the proposed rule, including how healthcare quality information can be incorporated into the price and cost-sharing transparency requirements included in the proposed rule and the impacts for prescription drug coverage. Comments are due by January 14, 2020.