The Latest Healthcare Transparency Rules for Employers
Theory: New healthcare transparency rules provide employees with greater transparency into hospital and doctor pricing, but faces an uphill battle against the industry who rely on negotiated rates staying hidden.
Healthcare transparency has been top of mind for many consumers and politicians the past few years. The idea is to give employees more visibility into the cost of healthcare so they can make educated decisions when choosing insurance and providers. Patients are often surprised by their healthcare bills and don’t understand there may be a difference in price between providers and locations.
On November 15, 2019, the Trump administration outlined a new set of healthcare pricing transparency rules targeted at giving patients insight into contracted insurance pricing with providers. These rules face significant hurdles before they become an accepted reality.
A set of policies were unveiled, one specifically targeted hospitals and the other at insurers and employers with self-insured plans, that outline a series of steps to bring greater transparency to consumers of how much a service will actually cost.
Hospital healthcare transparency
For hospitals, the final rule requires them to provide multiple sets of rates for 300 services they provide, including the list price, the price if paid in cash without insurance, and both the lowest and highest negotiated rate they have with insurance companies. While not required to specify which insurer has the best or worst negotiated rate, this data is fiercely protected by insurers.
Insurer healthcare transparency
For insurers or employers with self-funded plans, the proposed requirements are more complicated. They will be required to post information to help employees obtain an estimate and understanding of their out-of-pocket expenses and to effectively shop for items and services. In addition, they must disclose in-network provider negotiated rates and historical out-of-network allowed amounts in machine-readable files posted online.
To protect consumers further, changes to the medical loss ratio programs will allow plans to receive a credit in their medical loss ratio calculations for savings they share with enrollees based on usage of pricing navigation tools and seeking care at lower-cost, higher-value providers.
Significant improvements have been made to provide greater healthcare transparency tools to employees as they seek affordable care, especially for those on higher deductible health plans. However, the secrecy surrounding negotiated rates leads most employees to find out the actual cost after the service is incurred. Because of this, employees end up perceiving their benefits as less valuable than they actually are. If employees can effectively see the variations in cost in real-time, over time the negotiated rates should narrow the differences, similar to how online airline ticket aggregators have normalized fare costs for specific routes.
The proposed regulation points out:
“In the health care market, where consumers generally are responsible for paying higher deductibles and have more cost sharing in the form of coinsurance, out-of-pocket liability is often directly contingent upon the reimbursement rate a health plan has negotiated with a provider. The fact that more consumers are bearing greater financial responsibility for the cost of their health care provides the opportunity to establish a consumer-driven health care market. If consumers have better pricing information and can shop for health care items and services more efficiently, they can increase competition and demand for lower prices.”
Equipping patients with actual negotiated rates will drive the desired behavior of shifting patients from high to lower-cost providers. Just like consumers comparison shop for products, they could more effectively shop for healthcare.
How healthcare transparency affects employers
For the self-insured employer, supporting and rolling out this level of transparency will be costly, with investments in new technology and communication plans to effectively launch the initiative with employees, but the administration believes the long-term benefits include cost savings to employers by reducing overall medical spend by employees. However, the employer cost savings will be greatest prior to employees meeting their deductible or out of pocket spending. Once those milestones are reached, there is little incentive for employees to continue researching and shopping for care.
The future of the new transparency rules
Many insurers and hospital systems have already decried the new regulations, with several lawsuits underway, as undermining their secret weapon: negotiated rates. Prescription drug pricing is not immune to the regulations; the estimated cost of a prescription drug from a pharmacy or mail order service must be provided. Further, any allowed amounts for a covered item by out-of-network providers must be clearly stated to provide real-time responses that are based on cost-sharing information at the time of the request.
The rules go into effect on January 1, 2021, although the administration is seeking input on the proposed regulations and legal battles may cause a further delay of the rules.
We will continue to update you with the latest on healthcare transparency.
Categorized in: Benefits Communication & Decision Support