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Q&A: Final rule on health care transparency

Benefits Administration and Outsourcing|Health and Benefits|Total Rewards

By Maureen Gammon , Anu Gogna and Benjamin Lupin | November 24, 2020

Employer plan sponsors should understand the rule essentially requiring that participants receive an explanation of benefits before care.

The departments of Health and Human Services (HHS), Labor and Treasury’s final regulation on health care transparency applies to certain group health plans and health insurance issuers offering group or individual health insurance coverage.1 The following Q&A is intended to assist employer group health plan sponsors in understanding the upcoming compliance requirements.

Q. Why was the rule issued?

The rule was issued pursuant to President Trump’s executive order on improving price and quality transparency. It significantly expands the information that certain group health plans must disclose to health plan participants, beneficiaries and enrollees. The rule will essentially make health insurance issuers (for fully insured plans) and third-party administrators (TPAs) (for self-insured plans) provide plan participants with an explanation of benefits prior to receiving care.

Q. Is this the same rule that applies to hospitals?

No. The health care transparency rule is intended to complement a similar hospital transparency rule issued earlier by HHS. That rule, also issued pursuant to 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. The final hospital transparency rule issued in November 2019 was quickly challenged in court by the American Hospital Association and upheld by the district court. The hospitals appealed to the U.S. Court of Appeals for the District of Columbia Circuit, and oral arguments were held on October 15, 2020. If not set aside by the D.C. Circuit, the hospital transparency rule will go into effect on January 1, 2021.

Q. What plans are subject to the final health care transparency rule?

The disclosure requirements in the final rule would apply to non-grandfathered2 group health plans and health insurers in the individual and group markets. This includes level-funded arrangements, multiple employer welfare arrangements, plans with alternative contracting and payment model structures (such as health maintenance organizations and accountable care organizations) and “grandmothered” plans. This Q&A refers to the plans covered by this rule as “impacted plans.”

Q. What plans are excluded from the final rule?

The final health care transparency 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, health reimbursement arrangements or other account-based group health plans (e.g., health flexible spending accounts).

Q. When does the rule go into effect?

The rule will be phased in over three years, from 2022 through 2024; however, employers are encouraged to begin discussing a plan for compliance with their insurers, TPAs and pharmacy benefit managers (PBMs) as soon as possible. Gathering the required information and building the systems will take both time and coordination prior to 2022.

Q. What will need to be done for plan years that begin on or after January 1, 2022?

The final regulation will require that impacted plans make available to the public (including stakeholders such as consumers, researchers, employers and third-party developers) three separate machine-readable files (which will need to be updated monthly and made available on the insurer’s or plan’s website free of charge) that include detailed pricing information.

The three files that will need to be publicly disclosed consist of:

  1. In-network information: A file showing negotiated rates for all covered items and services between the plan or issuer and in-network providers
  2. Out-of-network information: A file showing both the historical payments to, and billed charges from, out-of-network providers
  3. Prescription drug information: A file detailing the in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level (note this third file was not included in the proposed rule but was added by the final rule)

Q. What must be done for plan years that begin on or after January 1, 2023?

The final rule will require that impacted plans and health insurance issuers make available to participants, beneficiaries and enrollees (or their authorized representative) personalized out-of-pocket cost information, and the underlying negotiated rates, for an initial list of 500 shoppable services through an internet-based self-service tool. This information can be requested in paper form, limited to information for up to 20 providers per request, and must be mailed (or shared by phone or email) within two business days of the request.

Q. What must be done for plan years that begin on or after January 1, 2024?

The personalized out-of-pocket cost information for the remainder of all covered items and services under the plan will be required to be provided via these self-service tools (or in paper form, by request).

Q. What information needs to be included in these personalized disclosures?

The final rule outlines seven content elements that a plan or insurer must disclose, in plain language, upon request:

  1. Estimated cost-sharing liability
  2. Accumulated amounts
  3. In-network rates
  4. Out-of-network allowed amounts
  5. Items and services content list for a bundled payment
  6. A notice of prerequisites to coverage (note: limited to concurrent review, prior authorization, and step-therapy or fail-first protocols)
  7. A disclosure notice (model available)

Plans or insurers may 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).

Because plans and insurers will be providing this information in advance of the care, the departments make it clear that the cost-sharing data are only estimates and will not necessarily reflect the amounts that the individual is ultimately charged.

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 (for example, “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.

Q. Who can request this information?

This cost-sharing information needs to be available upon request to plan participants, beneficiaries and enrollees (or their authorized representative). The final rule clarifies that disclosures of cost-sharing information are only required to individuals who are enrolled in the plan or coverage.

Q. Can employer plan sponsors rely on insurance carriers and TPAs to comply with the final rule?

It depends. Fully 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.

The protection described above does not apply to self-insured group health plan sponsors that contract with a TPA (including a PBM for prescription drug information sharing). The plan sponsor (not the TPA nor PBM) will be liable for any failure to comply with the final rule.

Q. What are the implications of the final rule on employer plan sponsors?

  • Cost increases. The departments estimate in the preamble to the final rule that compliance will cost the industry billions of dollars. The cost of setting up the required systems is likely to be passed through to the employer plan sponsors and could be significant. Whether this is a one-time cost or spread over a period of years will be something to watch as the market for these tools evolves. The alternative of employer plan sponsors building these tools on their own with information from the carriers is unlikely to be cost-efficient or desirable for most employers. Furthermore, employers are unlikely to have the required charge data nor the capability of collecting the required data in-house and building the required tool to share that information. As a result, employers will likely need to pay a third party for compliance.
  • Written agreements for disclosing the information. As stated previously, under the final rule, fully insured group health plans can enter into a written agreement with an insurance carrier 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 employer 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 employer plan sponsor and not the third party will be liable for failure to comply; therefore, plans and insurers will need to contract with third parties to develop and update the various tools needed for the disclosure of information (including not only insurance carriers/TPAs but also PBMs). Because employers sponsoring self-insured plans would still be responsible for any violations of the final rule, employers will likely need to discuss indemnification via the written agreement(s) with these third parties and with qualified legal counsel.
  • Coordinating with multiple parties. Depending on the specific setup of the group health plan, employer plan sponsors are likely going to need to coordinate the gathering and disclosure of different information from multiple vendors. The “items or services” under the final rule include encounters, procedures, medical tests, supplies, drugs, durable medical equipment and fees (including facility fees). This is likely to involve multiple insurance carriers and TPAs and will also require written agreements among the various parties setting forth each party’s responsibilities, deadlines for compliance, updating of the information and so on.

Q. Who oversees enforcement of the final rule?

State insurance regulators will be the primary enforcers of the transparency rule for fully insured plans, while the DOL will enforce the final rule for group health plans subject to ERISA (e.g., self-insured plan). The Treasury will oversee certain church plans, and HHS will oversee non-federal governmental plans.

The departments also include 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’s 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.

Q. Will the rule be challenged in court? Will President-elect Biden support the rule?

This rule will almost certainly face legal challenges. The preamble to the final rule appears to anticipate these challenges, and the rule also includes a severability clause (so if one part of the rule is thrown out, the remainder of the law can still stand). Furthermore, the delayed implementation timeline provides employers, insurance carriers and other interested parties with additional time to lobby for changes (or extensions).

This rule is a result of the Trump administration leveraging provisions of the ACA in an attempt to expand transparency in the health insurance market, happening at the same time as the administration argues that the entire law is invalid in California v. Texas (the Supreme Court case arguing the individual mandate is unconstitutional and that the entire law must fall).3 While comments on the proposed rule reflected general support for more transparency, it will be interesting to see if a new administration will support this rule in its final form.


1 See “Departments finalize transparency in health coverage rule,” Insider, November 2020.

2 The term “grandfathered” is defined in section 1251(e) of the Affordable Care Act and is used by the IRS, DOL, Centers for Medicare & Medicaid Services, and HHS to refer to certain group health plans and health insurance coverage existing as of March 23, 2010 (the enactment date of the Affordable Care Act).

3 See “Potential impact of Supreme Court changes on the ACA,” Insider, October 2020.

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Insider November 2020 PDF .4 MB

Senior Regulatory Advisor, Health and Benefits

Senior Regulatory Advisor, Health and Benefits

Senior Regulatory Advisor, Health and Benefits

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