In a continued push for increasing price transparency in healthcare, the Trump administration recently released a final rule on transparency in coverage. The rule was issued by the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury to provide increased visibility into the cost of care for treatments and procedures and to support cost-conscious decisions about healthcare services. The administration views increased price transparency as an important lever to promote stronger competition, drive down prices, and impact increasing healthcare cost trends.
The new rule will affect patients with commercial insurance, through either employer or individual coverage, on non-grandfathered plans. Beginning January 1, 2023, insurers will be required to provide these members with a shopping tool (web-based or on paper, if requested) that will provide accurate, real-time, patient-friendly cost estimates for procedures, drugs, durable medical equipment, and other services. These estimates are to encompass both the patient’s cost-share responsibility, as well as the total cost of the service, including contracted rates. For the first year, cost information must be made available for the 500 most “shoppable items”; starting January 1, 2024, the costs must be shown for any service that a patient may need. Additionally, the rule includes provisions that allow insurers to take credit for savings generated by plans that encourage use of lower-cost, high-value providers, in their medical loss ratio (MLR calculations), beginning with the 2020 reporting year.
What Kind of Data Will Be Shared?
The final rule requires that insurers not only provide transparent cost data for member consumptions, but also make publicly available in-network provider rates, billed charges and allowed amounts of out-of-network providers, and prices for prescription drugs. Insurers will be required to publish several standardized, regularly updated data files for the purposes of research, innovation, and comparison across the healthcare market. Technology companies and developers will have the opportunity to use this data and create additional private sector solutions to help drive comparison between treatments and insurance plans and further drive competition. Public files will be required for plan or policy years beginning on or after January 1, 2022. Patient cost-share information must be included starting January 1, 2023 where it will be required for 500 specified items, and then for all items or services starting January 1, 2024.
It should be noted that the legal authority for the transparency in coverage final rule is derived from the Affordable Care Act (ACA). Despite the Trump administration’s efforts to strike down the ACA in its entirety, it has used key components to support certain initiatives. Should the ACA be invalidated through the courts, this rule and others tied to the ACA, would likely also be terminated.
Even if the ACA remains in place, there is uncertainty around whether the incoming Biden administration will keep and implement the rule. President-elect Biden may allow the rule to remain given that he has been supportive of measures to reduce the cost of prescription drugs and promote cost transparency. Additionally, this could be an opportunity for him to support a bi-partisan initiative as he begins his term.
Assuming the rule is implemented as written, insurers will be facing a potentially heavy lift in aggregating the required data and making it easily available and understandable to both their members and the public. Depending on the resources available internally, insurers may look to other stakeholders such as pharmacy benefit managers (PBMs) or third-party vendors to help build and maintain these data files, and provide it in a user-friendly manner to both patients and other stakeholders. Another concern for payers is the broad visibility into information that is traditionally proprietary: negotiated rates. For prescription drugs, insurers will be required to provide the negotiated rate for a drug, but the rule goes on to clarify that this disclosure will generally not be required to disclose discounts, rebates, or price concessions for a drug.
How Will Transparency Impact Patient Decisions?
While more information will be available to patients in qualifying plans, it remains to be seen how, when, and where cost information will have the most impact on the treatment decision-making process. Benefit design will likely be the most important driver of patient out-of-pocket cost, and may have more effect as compared to total cost. Patients will have the ability to compare costs between providers, which may lead to more patients selecting in-network care and leading to less surprise bills post-service. With a growing number of patients enrolled in high-deductible or consumer-directed plans, access to consistent cost and out-of-pocket data across a breadth of services may help those patients better incorporate cost as they weigh multiple options, as was the intention of these plans.
Even with the required enhancements, it will be imperative that patients and providers, as well as other stakeholders, understand the data that they are reviewing, particularly when comparing different treatment options. Patients may push for treatments based solely on the cost, or compare cost across several treatments that are either not comparable or not appropriate for that patient’s specific clinical profile. The shared decision-making process between patients and their providers remains an important part of the care process, with this additional cost data as an important input. It will also be critical for all stakeholders to have balanced access to data describing the quality and value of given treatment options.
The administration’s intention of this rule is bringing cost to the forefront of discussions and decisions about a patient’s course of treatment. Manufacturers will need to assure that clinical value is not lost from the discussion between a patient and provider and that there is a strong story to justify a given cost. In addition to finding ways to demonstrate the quality of treatments in a patient-friendly manner, there may also be opportunities to educate patients on what goes into price, in-network vs. out-of-network rates, and benefit design. With this rule focused on supporting consumerism to drive down healthcare costs, manufacturers may consider if partnership opportunities with employer groups are available as they look to capitalize on these changes.
Centers for Medicare & Medicaid Services. CMS completes historic price transparency initiative. Published October 29, 2020. Accessed December 7, 2020. https://www.cms.gov/newsroom/press-releases/cms-completes-historic-price-transparency-initiative
Centers for Medicare & Medicaid Services. Transparency in Coverage Final Rule. CMS-9915-H. Accessed December 7, 2020. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS-Transparency-in-Coverage-9915F.pdf
Centers for Medicare & Medicaid Services. Transparency in Coverage Final Rule fact sheet (CMS-9915-F). Published October 29, 2020. Accessed December 7, 2020. https://www.cms.gov/newsroom/fact-sheets/transparency-coverage-final-rule-fact-sheet-cms-9915-f
Department of Health and Human Services. Trump administration finalizes rule requiring health insurers to disclose price and cost-sharing information. Published October 29, 2020. Accessed December 7, 2020. https://www.hhs.gov/about/news/2020/10/29/trump-administration-finalizes-rule-requiring-health-insurers-disclose-price-and-cost-sharing.html