Read More

Departments Issue Transparency in Coverage Final Rule

On October 29th, the release of the Transparency in Coverage rule delivered and finalized methods to enable consumers to know and understand the cost of health care, and their corresponding out-of-pocket costs, before they receive services.

Executive Order

While an executive order is not a law, it sets the tone for Congress and the regulatory agencies, like the Department of Health and Human Resources (HHS), the Internal Revenue Service (IRS), and the Department of Labor (DOL). It provides instruction and prioritization to regulatory agencies for new rules and, on Congressional activities, insight as to whether the President will sign or veto certain bills.

This final rule is a collaboration between the Center for Medicare and Medicaid Services (CMS) and the Departments of Health and Human Services (HHS), Labor (DOL), and Treasury [“Departments”] in response to President Trump’s previous Executive Order to improve quality, choice, and competition in the health care market. This rule specifically targets improvement of consumer information in the health care decision-making process.


It’s no secret that the cost of health care goods and services continues to grow. Subsequently, we’ve seen the methods for financing, or paying, for that health care, e.g. health plans, health insurance, and out-of-pocket costs, rise. Trying to budget for these costs is virtually impossible for the average person, namely, because there is little information available on the actual cost of health care goods and services.

With the purchase of a product or service, one can look at the attributes of the item or service, its quality, its cost, and then determine the overall value it has to them and for their situation. With those pieces of information, an individual can make a good purchasing decision.

Unfortunately, that has not been the case for health care goods and services. Consumers do not have information available to them necessary to weigh different alternatives and make informed health care decisions. In fact, many times, consumers are in the dark that alternatives even exist, let alone how to compare them.

Key Insight

“Price transparency puts patients in control and supports competition on the basis of cost and quality which can rein in the high cost of care," said CMS Administrator Seema Verma. "CMS’ action represents perhaps the most consequential healthcare reform in the last several decades.”

President Trump’s June 2019 Executive Order, Improving Price and Quality Transparency in American Healthcare to Put Patients First, acknowledges this gap in consumer information and lays out specific requirements for providers and health plans to publicly disclose costs. Specifically, it instructs the Departments to develop regulations requiring:

  • hospitals to publicly disclose standard charge amounts;
  • all healthcare providers, health insurers, self-insured health plans provide information on expected out-of-pocket costs for items or services to patients prior to receiving care;
  • a report that addresses the federal government or private sector impediments to healthcare pricing transparency for patients and providing remedies that will promote competition;
  • develop a Health Quality Roadmap that aligns and improves reporting on data and quality measures across Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), the Health Insurance Marketplace (Exchange), the Military Health System, and the Veterans Affairs Health System; and
  • additional steps necessary to implement the principles on surprise medical billing

This new rule builds on the other CMS transparency accomplishments in 2019 and 2020, along with upcoming changes for 2021, that address cost transparency for Medicare, Medicaid, Children’s Health Plans (CHIP) and Veterans Affairs Health System (VA). It encourages plan issuers to create new plan offerings that incent customers to shop for high quality/lower-cost care. Set copayments, a staple in many insurance plans, provide no incentive since the is the same for all solutions. Here, the consumer is blind to the actual tradeoffs between health care delivery and service.

Details of the Final Rule

Applicability – group health plans and health insurance issuers in the individual and group markets

  1. Beginning with plan years effective on or after January 1, 2022, the rule requires:
    • require plans to make publicly available standardized and regularly updated data files;
  2. Beginning with plan years effective on or after January 1, 2023, health plans to provide and online shopping tool containing:
    • the negotiated rate between the health care provider and the health plan for each service; and
    • a personalized estimate of their out-of-pocket cost for 500 of the most shoppable items and services; and
  3. Beginning January 1, 2024, health plans will expand the online shopping tool to include the costs for the remaining procedures, drugs, durable medical equipment and any other item or service they may need

This final rule opens the way to greater openness and transparency in our healthcare system,” said U.S. Secretary of Labor Eugene Scalia. “American workers in employer-sponsored health plans will now have access to real-time, personalized cost-sharing information that empowers them to shop and compare costs between specific providers before receiving care. Today’s rule is another example of the Trump Administration improving healthcare access and options for American workers.

Required disclosures1 to plan participants and beneficiaries – the plan or issuer must provide, to the participant, beneficiary, or enrollee requesting information, a notice and disclosure with the following:

Required Disclosure

Required Notice

Method/Formats for Disclosure2

  • Required cost-sharing amount, i.e. balance after application of insurance payments and discounts;
  • Accumulated amounts, i.e. total of all charges satisfying the deductible and out-of-pocket amounts and cumulative treatments that count toward any plan limitations based on number of visits, units, hours, days, etc.;
  • In-network rate, including negotiated rate or underlying fee schedule rate;
  • Out-of-network allowed amount;
  • List of items and services included in a bundled payment, if requested; and
  • Any limitations or pre-requisites
  • There may be a potential for balance billing or surprise billing if allowed by state law;
  • Actual charges may differ from the estimate if services rendered differ from those for which the estimate was provided;
  • Cost-sharing liability is not a guarantee that benefits will be provided;
  • Whether the plan counts the copayment assistance and other third-party payments in the total deductible and out-of-pocket;
  • Preventive services, if billed as such, may not be subject to cost-sharing; and
  • Other disclaimers and disclosures the plan deems appropriate
  • Internet-based self-service tool – must be written in plain language, cannot require a subscription or fee, and provides real-time response based on information that is accurate at the time of the request with search available by:
    • Billing;
    • Name of in-network provider;
    • Other relevant factors that determine out-of-pocket costs;
    • Out-of-network allowed amount,
    • Paper method – in plain language providing no less than 20 providers and mailed within 2 business days after request receipt
    • Phone call or email

1Does not apply to grandfathered health plans, health reimbursement arrangements (HRAs) or other account-based group health plans or short-term limited duration plans
2Health plans may use a written agreement to require health insurance issuers or third-parties to provide the notice/disclosure

Required public disclosures – the plan or issuer must provide machine-readable files to the public and update on a monthly basis. These files must include the following information:

  • In-network provider rates for covered items and services, including;
    • The 14-digit Health Insurance Oversight System (HIOS) identifier or Employer Identification Number (EIN) for each coverage option offered by a group health plan
    • A billing code and a plain description for each covered item or service under each coverage option
    • All applicable rates – negotiated rates, underlying fee schedule rates, or other amounts
  • Out-of-network allowed amounts and billed charges for covered items and services; including:
    • The 14-digit Health Insurance Oversight System (HIOS) identifier or Employer Identification Number (EIN) for each coverage option offered by a group health plan
    • A billing code and a plain description for each covered item or service under each coverage option
    • Unique out-of-network allowed amounts and billed charges for covered items or services furnished by out-of-network providers during the 90-day time period that begins 180 days prior to the publication date
  • Negotiated rates and historical net prices for covered prescription drugs
    • The 14-digit Health Insurance Oversight System (HIOS) identifier or Employer Identification Number (EIN) for each coverage option offered by a group health plan
    • The NDC, and the proprietary and nonproprietary name assigned to the NDC by the Food and Drug Administration (FDA), for each covered item or service that is a prescription drug under each coverage option offered by a plan or issuer;

Impact on health insurance issuer’s medical loss ratio (MLR) – the Patient Protection and Affordable Care Act (PPACA) created accountability among health insurance issuers requiring 80%, or 85% for large group health plans, of premium to account for clinical services, claim reimbursement, and activities to improve health care quality. This final rule allows health insurers to include costs associated with the provision of this cost transparency as an activity to improve health care quality. These expenses may be included beginning with the 2020 MLR reporting year.

Next steps

Employers with fully insured group health plans should monitor the progress with their carriers and communicate availability to employees upon availability of information and tools.

Employers with self-funded group health plans should begin working with their third-party administrators or administrative service only (ASO) companies to understand what role they will take in helping to comply with the new rule. If using a third-party vendor, health plans will need a written contract to ensure that all responsibilities are met. Discussions must take place in enough time to comply with the rule so it’s important to reach out now and beginning planning.

We will further advise upon the release of any other information or updates.

Never miss another update. Visit OneDigital’s Compliance Confidence blog to stay on top of the latest developments and regulatory changes that impact your program offerings.