Insurers Must Post Out-of-Pocket Medical Costs Under New Rule

(Bloomberg Law) -- Health insurers will have to post on the internet personalized out-of-pocket costs to patients under a rule finalized Thursday.

Insurance plans will also be required to make their in-network negotiated rates with doctors and allowable out-of-network rates available to the public, according to the multi-agency rule. They will be required to post their negotiated pharmaceutical prices and the historical net prices for all their covered drugs.

The rule is likely to face a legal challenge from industry groups and possibly individual insurance providers that say it would drive up consumer prices and reduce competition.

Most plans, including employer-based group health plans and health insurance issuers offering group and individual coverage, will be required to post the information.

The requirements start taking effect in 2022 but won’t take full effect until 2024. Publicly available data about the costs have to be available for plans starting on or after Jan. 1, 2022. Cost-sharing information for 500 services have to be available for plans after Jan. 1, 2023, and then it will be required for every service starting Jan. 1, 2024.

The time given to plans to implement the rule “reflects that there’s a lot of work involved” for insurers, Health and Human Services Secretary Alex Azar said in a call with reporters Thursday. He said this longer timeline also reflects that insurers work on an annual plan year cycle.

Insurers that encourage patients to shop for providers that offer lower cost services with higher value and share those savings will receive credit in their medical loss ratio. That ratio is the percentage of a premium that an insurer spends on services that improve care quality, and insurers have to pay rebates if they don’t meet a certain threshold.

“The vast majority of patients don’t have easy access to this information today, but when they do, we see prices drop,” Centers for Medicare & Medicaid Services Administrator Seema Verma said during the same call.

The Internal Revenue Service, Employee Benefits Security Administration, CMS, and Departments of Treasury, Labor and Health and Human Services crafted the rule.

“Employers deserve to know the going rates for a particular health service when designing their plan,” Labor Department Acting Assistant Secretary Jeanne Klinefelter Wilson said during the call.

Industry Opposed

America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association (BCBSHA) both filed comments opposing the regulation when it was first proposed.

Disclosing competitively negotiated rates for every single health-care item and service would undermine competition, push prices higher, reduce affordability, and complicate rather than simplify consumers’ health-care experience, Matt Eyles, AHIP’s president and CEO, said in a statement in January.

Verma said this information is already available to patients in their explanation of benefits, and that the rule requires those prices to “be made available before they get their care instead of after.” Any complaints from insurance plans that the disclosures take away their negotiating power simply signals they’re “protecting the considerable profits special interests reap from business as usual.”

Verma said the administration is confident the rule would stand up to legal challenges from the industry. “There have been scores of challenges to a lot of the administration’s policies,” she said. “We stand steadfast on the side of the American patient.”

The rule is similar to a CMS rule that requires some 6,000 U.S. hospitals to disclose their negotiated rates with insurers for 300 common medical services, along with the discounted cash price they’re willing to accept for those procedures. The American Hospital Association led the lawsuit industry groups and hospital systems brought against the regulation that’s set to take effect Jan. 1, 2021.

A federal district judge in Washington, D.C. upheld the rule in June. The hospital groups appealed, arguing the CMS unlawfully expanded the definition of “standard charges” that a hospital must disclose under a provision in the Affordable Care Act to include these negotiated rates.

The U.S. Court of Appeals for the District of Columbia Circuit has yet to issue a ruling in the case. Arguments were heard Oct. 15 and the court signaled then that it supported the rule.

In November 2019, the BCBSA said neither pricing rule would help consumers better understand what health services will cost them or advance the broader goal of lowering health-care costs.

The new price transparency rule relies on legal authority granted by the ACA, which the Trump administration and Republican-led states are trying to invalidate in a case at the U.S. Supreme Court.

Verma said the administration would continue its policies to make information on health-care prices available to consumers regardless of the outcome of that case, without specifying how.

“The president’s been very clear that we’re going to keep what’s working and fix what’s broken,” she said.

To contact the reporters on this story: Shira Stein in Washington at sstein@bloomberglaw.com; Lydia Wheeler in Washington at lwheeler@bloomberglaw.com, John Tozzi at jtozzi2@bloomberg.net

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

©2020 Bloomberg L.P.