On October 29, 2020, the Department of Health and Human Services, the Department of Labor and the Department of the Treasury released the final “Transparency in Coverage” rule. The rule requires most group health plans and issuers to provide individualized cost-sharing information to participants, beneficiaries and enrollees upon request, and to publicly disclose in-network provider negotiated rates, historical out-of-network allowed amounts and drug pricing information. The final rule also amends the medical loss ratio (MLR) rules to allow issuers to receive credit in the calculations for savings they share with enrollees utilizing lower-cost, higher value providers.

The final regulations are similar to the proposed regulations issued on November 15, 2019 (described in this previous blog post). While the proposed rule had included a request for information regarding how providing quality measurements and reporting could be used to complement cost-sharing information, the final rules do not address health care quality and continue to focus on price transparency.

Cost-Sharing Disclosure to Participants

The final rule requires most group health plans and issuers to disclose the following cost-sharing information to participants, beneficiaries, and enrollees through a self-service tool made available on a website and to make such information available in paper form upon request:

1.  An estimate of the participant’s or beneficiary’s cost-sharing liability for a covered item or service. There are special rules for estimates related to bundled payment arrangements and preventive items and services:

    • If the request relates to items and services that are subject to a bundled payment arrangement, estimates of the cost-sharing liability for the requested covered item and service, and for each of the items and services within the bundled arrangement, must generally be provided.
    • If the request relates to a preventive item or service that is generally required to be covered without cost-sharing, the estimate must show the cost-sharing liability that applies for non-preventive purposes if the plan cannot determine whether the request is for preventive or non-preventive purposes.

2.  The “accumulated amounts”, which generally include the amounts a participant or beneficiary has paid out-of-pocket at the time of the request with respect to a deductible or out-of- pocket limit, as well as the amount accrued toward any a cumulative treatment limitation (such as a limit on the number of items, days, units, visits, or hours covered in a defined time period).

3.  The in-network rate for the covered item or service, consisting of (a) the amount the plan or issuer has contractually agreed to pay (i.e., the “negotiated rate”), and (b) rate the plan or issuer uses to determine the participant’s or beneficiary’s cost-sharing liability (i.e., the “underlying fee schedule rate”) to the extent it differs.

4.  The maximum amount the plan or issuer will pay for a covered item or service furnished by an out-of-network provider (i.e., the “out-of-network allowed amount”) or any other rate that provides a more accurate estimate of an amount a plan or issuer will pay for the item or service, reflected as a dollar amount. If the plan or issuer reimburses an out-of-network provider a percentage of the billed charge for a covered item or service, the percentage would be disclosed.

5.  If the request relates to an item or service subject to a bundled payment arrangement, a list of items and services included in the arrangement for which cost-sharing information is being disclosed.

6.  If applicable, notification that coverage of the item or service is subject to a prerequisite.

The disclosure must be accompanied by a notice in plain language that includes, among other things, a statement that the actual charges may be different from the estimate of cost-sharing liability and that the estimate is not a guarantee that benefits will be provided for the item or service.

An initial list of 500 items and services will be required to be available via the self-service tool for plan years that begin on or after January 1, 2023. All items and services will be required for the self-service tool for plan years that begin on or after January 1, 2024.

Pricing Disclosure to the Public

The final rule also requires most group health plans and issuers to make three machine-readable files with pricing information available to the public, showing (i) negotiated rates for covered items and services between the plan or issuer and in-network providers (the “In-network Rate File”), (ii) historical payments to out-of-network providers, and (iii) in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level (the “Prescription Drug File”). While the final rule separates the In-network Rate File and the Prescription Drug File, the proposed rules would have required plans and issuers to include negotiated rates for covered prescription drugs in the In-network Rate File. The machine-readable files must be updated monthly. The three files are required to be made public for plan years that begin on or after January 1, 2022.

Satisfying the Participant and Public Disclosure Rules

An insured group health plan may satisfy the requirements of the final rule if the plan requires the issuer offering the coverage to provide the participant disclosures and machine-readable files pursuant to a written agreement between the plan and issuer. If the issuer fails to provide full or timely information, then the issuer, but not the insured plan, will be in violation of the transparency requirements. A self-insured group health plan may similarly contract with a third party to provide the required information. However, if the third party fails to provide compliant information, the plan will be in violation of the transparency requirements.

These requirements do not apply to:

  • Grandfathered health plans that are exempt from many of the Affordable Care Act coverage requirements; or
  • Health reimbursement arrangements or other account-based group health plans (except qualified small employer health reimbursement arrangements) or short term limited duration insurance.

Changes to the Medical Loss Ratio

The MLR provisions of the Affordable Care Act require health insurers to spend at least 85% of premiums for large group policies on medical expenses and activities to improve health care quality.  Amendments to the MLR regulations are finalized as proposed, and beginning with the 2020 MLR reporting year, an issuer may count as medical expenditures (i.e., include in the numerator) any shared savings payments to encourage enrollees to shop for services from lower-cost, higher-value providers (for example, through gift cards, cost-sharing reductions, or premium credits).