The big picture behind the “Transparency in Coverage” rules
This rule really does have the power to transform our industry. It could also get so bogged down in “implementation wars” that its impact is scarcely felt. Either way, this is something worth paying attention to.
I’m going to be honest with you, the final Transparency in Coverage Rules for health plans surprised me — a lot. Primarily because (1) they will lead to the public release of so much proprietary data, and (2) they will be costly to implement.
Of course, I knew something was coming and that it would be significant. I just didn’t know how significant—and the more I think about it, the more anxious I become to see what happens next. This rule really does have the power to transform our industry. It could also get so bogged down in “implementation wars” that its impact is scarcely felt. Either way, this is something worth paying attention to.
So, what is it that I’m so fired up about? The new rule can be broken into two key components: the public disclosure requirements and the individual cost estimate requirements. The public disclosure rule requires most employer-sponsored health plans to publish what they pay for benefits. You read that correctly By plan years beginning on or after January 1, 2022, non-grandfathered group health plans will have to make publicly available files including all network negotiated rates, actual amounts paid towards out-of-network benefits (subject to limited privacy protections), and prescription drug costs net rebates and similar discounts. That’s a LOT of traditionally proprietary information flooding the marketplace.
Before we explore the implications of all that information suddenly becoming public, it’s worth reviewing the second half of the new rules. Under the individual cost estimate requirements, plans will also have to build web-based portals for plan participants to get real-time cost estimates of what seeking certain medical services will actually cost them. These new cost estimators will be different from much of what I’ve seen in today’s world in a few key ways.
Also: COVID-19 and the need for price transparency
First, they will be granular. This is not a decision support tool — it’s a tool that allows individuals to look at costs on a code-by-code and provider-by-provider basis. Second, the tool needs to take into account real-time cost accumulators. This means that not only will it need to do a “fee look-up,” it will also need to be able to filter that information based on how much the individual member has accrued towards their deductible, out-of-pocket maximum, etc. And, all of this information needs to be made available at the time the information is sought. Finally, there will need to be a “paper-based” option for individuals not wishing to use the online version.
Now, before you flood my inbox with reminders about all the similar products on the market already, I should pause to say that, of course, I know there are many great cost estimators available today. What I see as new and unique about this is the idea that EVERYONE will have access to the information — not just those individuals in plans that already rely upon and value transparency. So, what does this all mean in a practical sense?
Lately, I’ve been using an analogy to explain this rule. Imagine you have a toddler at home who only eats bananas. Good parent that you are, you need to acquire delicious, healthy bananas for your child, and you’d like to do so in a cost-efficient way. You know you can purchase bananas at a big box store, a local supermarket, and a roadside produce stand. But, none of these locations have prices available for the bananas. You won’t know the cost until after the banana is already in your toddler’s tummy. So, how do you choose which bananas to get?
First, you may or may not personally care about the price of the banana. It all depends on if you have a comprehensive, low-deductible grocery plan from your employer (work with me here…). So, if your employer is paying for your groceries, the price likely doesn’t matter. If you are paying, you probably care a lot more.
You likely do care about how fresh the banana is. Ideally, you’d like to feed your baby a yellow (rather than a green or brown banana). Unfortunately, you can’t see the bananas before you buy them either. You have to rely on the grocers’ reputations to decide where you will get the bananas. Certainly, you can rely on the quality of the bananas you’ve purchased in the past or recommendations from friends, but in reality, it’s still a gamble. Just ask anyone who has used Instacart to purchase produce.
Bringing it back to health insurance, our bananas represent a medical service or procedure. And knowing pricing will help change the game. Access to more detailed pricing information will undoubtedly help employers design better self-funded health plans and may, in the long-term, help drive prices down. However, the opposite is also possible: Transparency could lead lower cost providers to increase their prices as readily as it leads to higher cost providers reducing them.
Pricing information is substantially more valuable when combined with quality information to allow for a value determination. Unfortunately, the new rules do not provide for more disclosure regarding quality. In health care, we can’t “see” the banana before we purchase it. Certainly, patients can meet their providers and seek second opinions, as appropriate, but this isn’t the same as comprehensive quality ratings. Without information on quality and the ability to make choices on value instead of just cost, it’s unclear if the transparency rules will have their intended impact.
So, now we watch and wait. While it is technically possible that the Biden administration will roll back the rules, I think there is a relatively low likelihood that this will happen. Notably, it is not clear where the new administration would differ on these rules, and Congress would have to approve any rollback. I do, however, think the timeline will get pushed back. The regulations will require substantial additional guidance to implement. That guidance could take a while. From there, carriers and TPAs will actually have to implement the rules. My best guess is that it will be at least 2023 before broad-scale pricing data is released.
When the information is released, will it help control health care costs? I’d like to hope it will. It will undoubtedly flood the market with additional data points. But, without more quality data, I’m not sure how useful that additional data will be. Ultimately, this is as much a philosophical question as anything else. I’ll continue to hope it helps and do my very best to help the plans I work with both comply and leverage the new information. But in doing so, I will also remain mindful of the law of unintended consequences, because what is clear is that the rules of the game are changing. And it is incumbent upon all of us to keep our eye on the ball.
Jennifer Berman is CEO, MZQ Consulting and senior vice president of compliance at Kelly Benefit Strategies.