What the Transparency in Coverage Proposed Rule Could Mean for the Healthcare Marketplace

The Department of Health and Human Services recently released the Transparency in Coverage proposed rule. It is a response to President Trump’s executive order to “Improve Pricing and Quality Transparency in American Healthcare.” It comes with significant implications for insurers, providers, consumers, and government agencies. The purpose behind it is to lower healthcare spending and increase quality by creating real-time, user-friendly data on pricing and healthcare service rates.

This proposed rule details potential requirements for most group health plans and health insurers to make cost-sharing information available upon request to participants, beneficiaries or enrollees. This includes estimates of an individual’s liability for covered services or items serviced by a known provider.

Price information would be made available through internet or non-internet means, in a machine-readable format allowing for filtering and searching via certain criteria, like location. The proposed rule would also require disclosure of in-network provider negotiated rates and historical out-of-network allowed rates.

The Department is considering and looking for comments on the inclusion of quality data to accompany pricing data made available to consumers. Specifically, the Department is requesting comments on whether quality data should be required, and if so, what standards should be set in place to ensure comparable metrics from plan to plan and insurer to insurer.

The Goal of the Transparency in Coverage Proposed Rule

The proposed rule clearly aims to push the health care industry into a free-market system. Price transparency is intended to encourage competition and choice in health care for consumers. The requirements outlined in the proposed rule will ultimately put more information in the hands of consumers, enabling them to make better-informed, cost-conscious decisions regarding their health care.

Potential Implications for Consumers 

The proposal could have major impacts on consumers, mostly in the form of perceived benefits, which could help them make more informed decisions. Impacts like the following are likely:

• Reduced likelihood of surprise billings.
• Access to price, and potentially quality, data at their fingertips.
• The ability to compare insurance plans, estimate the cost of in-network versus out-of-network services, and consider the quality of physician care.
• The ability to estimate their out-of-pocket costs, thus more effectively budgeting for their healthcare expenditures.

Potential Implications for Insurers

If insurers are required to make their in-network provider rates public, as well as historical out-of-network allowed amounts, price variability among providers and services will decrease. As a result of the proposed rule, insurers may experience the following:

• Diminished negotiating leverage, to an extent.
• Increased cyber-security burdens of making data available to the public while ensuring individually identifiable information and other sensitive data is protected.
• Increased administrative and operating expenses to implement the proposed rule related to developing and building the database, training staff, responding to higher volume consumer questions or inquiries, delivering consumer’s cost-sharing information, and maintaining the database.
• Normalized out-of-network allowable rates as a result of transparency, which will also impact the out-of-pocket costs for the consumer. 

Potential Implications for Providers

If pricing and negotiated rates become public knowledge, price adjustments will come as a result, as providers can compare other provider negotiated rates and the negotiated rates of insurers. Providers may then become less willing to provide negotiated services at a discounted rate in exchange for volume of in-network patients because that discounted rate will be made public.

Additionally, if consumers are made able to budget for health care costs in advance, providers could experience more timely payments, lowering providers’ days in accounts receivable balances and putting more revenue in the hands of providers.

Potential Implications for Government Agencies 

The availability of price and quality data will enable government agencies to potentially determine if premium rates are set appropriately. This could facilitate the review of anti-trust violations. However, states and government agencies will also incur additional costs to review, enforce, and monitor the proposed rule. These costs could be passed on to individuals, insurers, or both.

Considerations for Success

While the transparency in coverage proposed rule intends to lower healthcare spending, there will be additional costs to implement and maintain databases and other software needed to provide price and quality data. Depending on the acuity of those costs, the resulting cost savings may not have a real significant impact on overall spending.

Ultimately, the biggest potential impact resulting from the rule would be giving consumers a better understanding of their healthcare costs and options in advance. However, there are other critical challenges beyond cost to address to achieve this goal.

In order for pricing and quality databasing to be beneficial, the data will need to be normalized in a way that makes it comparable across insurers. Furthermore, even if the data is available to the public, the presentation of it has the potential to be very complex. Therefore, consumers could need a greater level of health care knowledge and literacy to be able to navigate and analyze the information.

Thus, commentary from industry insurers and providers is needed to ensure the feasibility and efficacy of the rule. Security, user-experience, cost, and data quality are all key concerns that will determine the viability of any final ruling.