Employee Benefits Security Administration, IRS, HHS Rule: Transparency in Coverage
WASHINGTON, Nov. 12 -- The Internal Revenue Service, Employee Benefits Security Administration and Department of Health and Human Services has issued a rule (26 CFR Part 54, 29 CFR Part 2590, 45 CFR Part 147 and 45 CFR Part 158), published in the Federal Register, entitled: "Transparency in Coverage".
The rule was issued by Sunita Lough, Deputy Commissioner for Services and Enforcement, Internal Revenue Service, David J. Kautter, Assistant Secretary of the Treasury (Tax Policy), Jeanne Klinefelter Wilson, Acting Assistant Secretary, Employee Benefits Security Administration, Department of Labor, Seema Verma, Administrator, Centers for Medicare & Medicaid Services and Alex M. Azar II, Secretary, Department of Health and Human Services.
DATES: Effective date: The final rules are effective on January 11, 2021. Applicability date: See the SUPPLEMENTARY INFORMATION section for information on the applicability dates.
FOR FURTHER INFORMATION CONTACT:
Deborah Bryant, Centers for Medicare & Medicaid Services, (301) 492-4293. Christopher Dellana, Internal Revenue Service, (202) 317-5500. Matthew Litton or Frank Kolb, Employee Benefits Security Administration, (202) 693-8335.
Customer Service Information: Individuals interested in obtaining information from the Department of Labor (DOL) concerning employment-based health coverage laws may call the Employee Benefits Security Administration (EBSA) Toll-Free Hotline at 1-866-444-EBSA (3272) or visit DOL's website (http://www.dol.gov/ebsa). In addition, information from HHS on private health insurance for consumers can be found on the Centers for Medicare & Medicaid Services (CMS) website (www.cms.gov/cciio) and information on health reform can be found at http://www.healthcare.gov.
* * *
The final rules set forth requirements for group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request to a participant, beneficiary, or enrollee (or his or her authorized representative), including an estimate of the individual's cost-sharing liability for covered items or services furnished by a particular provider.
Under the final rules, plans and issuers are required to make this information available on an internet website and, if requested, in paper form, thereby allowing a participant, beneficiary, or enrollee (or his or her authorized representative) to obtain an estimate and understanding of the individual's out-of-pocket expenses and effectively shop for items and services.
The final rules also require plans and issuers to disclose in-network provider negotiated rates, historical out-of-network allowed amounts, and drug pricing information through three machine-readable files posted on an internet website, thereby allowing the public to have access to health coverage information that can be used to understand health care pricing and potentially dampen the rise in health care spending.
The Department of Health and Human Services (HHS) also finalizes amendments to its medical loss ratio (MLR) program rules to allow issuers offering group or individual health insurance coverage to receive credit in their MLR calculations for savings they share with enrollees that result from the enrollees shopping for, and receiving care from, lower-cost, higher-value providers.
SUPPLEMENTARY INFORMATION:
I. Background
The final rules require group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request, to a participant, beneficiary, or enrollee, which, unless otherwise indicated, for the purpose of the final rules includes an authorized representative, and require plans and issuers to disclose in-network provider rates, historical out-of-network allowed amounts and the associated billed charges, and negotiated rates for prescription drugs in 26 CFR part 54, 29 CFR part 2590, and 45 CFR part 147. HHS also finalizes amendments to its MLR program rules in 45 CFR part 158.
A. Statutory Background and Enactment of PPACA
The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) was enacted on March 30, 2010 (collectively, PPACA). As relevant here, PPACA reorganized, amended, and added to the provisions of part A of title XXVII of the Public Health Service (PHS) Act relating to health coverage requirements for group health plans and health insurance issuers in the group and individual markets. The term group health plan includes both insured and self-insured group health plans.
PPACA also added section 715 to the Employee Retirement Income Security Act of 1974 (ERISA) and section 9815 to the Internal Revenue Code (Code) to incorporate the provisions of part A of title XXVII of the PHS Act, PHS Act sections 2701 through 2728, into ERISA and the Code, making them applicable to group health plans, and health insurance issuers providing coverage in connection with group health plans.
1. TRANSPARENCY IN COVERAGE
Section 2715A of the PHS Act provides that group health plans and health insurance issuers offering group or individual health insurance coverage must comply with section 1311(e)(3) of PPACA, which addresses transparency in health coverage and imposes certain reporting and disclosure requirements for health plans that are seeking certification as qualified health plans (QHPs) that may be offered on an Exchange. A plan or coverage that is not offered through an Exchange (as defined by section 1311(b)(1) of PPACA) is required to submit the information required to the Secretary of HHS and the relevant state's insurance commissioner, and to make that information available to the public.
Paragraph (A) of section 1311(e)(3) of PPACA requires a plan seeking certification as a QHP to make the following information available to the public and submit it to state insurance regulators, the Secretary of HHS, and the Exchange:
* Claims payment policies and practices,
* periodic financial disclosures,
* data on enrollment,
* data on disenrollment,
* data on the number of claims that are denied,
* data on rating practices,
* information on cost-sharing and payments with respect to any out-of-network coverage, and
* information on enrollee and participant rights under Title I of PPACA.
Paragraph (A) also requires a plan seeking certification as a QHP to submit any "[o]ther information as determined appropriate by the Secretary."
Paragraph (C) of section 1311(e)(3) of PPACA requires plans, as a requirement of certification as a QHP, to permit individuals to learn the amount of cost sharing (including deductibles, copayments, and coinsurance) under the individual's coverage that the individual would be responsible for paying with respect to the furnishing of a specific item or service by an in-network provider in a timely manner upon the request of the individual. Paragraph (C) specifies that, at a minimum, such information must be made available to the individual through an internet website and through other means for individuals without access to the internet.
Together these statutory provisions require the overriding majority of private health plans[1] to disseminate a substantial amount of information to provide transparency in coverage. The portions of the final rules that require plans and issuers to disclose cost-sharing information upon request, to a participant, beneficiary, or enrollee implement paragraph (C) of section 1311(e)(3) of PPACA. The portions of the final rules that require plans and issuers to disclose in-network provider rates, historical out-of-network allowed amounts and the associated billed charges, and negotiated rates for prescription drugs implement paragraph (A) of section 1311(e)(3) of PPACA. The requirements to disclose out-of-network allowed amounts specifically implements the requirement in section 1311(e)(3)(A)(vii) to provide information on "payments with respect to any out-of-network coverage." In addition to payment information on out-of-network charges, the Secretary of HHS determined that payment information on in-network rates and prescription drugs is also appropriate information to require plans and issuers to disclose to provide transparency in coverage under section 1311(e)(3)(A)(ix).
PPACA's transparency in coverage requirements were enacted in coordination with a set of requirements that transformed the regulation of private market health plans and issuers. These requirements for the first time apply a comprehensive framework for regulating private health coverage through Federal law.[2] Prior to PPACA, Federal law relied on states to be the primary regulators of health insurance, but applied only a limited set of Federal requirements to govern private health coverage. Where Federal law regulated private health coverage, there was a substantial variation in how these regulations applied, depending on whether private health coverage was self-insured group coverage, large group insurance coverage, small group insurance coverage, or individual insurance coverage. To establish a comprehensive framework for regulating private health coverage, PPACA first set out a series of requirements on "Improving Coverage" that generally apply to group health plans and health insurance issuers offering group or individual health insurance coverage.[3] These requirements ranged from the prohibition on lifetime or annual dollar limits in section 2711 of the PHS Act to the requirement to cover out-of-network emergency services in section 2719A of the PHS Act and include the transparency in coverage requirements in section 2715A of the PHS Act.[4] By including transparency in coverage in this set of requirements that apply to most private coverage, Congress established transparency as a key component to PPACA's comprehensive framework for regulating private health coverage.[5]
On March 27, 2012, HHS issued the Exchange Establishment final rule that implemented sections 1311(e)(3)(A) through (C) of PPACA at 45 CFR 155.1040(a) through (c) and 156.220.[6] The Exchange Establishment final rule created standards for QHP issuers to submit specific information related to transparency in coverage. QHPs are required to post and make data related to transparency in coverage available to the public in plain language and submit this same data to HHS, the Exchange, and the relevant state insurance commissioner. In the preamble to the Exchange Establishment final rule, HHS noted that "health plan standards set forth under the final rules are, for the most part, strictly related to QHPs certified to be offered through the Exchange and not the entire individual and small group market. Such policies for the entire individual and small and large group markets have been, and will continue to be, addressed in separate rulemaking issued by HHS, and the Departments of Labor and the Treasury."
2. MEDICAL LOSS RATIO
Section 2718(a) of the PHS Act, as added by PPACA, generally requires health insurance issuers offering group or individual health insurance coverage (including a grandfathered health insurance plan) to submit an annual report to the Secretary of HHS that details the percentage of premium revenue (after certain adjustments) expended on reimbursement for clinical services provided to enrollees under health coverage and on activities that improve health care quality. The proportion of premium revenue spent on clinical services and quality improvement activities is called the MLR. Section 2718(b) of the PHS Act requires an issuer to provide annual rebates to enrollees if its MLR falls below specified standards (generally 80 percent for the individual and small group markets, and 85 percent for the large group market). HHS published an interim final rule to implement the MLR program in the December 1, 2010 Federal Register (75 FR 74863). A final rule was published in the December 7, 2011 Federal Register (76 FR 76573). The MLR program requirements were amended in final rules published in the December 7, 2011 Federal Register (76 FR 76595), the May 16, 2012 Federal Register (77 FR 28790), the March 11, 2014 Federal Register (79 FR 13743), the May 27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR 12203), the December 22, 2016 Federal Register (81 FR 94183), the April 17, 2018 Federal Register (83 FR 16930), the April 25, 2019 Federal Register (84 FR 17454), and the February 6, 2020 Federal Register (85 FR 7088).
B. Benefits of Transparency in Health Coverage and Past Efforts To Promote Transparency
PPACA's transparency in coverage requirements can help ensure the accurate and timely disclosure of information appropriate to support an efficient and competitive health care market. A well-functioning, competitive market depends on information being available to buyers and sellers.[7] As President Trump's "Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First" explains: "To make fully informed decisions about their health care, patients must know the price and quality of a good or service in advance." Yet, as the Executive order then notes, "patients often lack both access to useful price and quality information and the incentives to find low-cost, high-quality care." The lack of this information is widely understood to be one of the root problems causing dysfunction within America's health care system.
The Departments of Labor, HHS, and the Treasury (Departments) are of the view that transparency in health coverage requirements will strengthen America's health care system by giving health care consumers, researchers, regulators, lawmakers, health innovators, and other health care stakeholders the information they need to make, or assist others in making informed decisions about health care purchases. Health care consumers include various persons and entities that finance health care needs through the purchase of insurance. Health care consumers also include uninsured persons without health coverage who must pay out-of-pocket for health care items and services and uninsured persons who may be shopping for health coverage. Employers that sponsor health plans for their employees and government programs that provide health care services and benefits to consumers are also health care consumers.
By requiring the dissemination of price and benefit information directly to consumers and to the public, the transparency in coverage requirements will provide the following consumer benefits:
* Enables consumers to evaluate health care options and to make cost-conscious decisions;
* strengthens the support consumers receive from stakeholders that help protect and engage consumers;
* reduces potential surprises in relation to individual consumers' out-of-pocket costs for health care services;
* creates a competitive dynamic that may narrow price dispersion for the same items and services in the same health care markets; and
* puts downward pressure on prices which, in turn, potentially lowers overall health care costs.
The goal of the final rules is to deliver these benefits to all consumers and health care stakeholders through greater transparency in coverage.
Comments received in response to the proposed rules on transparency in coverage (discussed in more detail later in this preamble) have strengthened the Departments' view that this price transparency effort will equip the public with information to actively and effectively participate in the health care system as consumers.[8] The majority of commenters acknowledged the importance of the availability of health care pricing information and appropriate tools to assist consumers in health care decision-making and managing health care costs. For these reasons and those explained in more detail below in this preamble, the Departments continue to be of the view that price transparency efforts are crucial to providing consumers (individual and institutional) with meaningful and actionable pricing information in an effort to contain the growth of health care costs.
1. TRANSPARENCY PROVIDES NECESSARY INFORMATION FOR CONSUMERS TO MAKE MORE INFORMED HEALTH CARE SPENDING DECISIONS
As explained in the report, "Reforming America's Healthcare System Through Choice and Competition," consumers have an important role to play in controlling costs, but consumers must have meaningful information in order to create the market forces necessary to achieve lower health care costs.[9] When consumers seek care, they do not typically know whether they could have received the same service from another provider at lower prices. Third-party payers negotiate prices on the consumer's behalf and reimburse costs directly to health care providers, concealing the actual price from the consumer at the point of care. After receiving care, consumers typically receive an Explanation of Benefits (EOB), which details the price charged by the provider, contracted or negotiated rate, and consumer cost sharing. Often, only after services are rendered is the cost of care disclosed to the consumer.
Historically, there has been little to no incentive for some consumers to consider price and seek lower-cost care.[10] Rapidly rising health care spending in the past 20 years, however, has led to consumers shouldering a greater portion of their health care costs through increases in out-of-pocket expenses.[11]
Since 1970, per capita out-of-pocket expenditures have nearly doubled due to a number of factors.[12] These factors include increased enrollment in high deductible health plans (HDHPs) and accompanying health savings accounts (HSAs), and increased plan and issuer reliance on payments towards deductibles comprising the proportion of total cost-sharing payments.[13] As explained in the preamble to the proposed rules, these shifts in plan design and enrollment are correlated with consumers bearing a greater share of their overall health care costs in the private health insurance market than in previous years.[14] From 2002 to the enactment of PPACA in 2010, nationally, the percentage of private sector employees enrolled in a health plan with a deductible increased from 47.6 percent to 77.5 percent and continued to increase to 86.6 percent in 2019.[15] Average family deductibles for private sector employees grew from $958 in 2002 to $1,975 in 2010, and then to $3,655 in 2019--an 85 percent increase since the enactment of PPACA.[16] These changes represent a substantial increase in the amount that consumers must pay for health care before insurance begins to cover items or services.[17] Deductibles made up 52 percent of cost-sharing spending in 2016, up from 30 percent in 2006, while copays dropped from 43 percent to 17 percent of cost-sharing payments over the same period.[18] The gradual shift away from copayments, which are predictable to the consumer through their set dollar amounts for each covered item or service, to deductibles and coinsurance, has increased the need for consumers to know the negotiated price in order to plan ahead and budget for out-of-pocket costs. Over time, price disclosure can improve consumers' ability to better manage costs of utilized health care for a variety of health care plans. Increased enrollment in HDHPs and the shift to coinsurance across plan and benefit designs means that consumers have a vested interest in learning the costs of care prior to paying for items or services, as they are responsible for paying out-of-pocket expenditures, which are directly dependent on the negotiated or contractual price.
These trends in designing health plans have led to consumers bearing an increased share of their health care costs. The fact that more consumers are bearing greater financial responsibility for the cost of their health care provides an opportunity to establish a more consumer-directed and consumer-driven health care market. Eighty-eight percent of consumers support requirements for providers and issuers to disclose prices prior to care.[19] 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.[20] However, consumers generally have little information regarding negotiated rates or out-of-network costs until after services are rendered. There is also wide variability in health care prices for the same service.[21] As a result, it can be difficult for consumers to estimate potential out-of-pocket costs.
2. TRANSPARENCY STRENGTHENS STAKEHOLDERS' ABILITY TO SUPPORT CONSUMERS
Making price transparency information publicly available strengthens the work of other health care stakeholders that help provide care or promote access to care to consumers, or otherwise aim to protect consumers and their interests in the health care system. These entities include researchers, regulators, lawmakers, patient and consumer advocates, and businesses that provide consumer support tools and services. A key aspect of transparency in coverage is to make health care pricing information more accessible and useful to consumers by making the information available to persons and entities with the requisite experience and expertise to assist individual consumers and other health care purchasers to make informed health care decisions.
With information on pricing, these other health care stakeholders can better fulfill each of the unique roles they play to improve America's health care system for consumers. For instance, with pricing information researchers could better assess the cost-effectiveness of various treatments; state regulators could better review issuers' proposed rate increases; patient advocates could better help guide patients through care plans; employers could adopt incentives for consumers to choose more cost-effective care; and entrepreneurs could develop tools that help doctors better engage with patients.
3. TRANSPARENCY REDUCES THE POTENTIAL FOR SURPRISE BILLING
Making the price of care available to consumers before they receive care can reduce the potential for consumers to be surprised by the price of a health care item or service when they receive the bill after receiving care. However, accessible pricing information holds special value for insured consumers.[22] Surprise billing has become a substantial concern for insured consumers, in particular, consumers who receive a bill from an out-of-network provider when they thought an in-network provider was treating them. While price transparency alone is not a complete solution to this problem, the disclosure of pricing directly to consumers could help mitigate some unexpected health care costs. As just noted, making pricing information public can also strengthen other health care stakeholders' ability to protect consumers. In the case of surprise billing, public information on pricing for in-network and out-of-network services could allow stakeholders to develop better tools to help patients avoid surprises and improve oversight of health insurance issuers, plans, and providers.
4. TRANSPARENCY INCREASES COMPETITION AND CONTAINS COSTS
Without transparency in pricing, market forces cannot drive competition. This lack of competition in many health care markets is demonstrated by significant, unexplained variations in prices for procedures, even within a single region.[23] For example, studies of price variation within California and nationally suggest that there is substantial opportunity for increased transparency to save money by shifting patients from high to lower-cost providers.[24] The Departments are of the view that consumers will take advantage of increased transparency to shop for their health care if price transparency is put into place nationwide.[25] Many empirical studies have investigated the impact of price transparency on non-health care markets, with most research showing that "price transparency leads to lower and more uniform prices, a view consistent with predictions of standard economic theory."[26] Studies suggest that consumers want and will use actionable pricing information to shop for more cost-effective care.[27] For example, when automobile prices were presented transparently on the internet, inclusive of the dealer invoice price, the consumers who did not like the traditional bargaining process were able to reduce spending overall by 1.5 percent.[28] Another study demonstrated the public display of life insurance prices for comparison led to a 5 percent decrease in the consumer price.[29] Price transparency also reduced price dispersion across other markets, such as the airline industry, which saw a reduction in price dispersion from 18 percent in 1997 narrowing to 0.3-2.2 percent in 2002 for fares available at multiple travel websites.[30] These lessons from other markets suggest that more thoroughly implementing price transparency across the health care industry could increase competition to provide lower costs and limit price variation.[31]
Despite the general absence of price transparency in the health care sector, there is research showing how price transparency leads to lower and more uniform pricing in health care markets. For instance, as noted in the preamble to the proposed rule, research shows patients saved $7.9 million and issuers saved $36 million on imaging services in New Hampshire after the state launched a website publishing health prices for most consumers with private health insurance.[32] One study found use of a telephone- and email-based tool to search for health care prices reduced the price paid by 10 to 17 percent and reduced the prices paid for care on average by 1.6 percent.[33] Another study of a program that provided health plan participants, beneficiaries, or enrollees with price and quality information to help select high-value imaging services found an increase in the use of lower-cost facilities.[34] This consumer behavior prompted higher-cost facilities to lower their prices, which resulted in a 30 percent reduction in the price variation between low- and high-cost facilities.[35] These studies, as well the numerous studies highlighted in subsequent sections of this rule, offer substantial evidence that price transparency in health care markets will result in consumer benefits similar to those that result from transparency in other markets.
Sunita Lough,
Deputy Commissioner for Services and Enforcement, Internal Revenue Service.
Approved: October 28, 2020.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
Signed at Washington DC, this 30th day of October, 2020.
Jeanne Klinefelter Wilson,
Acting Assistant Secretary, Employee Benefits Security Administration, Department of Labor.
Dated: October 8, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 20, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-24591 Filed 11-3-20; 4:15 pm]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P
The document is published in the Federal Register: https://www.federalregister.gov/documents/2020/11/12/2020-24591/transparency-in-coverage
TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com
Digital Signature Market Size is Projected to Grow USD 1228.2 Million by 2025 | Valuates Reports
Inland Insurance Offers Solid Contractors Bonds in Coeur d'Alene and Sandpoint
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News