Vice President, Communications, California Association of Health Underwriters
President, Advanced Benefit Consulting & Insurance Services, Inc.
December, 2020
Published in the February issue of California Broker | Read the article online
Published in the January-February issue of The STATEMent | Read the article online
Published in the March & April issues of America’s Benefit Specialist | Read Part 1 online | Read Part 2 online
On October 29, 2020, the Department of Health & Human Services, Department of Labor, and Treasury Department collectively issued proposed and final rules on “Transparency in Coverage” that will require most employer-sponsored group health plans to disclose price and cost-sharing information to its plan participants upon request, before services are provided. The proposed rule was issued alongside a new Final Rule that will require hospitals to provide patients with information about the hospital’s “standard charges” beginning in 2021. The provisions of the rules will be implemented through 2024, but health issuers, insurance companies, third party administrators and vendors creating the necessary tools should be working now on the requirements, because they are tedious and complicated. This is definitely NOT something these entities should be waiting on.
I asked Marilyn Monahan, attorney from Monahan Law Offices, what she thinks employers should start doing now to prepare for the transparency rules? “Understand what the rule requires, and begin planning,” commented Marilyn. “The planning steps will differ depending on whether the employer offers fully insured or self-funded benefits. Determine how each requirement will be met—by the insurer, an outside vendor, or a TPA. If you will be contracting with an outside vendor to perform the services, remember that it will take time to find the right service provider, to set up the system, and to test the system, so that you ensure the system is fully operational on time. Creating a timeline and a budget will be essential parts of the process.”
Along these same lines, I asked MaryAnn Wessel of EBA&M Corporation, a TPA in Orange County, CA (specializing in self-funded health plan administration), that we do a lot of self-funded business with, what advice would she give self-funded employers who are just now starting to think about these rules? What did she think their first steps should be, and what role will they play in the early stages? “As a TPA, we will begin communication with our clients through their broker/consultants—however, what we learned from HIPAA Privacy, ACA and even before those major regulations, COBRA, is that we will have to take the lead with some brokers to assist their clients. Not all broker/consultants are informed on these subjects and therefore, we as the TPA must provide very informative communications to them for their clients. We definitely had to do this for HIPAA and ACA,” she commented.
Third party administrators and other service providers for the most part are just beginning their implementation process. Many TPAs, for example, are just now starting to learn about the rules, so that they can make the determination as to whether they will offer services in-house or subcontract with a vendor. Although the Final Rules make it sound (in my opinion) as though everyone will jump on the “do-it-yourself” project, I seriously doubt it. The creation of the tools will be too time-consuming and too expensive for most. I could be wrong, but if I were still in the TPA business, I’d definitely be looking for partners on this project!
Also along these lines, I asked MaryAnn Wessel where they were on this project, and where she thought others are. “Most TPAs in our opinion are at the same stage EBAM is at—-in the learning period right now and discussion internally on how to fully comply.” With the early phases due in a year, time is of course, of the essence.
The effective date of the final rules are 60 days after the publication in the Federal Register, or January 11, 2021.
Some groups are anticipating a delay or possible removal of these rules by incoming President-Elect Biden’s administration, but folks, it’s not that easy to get rid of federal rules once they are executed and finalized… Look how long it’s taking for Texas v. U.S in the ACA matter, which was a primary task of the Trump Administration.
These rules will bring on a huge burden to certain plan sponsor employers; particularly self-funded employers. I asked Marilyn if she anticipated this being an expensive undertaking for plan sponsors, particularly those with self-funded health plans? “Plan sponsors with self-funded plans, in particular, will find this to be a time consuming and expensive undertaking. While many self-funded employers will contract with a TPA or ASO to provide these services, these vendors will undoubtedly charge additional fees.”
I will attempt to break down the requirements for you, in real-world terms, to assist you in understanding the pending rules.
Comments on the proposed rules are due by January 14, 2021.
Brief Summary – Final Rule
Brief Timelines
The Final Rule will apply on a phased-in basis, with requirements over the period between January 1, 2022 and plan years beginning on or after January 1, 2024. In the most simplistic view, the requirements will be broken down as follows:
- 2022: Issuer/Plan Data Files required to be released to the public
- 2023: Website self-service tool for 500 shoppable services due to be available to public
- 2024: Website – all services required to be completed
In general, applicability of dates are as follows:
The requirements would be applicable for plan years (or in the individual market, policy years) beginning on or after one year after the finalization of the final rules. The requirements to publish the machine-readable files will become effective for plan years (or in the individual market, for policy years) beginning on or after January 1, 2022. The applicability of the internet-based self-service tool requirements and providing the pricing information for a minimum of 500 shoppable services and items beginning with plan years (or in the individual market, policy years) on or after January 1, 2023. Plans and issuers will be required to provide the pricing information through the internet-based self-service tool for all items and services by plan years (or in the individual market, policy years) beginning on or after January 1, 2024. All in all, it’s a four-year implementation period.
I will provide more detailed information throughout this article on each of these requirements.
Background and Summary
The final rules set forth, according to the Final Rule (CMS 9915-F) the “requirements for group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request to a participant, beneficiary, or enrollee (or his or her representative), including an estimate of the individual’s cost-sharing liability for covered items or services furnished by a particular provider.” This information must be made available on a public website in a manner which allows the participant, beneficiary or enrollee, herein referred to as participant, to obtain an estimate and overall understanding of the individual’s out-of-pocket expenses, and have the ability to shop those services and prices across the market. In other words, select your upcoming surgery, hospitalization or service across multiple providers to find out the differences in price, just as we would for any other consumer good. This, my friends and readers, is the entire idea behind health insurance transparency…. To be able to shop for health care like we shop for a home, a car, a computer, or anything else. What a concept!
This summary makes it sound simple, and although the broad concept is a simple one, the rules and how they will implement them, are anything but simple.
On June 24, 2019, President Trump issued Executive Order 13877, which called for “Improving Price and Quality Transparency in American Healthcare to Put Patients First.” The order directed the Secretaries of the Departments, simply stated, to issue rules and ask for feedback from commenters on health care transparency.
The final rules also require plans and issuers to disclose in-network provider negotiated rates, historical out-of-network allowed amounts (such as usual and customary rates), and drug pricing information through three machine-readable files posted on an internet website, allowing the public to have access, and hopefully, keep future prices down due to competition and full disclosure.
Also included in the Final Rule were final amendments to HHS’s medical loss ratio (MLR) program rules, to allow issuers offering group or individual health insurance coverage to receive credit in their MLR calculations they share with enrollees, which would hopefully result in the enrollees shopping for and receiving care from lower-cost, higher-value providers.
The intended outcomes include providing for consumers to determine costs prior to treatment, to increase timely patient payments, to provide relief from Surprise Billing, to provide better plan choices for individuals shopping for health coverage, to issue compliance enforcement to the state, and review potential anti-trust and potential collusion issues. I’ll of course get into these issues throughout this article.
Background & Relationship to the ACA
The Patient Protection and Affordable Care Act was enacted, as we all probably remember, as well as the Health Care and Education Reconciliation Act of 2010, known collectively as PPACA. PPACA was amended and added to provisions of the Public Health Service (PHS) Act, relating to health coverage requirements for group health plans and health insurance issuers in the group and individual markets, including both fully insured and self-insured group health plans. PPACA also added provisions to ERISA (section 715) and the Internal Revenue Code (section 9815), making them applicable (stated simply) to group health plans.
To make long, detailed statutory provisions somewhat simpler, the PHSA defined certain reporting and disclosure requirements that could be offered in the Exchanges, as well as provided for transparency in health care.
This background is important later in this article when I address what types of plans are affected by the Transparency Final Rules (ie grandfathered, non-grandfathered and grandmothered plans).
Important Goals and Provisions in the Transparency Final Rule
One of the most important goals of the Transparency Rule is to make consumers more informed on health care spending decisions.
In addition, the hope is that Transparency reduces the potential for Surprise Billing, which is something that has been very important to the health insurance industry, including the National Association of Health Underwriters and California Association of Health Underwriters, as well as other industry associations like the Self-Insurance Institute of America, to name just a few, as well as to consumers.
According to the Final Rule, “making the price of care available to consumers before they receive care can reduce the potential for consumers to be surprised by the price of a health care item or service when they receive the bill after receiving care.”
One of the largest concerns is receiving a bill from an out-of-network provider when they thought an in-network provider was treating them. In my historical terms, we called this “forced providers”… for example, you have a surgery, you choose the PPO facility and PPO surgeon, but you find out later that your anesthesiologist was non-PPO, or when your doctor sends your lab work out to a PPO lab, who then can’t perform that testing and sends it elsewhere, resulting in a non-network lab. Hence, the plan participant had no control; it was a forced provider.
The hope is that while pricing transparency is not the complete solution alone, the disclosure of pricing directly to consumers could help mitigate some of the unexpected costs. Another important hope in this is that by disclosing pricing up front on a public website, consumers can shop, and will of course be drawn to lessor-cost providers; hence, natural competition of providers, which would hopefully drive down costs.
Who Do The Rules Apply To?
The Transparency Final Rules apply to all group health plans and health insurance issuers in the group and individual market, which includes applications to employers who sponsor group health plans. In other words, they do not just apply to health insurance companies… They apply to plan sponsor employers as well, even though they generally don’t even have access to their health plan’s pricing information, assuming they are non-grandfathered under the ACA. This, of course, will cause confusion and expense to employers, as they navigate how to find vendors to help them with the disclosure requirements.
In the Final Rules, they specifically discussed how the Departments acknowledged that section 2713 of the PHS Act requires non-grandfathered group health plans and issuers offering non-grandfathered coverage to provide coverage without cost-sharing (such as preventive services). However, if the same items or services are furnished for non-preventive services, the participant may be subject to cost-sharing terms of their plans. The Departments stated that the issuer must display the non-preventive cost-sharing liability in the newly required self-service internet tools, along with a statement (disclosure notice, to be discussed later in this article) that the item or service may not be subject to cost sharing if it is billed as a preventive service.
Exemptions:
There are some important exceptions to who has to comply, including:
- Grandfathered Health Plans
- HRA/HSA Plans
- Excepted Benefits (such as dental and vision plans)
- Healthcare Sharing Ministries
- Short-Term, Limited Duration Insurance (STLDI)
First, Grandfathered health plans (those with grandfathered status under the ACA as of March, 2010, as previously discussed in the Background & ACA section of this article). It’s important to note, however, that “Grandmothered” health plans do have to comply. In the Final Rules, just as the Departments specifically discussed the non-grandfathered health plans, they also discussed the Grandfathered health plans.
According to the Final Rules, “Grandfathered health plans are health plans that were in existence as of March 23, 2010, the date of the enactment of PPACA, and that are only subject to certain provisions of PPACA, as long as they maintain their status as grandfathered health plans under the applicable rules. Under section 1251 of PPACA, section 2715A of the PHS Act does not apply to grandfathered health plans. Therefore, the proposed rules would not have applied to grandfathered health plans…”
So how many groups are currently grandfathered today? Our block of business is likely somewhat different than most… All but one of our self-funded groups, as of now, are grandfathered, but that is certainly not the norm in the self-funded business. I believe we only have one or two fully-insured groups that are grandfathered as of now, which is certainly more common. I asked Maryann Wessel at EBA&M, who offers self-funded claims administration and other services, what percent of her groups were grandfathered vs non-grandfathered. “75% of our traditional self-funded accounts are Non-Grandfathered,” Maryann replied. I know that our groups make up part of that 25% that remain grandfathered with them!
The Rules went on to state that they also “do not apply to any group health plan (or group health insurance coverage offered in connection with a group health plan) or individual health insurance coverage in relation to its provision of excepted benefits. Excepted benefits are described in section 2791 of the PHS Act, section 733 of ERISA, and section 9832 of the Code. Section 2715A of the PHS Act is contained in title XXVII of the PHS Act, and therefore, the proposed rules would not have applied to a plan or coverage consisting solely of excepted benefits.”
“The Departments also proposed that rules would not apply to STLDI… therefore, the proposed rules would not have applied to STLDI coverage.”
The Departments also proposed that “the rules would not apply to health reimbursement arrangements, or other account-based plans…”
In contrast, the Departments proposed that the final rules “would apply to grandmothered plans, meaning certain non-grandfathered health insurance coverage in the individual and small group markets with respect to which CMS has announced it will not take enforcement action even though the coverage is out of compliance with certain specified market requirements.”
The Final Rules adopted these provisions as proposed.
Disclosure Elements & Disclosure Notice
The Departments state in the Final Rules that they concluded that requiring group health plans and health insurance issuers to disclose to participants, beneficiaries, or enrollees, cost-sharing information in the “manner most familiar to them is the best means to empower individuals to understand their potential cost-sharing liability for covered items and services provided by particular providers.” This, in turn, resulted in them modeling the price transparency requirements on existing notice requirements.
The PHS Act and ERISA requires non-grandfathered plans and issuers offering non-grandfathered coverage in the individual or group markets to provide a notice of adverse benefit determination, which is typically satisfied by the Explanation of Benefits (EOB), to plan participants. EOBs typically include the amount billed by a provider for items and services, negotiated rates or underlying fee schedules with in-network providers or allowed amounts for out-of-network providers, the amount the plan paid to the provider, and the individual’s obligation for deductibles, copayments, coinsurance, and any other balance under the provider’s bill. As consumers are familiar with and used to seeing the EOB, the rules were intended to similarly require plans and issuers to provide the specific price and benefit information on which an individual’s cost-sharing is based. The Departments felt the participants would also benefit from understanding the price of items and services, even in circumstances when their cost-sharing liability is not based upon a negotiated rate or underlying fee schedule rate. Therefore, the Rule requires disclosure of the negotiated rate, even if it is not the amount used as the basis for cost-sharing liability.
Seven Content Elements
There are seven content elements that a plan or issuer must disclose upon request to a plan participant, beneficiary or enrollee, for a covered item or service:
- Estimated cost-sharing liability
- Accumulated amounts
- Negotiated rates
- Out-of-Network allowed amounts
- A list of items and services subject to bundled payment arrangements
- A notice of prerequisites, if applicable, and
- A Disclosure Notice
These seven content elements generally reflect the same information that is included in an EOB after health care services are provided.
Another key element is that of the “Plain Language” requirement, which means that it must be written and presented in a manner calculated to be understood by the average participant, beneficiary or enrollee. Therefore, issuers and health plans are required to limit the use of “technical jargon” and long, complex sentences, so that the information provided will not have the effect of misleading, misinforming, or failing to inform participants.
Of course, I have to ask, as a former executive for a third-party administrator, why not just add additional requirements to the EOB and be done with it? Because an EOB won’t result in full transparency is the simple answer…
The Final Rule also requires a Disclosure Notice. Such notice requires a complete description of the prerequisites, but also determined that all of that detail would create “unnecessary complexity and impose significant burdens on plans and issuers regarding information that is already available in Plan Documents.” Therefore, they decided it best to require a notice, but with modifications.
The seventh of seven content elements is a notice that communicates certain information in plain language, including several specific disclosures, including: a statement that out-of-network providers may bill participants for the difference between providers’ billed charges and the sum of the amount collected from the group health plan or health insurance issuer and the amount collected from the participant, in the form of cost-sharing (the difference referred to as balance billing), and that these estimates do not account for those potential additional amounts; the actual charges for the covered items and services may be different than those described in the cost-sharing estimate (for example, a simple surgery becomes more complicated when they discover additional medical concerns during the procedure, or complications that occur); a statement that the estimated cost-sharing liability for a covered item or service is not a guarantee of coverage will be provided for those items and services; and any additional information, including other disclaimers that the plan or issuer determines appropriate, so long as the additional information does not conflict with the information they are required to provide.
In simpler terms, the disclosure notice must include information in plain language that discloses whether the copayment assistance and other third-party payments are included and counts toward deductibles and out-of-pocket maximums (for example, RX copay assistance from the pharmaceutical company is not included), and a statement that the item or service may not be subject to cost-sharing if it is billed as a preventive service (for example, if someone is getting a mammogram but it’s actually beyond the preventive services allowed number of mammograms, such as 3 or 4 in a single year).
To satisfy these requirements, the Departments created a model notice that plans and issuers could use, but are not required to use, to satisfy the disclosure notice requirements. A copy of the draft model notice can be found at:
I would like to say that most industry experts, including myself and attorneys I work with, as well as the National Association of Health Underwriters, have recently stated that they do not recommend use of the model notice without substantial additional information being added to it. Keep in mind also that in the disclosure notice, if balance billing is permitted under state law, the Final Rule will not override the state law.
Now the question becomes, how do we do all of this disclosure? The simple answer is by requiring, as mentioned previously above, issuer/plan data files be released to the public (by 2022), by creating an internet website that discloses the prices of 500 shoppable services in a self-service tool (by 2023) and adding all additional website services by 2024. Easy peasy, right? Not so much….
Website Self-Service Tool for 500 Services and Delivery of Cost-Sharing Information
Table 1 of the Final Rules contains a list of 500 items and services list. The table includes the Code, Description, and Plan Language Description. This table can be found on page 93 of the Final Rule, at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS-Transparency-in-Coverage-9915F.pdf
Keep in mind, this table is much more extensive than the prior hospital requirement to post their “standard charges” for 70 shoppable items as of January 1, 2019. Under the Hospital Price Transparency final rule, hospitals are required to disclose 5 types of standard charges:
- The gross charge
- The discounted cash price
- The payer-specific negotiated charge
- The de-identified minimum negotiated charge
- The de-identified maximum negotiated charge
So let’s talk about the Internet-Based Self-Service Tool that the Rules require, and how that information may be delivered.
Health plans and issuers must make cost-sharing information available for the 500 items and services on or after January 1, 2023, and for all items and services for plan years beginning on or after January 1, 2024.
Plans and issuers must make the required information available, without fees, in two ways….
- Through an internet-based “self-service tool” and
- In paper form by mail upon a customer’s request.
Internet Self-Service Tool and Delivery of Information
The Final Rule states that the Departments agree that the self-service tool requirements should ensure all people enrolled in group health plans and health insurance coverage have access to the same baseline functionality, while providing enough flexibility for plans and issuers to develop and iterate on innovative internet-based self-service tools. The Departments also agreed that certain additional content elements could be beneficial to participants, including general benefit summary information and quality metrics. In addition, the Departments also agree that plans and issuers should have flexibility to design tools that can maximize consumer utility and acknowledge that the suggested additions to search functionality could be beneficial to consumer, but they decline to require the adoption of some of the suggestions to avoid being overly burdensome and prescriptive.
This internet method of delivery allows for a search by billing code (CPT code) or a descriptive term. Keep in mind, most consumers will not be aware of CPT codes, and will likely more often use a descriptive term. It should also allow users to enter a specific in-network provider, along with the CPT code or descriptive term. If the plan or issuer utilizes a multi-tiered network, the tool would be required to produce the relevant cost-sharing information for the covered item or service for individual providers within each of the tiers.
If an estimate varies based on factors other than the provider, the tool would also be required to allow users to input sufficient information to disclose meaningful cost-sharing data. For example, a participant should be able to make the distinction between whether a service is preventive or diagnostic.
If the cost-sharing liability estimate for a prescription drug depends on the quantity and dosage of the drug, the tool would be required to allow the user to input the quantity and dosage into the tool.
If an estimate varies based on the place of service, such as a hospital setting vs an outpatient setting, the variance must be shown. The Rules also allow users to search for the out-of-network allowed amount or other metric for a covered item or service, such as a zip code or the location of the out-of-network provider. The tool must be able to allow users to refine or reorder the results with sorting and filter options, for geographic proximity and amount of estimated cost-sharing. The Departments also encourage plans and issuers to also provide a mobile application version, in addition to the website tool, although it is not required.
Health plans and issuers must make cost-sharing information available for the 500 items and services on or after January 1, 2023, and for all items and services for plan years beginning on or after January 1, 2024.
For internet delivery, there can be no subscription or other fees to access data. It needs to be delivered to the consumer free of charge. Health plans and issuers must provide real-time responses based on cost-sharing information that is accurate at the time of the request, such as out-of-pocket limits and amounts applied to date, deductible amounts and the amounts applied to date.
Paper Delivery
Most of us realize that it is not feasible to assume that all plans and populations of participants will be able to use the website self-service tool. There are language barriers, low economic areas in which families may not have access to computers, etc. Because of these concerns, plans and Issuers must also offer an alternative, paper delivery upon request. For the paper versions, once again, plans and issuers may not require a fee. They are required to refine or reorder the results if the result request returns more than one result. The paper delivery must be provided no later than 2 business days after the request is received, which is by most industry expert standards, nearly unattainable, and difficult and burdensome at best.
The plan or issuer may also limit any results for a paper request to 20 providers per request, and they must be able to sort in a way that is meaningful to the participant searching. This includes by cost, location, etc.
If a participant requests an alternative means of disclosure, such as by phone or email, the plan or issuer is permitted, as long as the request is delivered in the same time-frame as the paper method.
Difficulty for Employers to Meet the Requirements and Use of Outside Vendors
The Final Rules state that based on 2019 Census data, there are 183 million Americans enrolled in employer-sponsored health plans at some point during the year. This means that more than 56% of the nation’s insured population has employer-sponsored coverage. The Transparency Rules has no intention of negatively impacting employer health plans and encourages the competition in the employer-based health care market.
The Final Rules allow for health plans, fully insured or self-insured, to enter into a contract with an issuer or vendor for administration and compliance of the transparency rules. Self-funded employers may enter into such contracts with issuers or vendors for administration, but remain liable for the compliance requirements.
I asked Marilyn what types of things the self-funded employer plan sponsor should be doing to protect themselves. “Under ERISA,” Marilyn stated, “hiring a service provider is a fiduciary function. When choosing a service provider, a plan fiduciary must perform adequate due diligence, and should consider the vendor’s experience, performance history, and fees. Each step in the process should be documented. The DOL’s booklet, ‘Understanding Your Fiduciary Responsibilities under a Group Health Plan,’ provides a summary of the actions plan fiduciaries should take when choosing a service provider.”
MEWAs (multiple employer welfare arrangements) that are employee welfare benefit plans assume liability and retains all related responsibility. For those that are not itself a plan, each employer providing benefits is separately responsible for compliance. The same applies to association health plans.
Data Files
Three files are required from issuers and group health plans in 2022. They include:
- In-network rate file
- Allowed amount file
- Prescription drug file
Although many commenters requested real-time updates, the Final Rules require monthly updates. This information must be provided by all health plans and issuers, including employer plan sponsors of non-grandfathered health plans, unless they contract these services with an outside vendor or administrator. The reality is, employer plan sponsors don’t really have access to this information, and yet they are still liable for it.
The use of these data files may not require the establishment of a user account, password or other credentials. This information is literally available to all of the general public. The files must include a “place of service code” and a provider TIN.
The In-Network Rate File must include the name and identifier for each coverage option (ie employer tax ID and health insurance oversight system (HIOS) ID, billing codes used by a plan or issuer for “purposes of billing, adjudicating, and paying claims for a covered item or service” (ie a CPT code, healthcare common procedure coding system (HCPCS) code, DRG, National Drug Code (NDC), or ICD-10 code, and each code must include a plain language description, for all 500 shoppable services). I ask, how many employers even know what these codes are? I was senior management in a self-funded health plan TPA for 12 years early in my career and I barely know what they are!
Also in the in-network rate file, you must provide the in-network applicable rate, which could be negotiated rates (ie fee for services), amounts in underlying fee schedules (such as PMPM models, or a base rate attached to that service), and derived amounts.
These rate files are extremely complex. I’m only touching on the requirements here.
The Allowed Amount File includes unique amounts that a plan or issuer allowed, as well as associated charges, for covered items or services furnished by out-of-network providers during a specified time period. That period, incidentally, is defined as the 90-day time period that begins 180 days prior to the publication date of the Allowed Amount File.
Allowed amounts must be reflected as a dollar amount, not a percentage or other amount. This is important and highly relevant for Reference-Based Pricing plans without a network. RBP plans generally tie their payments to a set percentage of something like Medicare, but do not have contractual arrangements with the providers. For example, 150% of the Medicare rate. That is not allowed under the allowed amount file. You must state the exact amount for that service, not the percentage of Medicare.
The Prescription Drug File is probably the most complicated, in my opinion, of all the required data files. Prescription drug negotiated rates are complex. These are the amounts a group health plan or health insurance issuer has contractually agreed to pay an in-network provider, including an in-network pharmacy or other prescription drug dispenser, for covered items or services, whether directly or indirectly, including drug rates through a TPA or PBM, which can be very complicated.
This data file must include prescription drug historical net price disclosures, which means a retrospective average amount a plan or issuer paid for a prescription drug, inclusive of any reasonably allocated rebates, discounts, chargebacks, fees, and additional price concessions received by the plan or issuer, which can be very complicated, but can save the plans considerable amounts of money.
Employer Contracting of Services- Protections from Liability
Obviously, most employers will need to contract these services out to a qualified third-party vendor. One of the most important things to keep in mind while shopping for these vendors is to work with one who will accept indemnification language, because as I said above, the employer is liable for the compliance, yet has no access to the rates, so they must rely on qualified parties. They will want to (in my opinion, need to) transfer that liability to the vendor that is actually performing the work.
I asked Marilyn Monahan about that liability, and about indemnification and other protections, and how important they were to employers. “Review the terms of the service provider’s contract carefully,” she stated. “To begin, the contract should clearly specify the duties and responsibilities of each party and, through representations and warranties, set expectations for the level of service that will be provided. Also consider how certain contract terms might impact you in the event the service provider fails to perform. For example, review (or add or delete) the indemnification, limitation of liability, termination, arbitration, venue, choice of law, and attorney’s fees clauses, which could all become very relevant in the event the vendor makes a mistake. Understand, and be clear about, the cost for the service.”
Privacy, Security & Accessibility
The Final Rules state that group health plans and health insurance issuers are required to provide cost-sharing liability estimates and related cost-sharing information that operates in tandem with existing state and federal laws governing the privacy, security and accessibility of the information that will be disclosed under the disclosure requirements. For example, the content to be disclosed by plans and issuers may be subject to the privacy, security and breach notification rules under HIPAA or similar state laws. Nothing in the final rules are intended to alter or otherwise affect plans’, issuers’ and other entities’ data privacy and security responsibilities under the HIPAA rules or other applicable state or federal laws.
Enforcement & Good Faith Compliance
The Final Rules state that the states will generally be the primary enforcers of the requirements imposed upon health insurance issuers by the final rules. The rules include a special applicability provision to address circumstances in which a group health plan or health insurance issuer, acting in good faith, makes an error or omission in its disclosures. A plan or issuer would not fail to comply with the rules solely because it, acting in good faith and with reasonable diligence, made an error or omission in a disclosure, provided that the plan or issuer corrects the information as soon as practicable. Additionally, to the extent such an error or omission, according to the Final Rules, was due to the good faith reliance on information from another entity, the rules include a special applicability provision under which, to the extent compliance would require a plan or issuer to obtain information from a third party, the plan or issuer would not fail to comply because it relied in good faith on information from the other entity, unless the plan or issuer knew, or reasonably should have known, that the information was incomplete or inaccurate.
The Departments are finalizing the “good faith” safe harbor. Good faith is an established legal and business term that is generally understood to involve honesty in fact and observance of reasonable commercial standards of fair dealing, according to the Uniform Commercial Code.
I should mention that states do not have authority to require such disclosures by plans subject to ERISA, which compose a significant portion of the private market.
High Costs of Implementation
The cost of implementing these rules is expected to be astronomical. However, the Departments anticipate that a number of TPAs and issuer-TPAs will seek to coordinate their efforts and take advantage of any resulting economies of scale to reduce their overall costs. However, I personally feel that if the companies are financially able to do this on their own and be one of the first to the market to offer it cost-effectively and on a wide-spread basis, they will definitely reap the rewards of market share and get a head start on the competition.
A number of Tables were presented in the Final Rules on estimated costs to implement items such as the internet-based self-service tool. Table 4 summarizes the High-End First Year Estimated One-Time Cost and Hour Burden for the Internet-Based Self-Service Tool for Each Issuer or TPA, which resulted in the total cost per respondent of $5,295,680.
Table 5A shows the Low Range first Year One-Time Cost and Hour Burden for the tool requiring a complete build at $1,037,423,712. Table B was Low-End for a Partial Build at $2,801,044,022. There are several tables with several variations of first-time costs, second year costs, and ongoing maintenance in the Final Rules.
I don’t expect the average TPA to be able to incur these costs. I assume most are already looking at vendors to subscribe to. So let’s hope some surface soon!
The bottom line is, this is an expensive requirement, and health plans and issuers will absolutely have to increase premiums to pay for it, and TPAs will have to increase their administrative fees to employers as well.
References & Helpful Links
Although I’ve provided multiple links within this article, I will provide a few more helpful ones to assist those looking for more information.
The Final Rule can be found at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS-Transparency-in-Coverage-9915F.pdf
Draft Model Notice can be found at:
Transparency in Coverage Final Rule Fact Sheet can be found at:
https://www.cms.gov/newsroom/fact-sheets/transparency-coverage-final-rule-fact-sheet-cms-9915-f
The National Association of Health Underwriters has an informative webinar on this subject in the Compliance Corner section of their website. I highly recommend it for anyone interested! www.nahu.org
Author’s Disclaimer: The information contained herein should not be construed as legal advice of any kind. I’ve gathered public information to attempt to assist readers in understanding the new rules. I always recommend that you seek the advice of your own legal counsel, as things will rapidly be changing, and situations vary.
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