While most Americans were setting up their out-of-office email messages and preparing to fire up the grill for the Fourth of July holiday weekend, the rules governing their health insurance were unlikely top of mind.
But on Friday, July 1, 2022, after months of implementation delays, a new rule went into effect that could upend how Americans shop for healthcare services—and how much they pay.
The Transparency in Coverage Final Rule, issued by the Centers for Medicare and Medicaid Services (CMS), requires health insurers to disclose pricing for covered services and items. Insurers must include the rates they have negotiated with participating providers for all covered services and items, as well as the allowed and billed amounts for out-of-network providers. Allowed amounts are the maximum rates insurers will pay for a given service and billed amounts are what providers have actually charged.
Taken together, this information should provide consumers with a clearer sense than they can get today of what their health insurance plan will pay for, even if they see doctors who don’t participate in their health insurer’s provider network. With that information, people can theoretically make informed trade-offs about which healthcare providers to see.
The information should also allow Americans to project their out-of-pocket costs more accurately because the amount the insurer will reimburse should no longer be a mystery. Knowing the out-of-pocket costs before you incur them is a level of visibility Americans have been sorely lacking.
The new insurance transparency rules follow the January 1, 2022 implementation of the No Surprises Act, which protects consumers from unexpected charges for certain services. The No Surprises Act requires private health insurers to cover certain out-of-network bills at the same rates they would if the services had been provided within the health plan’s network.
In theory, this level of transparency could force healthcare prices down (though some economists warn it could also encourage some providers to raise their rates if they feel they’ve been underpaid). When the rates health insurers negotiate with healthcare providers are on full display, the companies paying for employer-sponsored health benefits may find reason to question insurers’ negotiating effectiveness.
A recent RAND study showed that the rates private insurers and employers paid to hospitals varied widely and on average were more than double what Medicare paid for the same services. Other research has shown that paying cash instead of using insurance can save consumers money on prescriptions nearly a quarter of the time. This type of data at a more granular level may give companies leverage to demand lower rates.
But all of these benefits will only materialize if health plans first comply with the new rules.
Results from the previously implemented Hospital Price Transparency Final Rule may offer a cautionary tale on this front. The hospital transparency rules require hospitals to publish standard charges for all their services and items and to make the prices for the 300 most common services accessible in a consumer-friendly format. The rule took effect on January 1, 2021 but a year later, just 14% of hospitals were in compliance.
CMS set higher fines this time around, so insurers who don’t provide the required data will have to pay $100 per day per violation for each affected member, which could quickly add up for large plans.
Many insurers have already posted the required files, though they can be hard to find. In at least one case, the page was up but no files were there.
But even full health plan compliance won’t automatically give consumers the information they need. The required format for this data—machine-readable files—are virtually impossible for a typical consumer to interpret. These files can power consumer-friendly presentation of the data but are anything but consumer-friendly on their own.
Nate Maslak, CEO and cofounder of Ribbon Health, a healthcare data company, thinks the data provided is far too complex for patients to understand and says the data is filled with mismatched and outdated numbers.
“Price transparency regulation on its own won’t give patients access to more affordable care decisions unless these insights are delivered to patients in a consumer-friendly fashion,” Maslak said.
Instead, the new rule creates conditions for technology companies and others to enable consumer-grade price transparency.
Maslak’s company is working with Turquoise Health to help healthcare organizations make the data easy for consumers to access and interpret. Together they are pairing pricing data with doctors’ location, specialty, expertise, and quality data.
“That way when a patient searches for care, they can actually ‘shop’ for it in the same way they would shop for another big purchase,” Maslak said. “I am excited for a future where patients can have the same confidence in booking care as they do in booking a hotel room—with clear and accurate information on how to get there, what it’s going to cost, and what to expect. We are building a world where anyone can simply find care that is both affordable and high-quality, and this regulation is essential to that vision.”