One last surprise from 2020: The Consolidation Appropriations Act's impact on plan sponsors

Even as 2021 draws to a close, we’re still having trouble escaping the pull of 2020. For employers and other sponsors of health and welfare plans, that means reckoning with the new regulations mandated by the Consolidation Appropriations Act (CAA) signed into law during the last days of 2020. The pandemic delayed the planned rollout of many of the CAA’s new compliance regulations, but 2022 will bring a whole new batch of requirements that, taken together, will significantly alter the calculus of sponsors when making decisions about their plan.

What’s changing in 2022

Most of the compliance rules taking effect in 2022 deal with increased pricing transparency and protecting plan participants from surprise medical billing. Not every requirement kicks in at the stroke of midnight on January 1st, and many of these provisions will require further guidance from federal agencies on how sponsors should implement them. The compliance rules are:

Surprise billing andiIndependent dispute resolution. Plan sponsors are no longer able to charge “balance billing” to participants who were given out of network services without their knowledge or consent. Any dispute over surprise billing can also be referred to an independent arbiter after 30 days.

Identification cards listing deductibles and out-of-pocket limit information. Any group health plans must issue either physical or electronic ID cards listing deductible and out-of-pocket limit information, as well as contact information for participants to reach out to with questions.

Continuity of care. Group health plans must continue to provide certain services to select participants in the event a contract with a provider is terminated.

Provider directory and coverage information requests. The CAA requires health plans to make available a directory of all service providers and facilities under contract (which should be updated at least every 90 days), and to respond to participant requests on network and coverage status of providers within one business day.

Advanced explanation of benefits (delayed until more regulations issued). Group health plans must communicate to participants a “good faith estimate” of the cost of individual procedures and services. Health plans would obtain this information from service providers.

Price comparison tool (delayed until January 2023). Group health plans (both grandfathered and non-grandfathered) have to offer participants online tools and phone support that allows them to compare the price of services.

Medical and drug cost reporting (delayed until December 2022). Health plans must provide reports to various federal departments on the cost of certain prescription drugs, which the government will use to compile reports on drug pricing trends available to the public.

What the future looks like for plan sponsors

The new regulations contained in the CAA represent more than just a bureaucratic tweak or two. They’re part of a bipartisan effort in government to make healthcare decisions more transparent for plan participants. If people have access to better information, they’ll make decisions about providers and services that will ultimately lead to higher quality healthcare that also drives down cost. But as we’re already seeing, increasing the transparency of the healthcare system will lead to higher costs for plan sponsors forced to weather a difficult transition.

Part of those increased costs stem from the administrative work plan sponsors need to undertake to ensure their plan documents and communication to participants reflect the latest regulatory reality. Even if those updates don’t incur a significant monetary cost, they still require time and effort from your HR and compliance teams.

But perhaps more worrisome for plan sponsors are the specific provisions which shift more of the financial burden of these health plans from participants to sponsor. The regulations concerning surprise billing and continuity of care, for example, create plausible scenarios where sponsors would fully reimburse service providers for out-of-network costs. This may be desirable from a fairness and ethical standpoint, but there’s little doubt that health plans will become more expensive for sponsors in the immediate future.

A murky regulatory atmosphere surrounding some of the most far-reaching parts of the regulations also compounds the challenge plan sponsors face in keeping their health plans compliant. The CAA originally required plan sponsors to provide a comprehensive set of online price comparison tools (as well as phone support) to participants, but a joint FAQ issued by the Departments of Labor, Health and Human Services (HHS), and the Treasury in August made clear this wouldn’t kick in until January 2023. That date may seem far away but considering the amount of work it takes to set up those systems, plan sponsors need to start planning now. That’s even more difficult when the government still must issue guidelines on what exact criteria the price comparison tools need to meet to stay compliant.

Will greater transparency lead to lower costs?

While plan sponsors can expect to pay more for health plans in the near-term, proponents of greater transparency argue that as participants use the new data to become more selective of healthcare services, competitive pressure among providers will drive down costs for everyone.

Whether this theory pans out at a national level remains to be seen. Much of the debate among experts centers around the quality of the data provided to participants. Given the complexity of how different parts of the healthcare system interact with each other (think of how many procedures and specialist are involved in a surgery), we’re still a long way off from a participant knowing their full financial responsibility for a service with just a glance at a menu. But if prices remain half-opaque to participants, they may not be able to make the meaningful choices that will drive down costs.

Given the rare bipartisan support for making healthcare costs transparent in a sustainable way, this may mean future legislation and regulations that require plan sponsors provide more data. While meeting the regulatory challenges stemming from the CAA may already seem daunting for sponsors, they should also prepare for more in the future.

Kevin Robertson is CRO with HSA Bank.