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Healthcare price transparency regulations: A primer for self-insured employers

April 9, 2021
Heidi Pearson

New healthcare price transparency regulations will have a huge impact for self-insured employers. Here’s what HR teams need to know to get ready.

Let’s say you’re in the market to buy a new car—but there’s a catch. The only information you get to make your decision is a 30-second commercial that includes no details on features or cost. In this situation, how could you possibly choose a vehicle that meets your everyday needs, let alone one that works for your budget?

It’s hard to imagine making a big purchase like a new car without specific information about costs, features, and performance. But we often do exactly that when we get medical care. As patients, we usually don’t have easy access to cost information up front, so we have no opportunity to compare our options. Instead, we head to the nearest clinic, or schedule procedures at a hospital recommended by a family member or friend, hoping we don’t get hit with huge bills later on.

The recent regulatory movement around healthcare price transparency—that is, making healthcare prices available to patients before they decide where to get care—aims to change these market dynamics, reducing costs and improving care delivery. Recent federal regulations, including the Transparency in Coverage Final Rule and the No Surprises Act, have the potential to make a meaningful impact on members of group health plans. Here’s what HR and benefits teams at self-insured employers need to know about this new legislation, initial steps to develop a compliance action plan, and the strategic opportunities for cost savings and employee experience these regulations present.

What is the Transparency in Coverage Rule?

In November 2020, the federal government issued the Transparency in Coverage Final Rule. This rule builds upon the Hospital Price Transparency Rule, which was issued earlier by the U.S. Department of Health and Human Services and went into effect on January 1, 2021. The Hospital Rule requires every U.S. hospital to make pricing information for 300 items and services available to consumers online. According to the Centers for Medicare and Medicaid Services, “this information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.”

The Transparency in Coverage Rule expands the transparency mandate to insurers and group health plans, requiring them to make certain healthcare price information accessible to plan participants at the beginning of each plan year. This Rule has two purposes:

  1. Help plan participants estimate their out-of-pocket costs for specific services and prescriptions and effectively shop for care across providers.
  2. Give consumers access to health coverage information that can be used to understand healthcare pricing and potentially slow the rise in healthcare spending.

What is the No Surprises Act and how does it impact price transparency?

The No Surprises Act was passed as part of the Consolidated Appropriations Act (CAA) signed into law December 27, 2020. The Act sets forth many requirements to protect consumers from expensive out-of-network and surprise bills. Specific to price transparency, it requires non-grandfathered health plans to offer price comparison guidance by phone and an online tool that allows members to compare cost-sharing estimates for items or services given by specific in-network providers.

While the specific compliance requirements still need more concrete definition over the coming months, the No Surprises Act creates further urgency for plan issuers to make healthcare price information available to members before they get care.

What are the healthcare price transparency requirements and deadlines for group health plans?

The No Surprises Act initial compliance deadline is January 1, 2022. This includes both phone and online options for cost-sharing estimate comparisons.

The Transparency in Coverage Rule became effective on January 11 of this year, and outlines three phases of work happening now through 2024:

  • For all plan years beginning on or after January 1, 2022, all group plans and issuers will be required to produce and make available three standardized files of healthcare pricing info, including: (1) negotiated rates for covered items and services; (2) historical allowed amounts and billed charges for OON providers; and (3) in-network rates and historical net prices for all covered prescription drugs.
  • Beginning January 1, 2023, all group plans and issuers will be required to provide plan participants with access to a web-based, personalized, self-service price transparency search tool that covers 500 items and services selected by regulators.
  • Beginning January 1, 2024, the tool must support searches for all items and services.

Next steps for HR and benefits teams

Since group health plans bear the compliance responsibility for these new regulations—and face a potential penalty of $100 per person per day per violation—HR and benefits teams have a lot to explore over the next few months. Here are some of the initial steps your team can take to start developing a compliance roadmap:

  • Talk to your broker/consultant and internal compliance officer to get their perspective on the regulations, understand how they could impact your benefit design and healthcare costs, develop a strategic action plan, and explore compliance solutions.
  • Talk to your third-party administrator (TPA) or clearinghouse to explore how they’re thinking about developing data feeds to support the required public data files and online tools. Find out whether they plan to assemble pricing data into the appropriate public file formats, or if they plan to bring in an outside service.
  • Review your TPA and other vendor contracts and make plans to update as needed to ensure your company has full access to the provider network and pricing data needed to assemble and publish data files.
  • Talk to your benefit administrator or HRIS to see how they can support your price transparency efforts. They may already have solutions in place that can be integrated into your compliance strategy without requiring a new RFP, security review, or vendor approval.

Once you’ve had these initial conversations, you’ll be able to start planning how much time and resourcing you’ll need to set your plan in motion. If possible, get your C-Suite involved in these discussions early so you get the support you need to smoothly navigate the Rule and its impact on your company.

How a strategic transparency approach can drive cost savings and improve health outcomes

While the Transparency in Coverage Rule and No Surprises Act aim to reduce healthcare costs over time, complying with these regulations won’t necessarily lead to lower costs or better care. For healthcare price data to make a lasting impact on how your members choose where to get care, it needs to be displayed in a way that’s easy to act on, and paired with equally important information on quality, experience, and convenience to support smart decision-making. 

Investing in a great user experience matters, especially when it comes to healthcare. If your shoppable price tool is difficult to use or complicates the research process, your members will either stop using it or opt for the highest-price providers, assuming cost correlates with value.

This is why price information is just one important factor to consider in a shoppable healthcare tool. You’ll also want to make sure plan members have access to additional information that helps them make confident choices. For example, if an employee is choosing where to deliver their baby, they don’t just want the cheapest hospital—they also want to be sure the facility is safe, has experienced OB-GYNs, and provides a convenient and supportive patient experience. When you choose a solution that delivers these kinds of insights to your members—above and beyond the cost transparency data required by regulators—your organization can improve health outcomes and drive measurable savings for your plan.

As you begin to develop a healthcare transparency action plan, in addition to considering compliance requirements, take a step back and think strategically about what investments you can make to provide a simple, holistic healthcare search experience. With the right solutions in place, these new regulations can be more than just a cost center. In the long run, they can drive cost savings and care improvements for your plan members and your benefits program.

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