An Irony of Ironies – The Final ACA Price Transparency Rule

Some found it somewhat ironic when, only one week before the Acting Solicitor General appeared before the United States Supreme Court to argue that Congress effectively repealed the entire Affordable Care Act (“ACA”) in December 2017 by reducing the tax penalty for not having health coverage to zero, the Centers for Medicaid and Medicare Services (“CMS”), joined by the Employee Benefits Services Administration and the Internal Revenue Service, announced final new rules implementing an obscure provision of the ACA, namely Section 1311(e)(3)(A).

The final rules replaced proposed rules issued in 2019 in response to Executive Order 13877, “Executive Order on Improving Price and Quality Transparency in Healthcare to Put Patients First” (July 27, 2019).  The proposed rules focused on making specific plan cost information available to plan members on a pre-service basis. Over 25,000 comments were submitted in response to the proposed rules.

As interpreted by the Departments in both the proposed and final rules, ACA Section 1311(e)(3)(A) provides broad authority to the Departments to require health insurance issuers and health plans to make not only eight specific categories of information listed in the statute publicly available, but also “other information determined by the Secretary,” in order to improve health plan cost transparency. Specifically, for plan years starting on or after January 1, 2023, health insurance issuers and health plans (other than grandfathered plans) are required to make available to their members a free website portal through which a member can receive a pre-service equivalent of an EOB to help them better understand how their plan or coverage pays for healthcare and help them shop for healthcare services and items based on price. During the first plan year, the information must be available with respect to 500 specific services or items that CMS has identified. Thereafter, the information must be available for all services.

Alternatively, the final rules allow members to request paper copies of the same information with respect to up to twenty separate service providers.

Cost sharing information that must be made available to plan members includes: (i) the member’s cost sharing liability for the specific service or item, (ii) the portion of a member’s current deducible or copayment responsibility that has already been satisfied, (iii) the in-network rate (and underlying fee schedule rate, if different) for the specific service or item, (iv) the out-of-network allowed amount (or percentage of billed charges) for the service or item, (v) if the request involves a bundled service, a list of all items included in the bundle, and (vi) any concurrent review, prior authorization, step-therapy, or fail first requirement that may apply to the service. This information must be accurate as of the time the information is requested (or reasonably accurate with respect to out-of-network providers).

In addition, at the same time the member must be provided a notice containing the following information in plain language: (i) that an out-of-network provider may balance bill the member and that the information provided does not include such potential additional financial responsibility, (ii) that the amount of the actual charges may differ depending on the nature and extent of the services actually provided, (iii) that the estimate is not a guarantee that the services will be provided, (iv) whether the plan or issuer counts discount assistance or other third party payments against the member’s financial liability or not, (v) with respect to preventative services, that the cost share may not be due if the service or item is billed as such, and (vi) other appropriate disclaimers.

The preamble to the final rules makes clear that the Departments assume that insurers and third-party administrators will take the lead in putting in place the systems necessary to comply with the final rules. While insurers and third-party administrators are generally responsible for providing post-service EOBs, only a few offer pre-service cost estimates.  Moreover, as the preamble makes clear that the pre-service cost estimator systems currently in place do not satisfy the specificity, accuracy, and other requirements of final rules.

The Departments estimate that the cost to insurers and third-party administrators to develop and maintain the internet-based tool to allow members to estimate the cost of medical services prior to receiving the service will be between $12 -19 billion over a three-year period.

As summarized in the Preamble, “the Departments continue to be of the view that price transparency efforts are critical to providing consumers (individual and institutional) with meaningful and practical pricing information in an effort to contain growing health care costs.” The Departments further justify the final rules based on clear trends by employers to shift a greater share of their health care spend to plan members by shifting plan designs away from copayments to deductibles and coinsurance.

Whether insurers and third-party administrators can complete this task on time and on budget is a great unknown, as is the basis question of whether consumer driven healthcare actually drives down costs and to what degree.

Even if the final rules effectively outsource the compliance obligation to third parties, they raise other questions for health plan sponsors related to how greater price transparency for members may impact plan sponsor liability. For example, many health plan sponsors face risks similar to those currently being faced by 401(k) plan sponsors, based on the selection of service providers and member cost issues tied to plan designs.

Also, while the final rules give employers with insured plans a pass on complying with the final rules, provided that the plan requires the insurer to provide the information by written agreement, employers with self-funded plans remain responsible for the failures of its service provider and will want to be clearly indemnified by the service provider.

Buckle up! It is going to be a fun two years!

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