Payers will have to start making rates public starting in 2022

Most payers will have to start making public a trove of cost data starting in 2022, according to a final rule published by the departments of Treasury, Labor, and Health and Human Services. (The final rule can be found here and the fact sheet can be found here.) In later years, payers will have to provide members with self-service online tools that tell them out-of-pocket costs and negotiated rates for healthcare products and services.

The final rule is part of the Trump administration’s push to help consumers understand what healthcare costs and help them shop for it. The administration has said greater transparency will lead to lower costs for consumers, especially those with commercial coverage. In 2019, the administration published a final rule requiring price transparency of providers (see here); this is the counterpart for payers. Payer and provider trade groups have balked at the rules, arguing (in court, in some cases) that these efforts will only confuse people and will not lead to lower prices or effective shopping strategies for consumers.

The rule is 556 pages long; HRI will not try to lay out all of its details here. But here are some highlights:

• Most group health plans and payers offering coverage on the individual and group markets will be required to make machine-readable data files available to the public listing negotiated rates for all covered items and services between the payer and in-network providers; historical payments to out-of-network providers (and billed charges from these providers); and in-network negotiated rates and historical net prices for prescription drugs by plan or issuer for each pharmacy location. The files must be updated monthly and must be available for plan years starting Jan. 1, 2022, or later.
• These payers also will be required to make available to members “personalized” out-of-pocket cost information and negotiated rates for 500 “shoppable” services determined by HHS for plan years that begin Jan. 1, 2023, or later. Data for all other items and services, including prescription drugs, must be available for plan years starting Jan. 1, 2024, or later. (Curious about what made the initial list of 500 shoppable services? The table is on page 93 of the payer transparency final rule.)
• The rule also changes how medical loss ratio (MLR) is calculated, allowing payers that offer “shared savings” programs to take credit for program payments to members in their MLR calculations. The rule includes an estimate that that this new option will reduce MLR rebate payments to members by $120 million per year, but that will be offset by $154 million in savings thanks to the programs, some of which will be shared with members and some of which will be kept by payers.

HRI impact analysis

The Trump administration has made price transparency for healthcare services and products a priority. Most of the administration’s policies around this have been challenged in court by industry groups. The pharmaceutical industry has so far successfully challenged an administration policy requiring companies to disclose prices in televised ads (see here). Providers have challenged in the courts a rule that would have them disclose negotiated rates with payers to the public; this new rule also may land in the courts.

Proponents of these transparency efforts say that consumers have a right to know in advance what a service might cost and that the secrecy behind the rates hinders any meaningful shopping around and competition. Critics say that consumers cannot truly shop for most medical care anyway and that disclosing rates will simply drive prices up, not down.

No matter one’s opinion on the drive for transparency, the rules have the potential to shift leverage in price-setting between payers and providers, and will require significant investments in IT from all parties. These rules, along with the administration’s interoperability policy (for HRI’s perspective on the interoperability rule, see here, and for a brief on pandemic-delayed deadlines for the interoperability rule, see here), also create significant openings for new entrants to develop products that help consumers shop for care, compare prices, find deals and steer them to care that fits their needs and wallet.