Preparing for Compliance with the Final Price Transparency Regulations
Employee Benefits Update
Date: December 08, 2020
The final rule on health plan price transparency, issued by the U.S. Departments of Health and Human Services, Treasury and Labor in late October, imposes new disclosure requirements on group health plans. While the requirements do not go into effect until 2022, plan sponsors will need to act in the coming months to prepare for compliance.
Which group health plans are subject to the rule?
The rule applies to self-insured and fully insured medical and prescription drug plans. It does not apply to grandfathered health plans, retiree-only plans, excepted benefits (such as limited-scope dental and vision benefits) or certain other arrangements that are exempted from the Affordable Care Act’s market reform provisions.
What does the rule require?
In general, group health plans and health insurers in the individual and group markets will be required to disclose and make readily available certain cost-sharing and pricing information beginning in 2022.
Publicly available disclosure of negotiated and historical pricing information
Effective for plan years beginning on or after January 1, 2022
Covered plans and issuers must make available to the public three machine-readable files (i.e., digital files that can be used for further processing of data) that include detailed pricing information for all covered items and services, including encounters, procedures, medical tests, supplies, durable medical equipment, prescription drugs and fees (including facility fees).
- The first file must include payment rates negotiated between plans or issuers and in-network providers. This file is not required to include information related to prescription drugs that are subject to a fee-for-service reimbursement arrangement; that information must be reported in a separate file, as described below.
- The second file must include historical pricing information showing unique allowed amounts and billed charges for covered items and services furnished by out-of-network providers. Certain limitations on this requirement are recognized to protect information where disclosure could result in a violation of applicable privacy laws.
- The third file must report the in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.
Plans cannot charge a fee to access the files or require individuals to establish a user account or submit any personally identifiable information to access the files.
The files must be updated monthly and include the date of the most recent update. Specific technical instructions will be provided in separate guidance.
Disclosure of estimated cost-sharing information to covered participants and beneficiaries
Effective for plan years beginning on or after January 1, 2023
In addition to the information that must be made publicly available, plans also must make available to participants, beneficiaries and enrollees (or their authorized representatives) personalized out-of-pocket cost-sharing information and underlying negotiated rates for covered health care items and services. This information must be provided through an internet-based self-service tool and, upon request, in paper form.
The information required to be provided includes estimated cost-sharing liability, amounts already accumulated toward the covered individual’s deductible and out-of-pocket maximum, in-network rates, out-of-network allowed amounts, a list of items and services combined under a bundled payment, notice of prerequisites for coverage (such as prior authorization) and certain other specific disclosures (such as a reminder of the possibility of balance billing).
There are 500 items and services identified in the preamble to the final rule that must be available for searching by the first day of the plan year that begins in 2023. All remaining covered items and services must be available for searching by the first day of the plan year that begins in 2024.
Can plan sponsors rely on third-party service providers or insurers for compliance?
The final rule anticipates that plan sponsors will seek to rely on third-party service providers to do much of the heavy lifting with respect to gathering data and creating and updating the required databases and files. Where a fully insured plan contracts with the insurer or other third party (such as a health care clearinghouse) to provide the required information, the insurer or third party will be responsible for any noncompliance. However, self-insured plan sponsors will remain responsible for compliance (and noncompliance) even if they contract with third parties to provide the required disclosures.
What steps should a plan sponsor take now?
Compliance with the final rule will be a matter of contract negotiation for most plan sponsors.
- If a plan sponsor is preparing to undergo an RFP process or renegotiate a third-party administrator (TPA) contract or insurance contract in the next year, it should ensure that its RFP and/or new contract addresses the disclosure requirements.
- If its current contract will not be up for renewal in the next year, the plan sponsor should reach out to its insurer or TPA to discuss amending the contract to address the disclosure requirements.
- If the plan has a pharmacy benefit carve-out, the plan sponsor should also contact its pharmacy benefit manager and/or specialty drug administrator.
- New contracts and amendments to current contracts should specify who will be responsible for developing, hosting, maintaining and updating the required databases and digital files and who will be responsible for responding to requests for paper disclosures.
- A self-insured plan sponsor should also consider whether the standard of care, indemnity and related provisions of applicable service agreements adequately protect it if a vendor does not fulfill its responsibilities.
- Because these disclosures will be electronic, a self-insured plan sponsor should ensure that contracts with TPAs and PBMs have adequate data security provisions.
- A plan sponsor should anticipate increased plan administration costs related to the new reporting requirements when budgeting for the 2022 plan year.
FOR MORE INFORMATION
For more information, please contact:
Julia Ann Love
Beth A. Mandel
or any member of our Employee Benefits & Executive Compensation group.
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