Health Plans & the New Federal Price Transparency Rules

An issue brief by the Kaiser Family Foundation (KFF) looks at how federal price transparency rules for health plans and hospitals could affect the market. Whether more transparency will reduce health care costs depends on several factors, including type of care, choices in a particular network, and, perhaps most importantly, how providers, purchasers, and payers respond to increased price transparency. 

Price information could alter negotiations between providers and insurers by allowing each to see what their competition charges and pays. Insurers and large employers may use the information to configure their networks to include lower-priced providers. Alternatively, lower-priced providers could demand higher prices, according to KFF. 

Some price transparency initiatives have shown modest decreases in health costs. However, price transparency could increase prices if providers try to negotiate higher rates to match their competitors, especially in highly concentrated markets. Two large employers found that a price transparency tool did not reduce their employees’ outpatient out-of-pocket spending, according to a study published in JAMA in 2016. Massachusetts requires payers to have cost estimator tools for services at various sites of care, but evidences does not show that the tools have decreased spending. Evidence suggests that most individuals don’t seek pricing information even when tools are available, and when they do, most don’t compare providers. 

The Challenges of Price Transparency Tools
Some employers and insurers already give enrollees cost estimates. But it takes more advanced technical input, management, and compliance to offer the kind of real-time cost-sharing data that’s required in the final rule. The federal government estimates that insurers and enrollees could save $154 million in medical costs, but it will cost insurers $5.7 billion to $7.9 billion to comply with the rule. The new rule requires insurers and plans to tailor cost-sharing information to each member’s health insurance plan. But it may be hard to get accurate real-time out-of-pocket estimates. 

What’s in the Final Rule 
Health Plans

• Starting on January 1, 2022, plans and issuers must make regularly updated files publicly available
  • Negotiated rates for in-network providers
  • Historical allowed amounts for out-of-network providers
  • Prescription drugs prices
• Starting on January 1, 2023, health plans must offer an online shopping tool that allows consumers to see the negotiated rate between their provider and their plan, as well as a personalized estimate of their out-of-pocket cost for 500 of the most shoppable items and services 
• Starting on January 1, 2024, these shopping tools must reveal the costs for the remaining procedures, drugs, durable medical equipment, and any other item or service they may need

Hospitals

• Starting on January 1, 2021, hospitals must provide clear pricing information online. They have to offer a file with all items and services as well as providing the information in a display of shoppable services.