The state of price transparency: a 30,000 foot view of where we stand

As health care costs continue to rise with inflation, the need for accurate pricing of hospital and provider services is critical to health plan participants. As a result, price transparency has taken a prominent spot  in the national spotlight.

Newly enacted federal legislations are designed to protect and empower patients by mandating transparent access to hospital and provider price information and enable fully informed, cost-conscious decisions about their health care options. In turn, price transparency is triggering a (re)introduction of consumer-driven strategies that are aligned with the health care industry’s shifts toward cost-effective, value-based care. Price transparency provides an opportunity for benefit professionals to better serve their clients by facilitating accurate fee insights and helping reduce participant costs. But benefit professionals first need to understand price transparency from the participant and provider perspectives, the compliance mandates new federal regulations aim to achieve, and most importantly, what strategies benefits advisors and brokers can take to optimize their role and value. 

A new dynamic between patient and provider

Price transparency puts patients in the driver’s seat to control their health care decisions and dollars. This empowerment is especially important for participants in an employer-sponsored health plan. Many workers are “financially fragile” and have not set aside savings specifically earmarked for out-of-pocket medical expenses, including regular cost sharing like deductibles, copayments, and coinsurance.

As health care consumers, participants are gaining access to help them make consumer-driven decisions about their providers. Access to accurate hospital and provider fees help participants anticipate costs and make informed decisions with an understanding of the specific fees and total costs before receiving care. 

Federal protection adds levels of price insight and fairness

Health care price transparency has become so important that it is now a national priority. Federal legislators have passed key regulations intended to support access and insight to price information with added levels of price insight, protection and fairness. 

To increase price transparency practices in health care, the Centers for Medicare and Medicaid Services (CMS) mandated that hospitals and providers publish meaningful price information for patients. As of January 1, 2021, the CMS issued mandates that hospitals operating in the United States provide clear, accessible pricing information online about the items and services they provide. 

Under CMS guidance and final rules, hospitals are required to make pricing information available in machine-readable format and provide a list of shoppable services that a patient can schedule in advance. This is intended to make price information accurate and easier to access and compare prices, estimate the cost of care, and confirm market value.

No Surprises Act

The No Surprises Act ​​(NSA) took effect in January of 2022. This act established new federal protections against certain surprise out-of-network medical bills. Surprise billing can occur when a patient receives out-of-network services during an emergency visit or from a provider at an in-network hospital without advance notice. This law prohibits providers from billing patients more than the in-network cost-sharing amount in these situations and allows consumers to appeal disputes over coverage of surprise medical bills to an external reviewer. 

Price transparency will not only help alleviate the problems of surprise medical bills, but it will also improve the quality and affordability of the broader U.S. health care system. Health plans, however, need to understand their rights and processes under the NSA and price transparency mandates before submitting a claim.

Advanced explanation of benefits

An explanation of benefits (EOB) from an insurance company contains important information regarding the medical services covered under a health plan. The advanced EOB is essentially a prospective EOB and a response to the good faith estimate that health care providers are required to send to health plan administrators and their members upon request to confirm cost estimates. The NSA requires health plans and insurers to provide an advanced EOB when requested in advance of treatment. The advanced EOB requirement  is designed to give advance notice of how a claim for future, scheduled medical services might be processed for the provider and services submitted; how such a claim will be processed; and most importantly, what the plan will pay and how much the participant will pay out of pocket for the medical services. 

Transparency in coverage

Beginning January 1, 2023, a new transparency rule took effect. The Transparency in Coverage rule requires insurers and plans to disclose negotiated rates for in and out-of-network rate history and drug pricing information. Specifically, the ​​insurance providers will need to make personalized out-of-pocket cost information available. This information will include the underlying negotiated rates for all covered health care items and services, including prescriptions to participants, beneficiaries, and enrollees (or their authorized representative).  The newly effective Transparency in Coverage rule intends to create the same transparency benefits as the NSA for broader medical costs and services. Consumer price transparency tools will include personalized, real-time, cost-share estimates for covered services and items, including pharmacy. Paper versions must be available upon request. For plan years beginning on or after January 1, 2023, the online tool must provide cost-share estimates for 500 shoppable services. For plan years beginning on or after Jan. 1, 2024, the online tool must provide cost-share estimates for all covered services.

Price transparency regulations are changing employer sponsored health plan obligations to members. It has been a difficult adjustment and there is considerable room for improvement. The industry needs more regulatory guidance and compliance enforcement with NSA. This is not happening.  

Adopting a “pure” reference-based pricing strategy

Even with greater transparency and protections, significant price variations can still exist across hospitals and providers for standard procedures. The best response is an approach that is both strategic and compliance-oriented. Because of this, many health plans have adopted reference-based pricing (RBP) strategies. Designed to moderate excessive hospital costs, RBP establishes a benchmark fee schedule and payment ceiling instead of negotiated fees by contracting with a provider network. Plan sponsors and participants benefit from the consistent application across all providers and health networks.

RBP is one of the fastest growing solutions in health benefits cost management. It brings stability to health care prices and point of purchase cost sharing by using Medicare reimbursement rates and other provider cost data to provide an objective cost baseline. This approach offers disciplined pricing that is fair and rational reimbursement for providers to accept. 

An effective way for employer-sponsored health plans to address the requirements and challenges of the NSA and IDR process is to adopt a “pure” RBP plan. These plans, which do not contract with providers, should remain unaffected by NSA because there aren’t any out-of-network claims; nor is there any determination of a median in-network rate. Adopting a “pure” RBP may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage and employee point of purchase cost sharing. Given the wide variation of provider charges for the same services, without any difference in quality, a pure RBP design offers an opportunity to avoid excessive and unreasonable provider fees and charges as well as to reduce eligible expenses which will, in turn, lower cost of coverage and employer and employee contribution.

Harnessing technology and powerful data

Plan administrators benefit from data insights through innovative software and tech-driven data analysis solutions. A tech-driven approach can provide participants with insights and tools to better manage their health care costs. Harnessing technology to understand vast amounts of data can identify potential areas of escalating health costs and identify opportunities to control health costs. Innovative medical billing services utilize powerful data-driven software and online data analytic tools that can provide a degree of price transparency by harnessing price data electronically – allowing fee comparisons that identity fair and reasonable prices.

Selecting a medical billing partner

Benefit professionals should take strategic action to ensure that their clients incorporate the most effective strategies for addressing today’s economic challenges to the “health and wealth” of their participants. A quality health plan should provide resources for easy, direct access and understanding of pricing, benefits and out-of-pocket expense information so plan participants can make informed and cost-effective decisions.

The right medical billing partner can facilitate all these strategic designs and processes – acting as an agent of change, embracing technology innovation and advocating for “what is fair and just.” The right partner will also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as participant legal representation. This support provides invaluable guidance to navigate federal and state healthcare regulations, identify areas to lower risk, reduce costs, and maximize value.

Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.