Price transparency rule leads to insurer confusion

Health insurance companies may not be ready to fully comply with new price transparency rules, but the government is ready to issue the fines.

At the start of July, federal regulators began enforcing a requirement that health insurers disclose the negotiated rates they pay to in-network providers and the potential out-of-network billable amounts patients may owe. Insurance carriers must present these data in a publicly available, machine-readable format online. Along with a related rule mandating hospitals disclose prices, the policy aims to help patients understand their costs and seek lower prices.

The regulation is vague and underwent changes late in the process, which makes it difficult for insurers to understand just what it means to be in compliance, said Dan Kuperstein, a senior vice president of compliance at consultancy Corporate Synergies and an attorney who specializes in employee benefits law. That’s even more true for smaller carriers, employers and third-party administrators, he said.

“The rule was written in very ‘legalese’ terms,” Kuperstein said. “It’s my job to break the legalese down, and even I found this one tough compared to other regulations I have been looking at.”

A week before the regulations took effect, the Centers for Medicare and Medicaid Services clarified that self-funded employers lacking consumer-facing websites could post the prices negotiated with providers on their third-party administrators’ websites.

But many other details about how to comply remain unclear. For example, businesses that use recruitment services to find job candidates are unclear about whether it’s sufficient to only post negotiated rates on third-party careers websites, Kuperstein said. Insurers that rent provider networks from other carriers are also unsure whether they are responsible for posting rates on their own websites, or if it’s enough for the other health insurance company to make the prices publicly available, he said.

And starting Jan. 1, insurers will be required to disclose out-of-pocket costs for 500 common, covered services via online, self-service tools. In 2024, health insurers will need to include personalized information for all medical services.

Eventually, insurance companies may also need to disclose what they pay for prescription drugs, although the government indefinitely delayed that requirement following objections from the Pharmaceutical Care Management Association and the U.S. Chamber of Commerce.

Combined with transparent provider directories and explanation of benefits guidelines mandated by the No Surprises Act at the start of 2022, insurance companies’ technology teams are in overdrive, said Jason Earley, a director in the healthcare and life sciences practice at consultancy West Monroe.

“The talent has already been taxed by a lot of other regulations, and the administrative costs will climb significantly with some of the No Surprises Act responsibilities over the next five years,” Earley said. “I’m less worried about this first file, and more worried about, ‘How do we maintain this?’ ”

One thing that will help drive compliance: Health insurance companies will face fines of $100 per member for each day they delay posting pricing information. These penalties could significantly cut into the margins of even the most profitable insurers, said Brad Ellis, senior director of insurance at Fitch Ratings.

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“Even if you look at the numbers out of companies like UnitedHealthcare, they cover 50 million people. If you divide that by member, they may only make $300 or less a year per member,” Ellis said. “That fine could be pretty heavy.” UnitedHealthcare posted its data ahead of the July 1 deadline.

Once the information is live across the industry, rate data will give larger health insurers a competitive edge over smaller companies because they have the resources to compare and adjust their reimbursements to gain an advantage over their rivals, Ellis said.

But patients and employers will have trouble understanding this raw information, which will undercut the promise of transparency driving lower costs, Ellis said. And policyholders will bear the compliance costs in the form of higher premiums, he said.

These disclosures could provoke more contract disputes between insurers and providers, along with questions about whether providers offering lower cash prices violates agreements promising insurers the most favorable rates, said Chris Severn, CEO and co-founder of Turquoise Health, a startup capitalizing on the new transparency regulations. Health systems will also use the data to promote their financial value to patients, he said.

Turquoise Health has been pre-selling this data to payer and provider customers since the start of the year, he said. Last month, the company partnered with Ribbon Health to embed the data into the startup’s care navigation, directory and delivery platform. That will help patients actually act on this information, Severn said.

“In my opinion, this July 1 date is the biggest day in healthcare since the (Affordable Care Act) was launched,” Severn said. “Everything we’re seeing on the ground with our customers is that they can’t wait for this data to come out.”