Understanding the New Health Care Transparency Requirements

Background. It has long been difficult to obtain accurate information about the charges for health care services. Even with federal requirements to be more transparent, many hospitals have resisted disclosing their fees. Health plan vendors that administer provider networks treat the fees that they negotiate with health care providers as proprietary information, often placing contractual limits on access to this information and its disclosure.

New Rule. A set of regulations issued jointly by the U.S. Departments of the Treasury, Labor, and Health and Human Services requires group health plans and insurers to disclose pricing information in three phases:

• In Phase One, health plans must publicly post machine-readable files for in-network rates, out-of-network allowed amounts and billed charges, and prescription drug negotiated rates and historical prices. This requirement does not apply to out-of-network services and prescription drugs if there are fewer than 20 claims for the service or item in the 90-day period for which information is gathered. Plans must update the information monthly.
• In Phase Two, health plans must make an internet service tool available to plan enrollees that, on request, provides them information relevant to their costs for 500 specified items and services. The information to be provided includes:
  • An estimate of their cost-sharing (deductible, co-payment, co-insurance) liability
  • Their accumulated amounts to date, for example toward satisfaction of a deductible (both individual and family)
  • The in-network rate or out-of-network allowed amount, as applicable
  • Certain information in the event of a bundled arrangement
  • Notice of other relevant information, such as whether any prerequisite applies to coverage for an item or service and whether balance billing could apply.
• Phase Three extends Phase Two to all items and services.

For Phases Two and Three, the internet service tool must allow plan enrollees to search for information by certain elements, such as billing codes, descriptive terms, and in-network providers. Enrollees must be able to refine and reorder their search by geography and the amount of cost-sharing responsibility. Plans must make search results available by paper free of charge, but may limit the results to 20 providers per request. The Consolidated Appropriations Act, 2021 (CAA) adds a requirement that certain information be available by telephone.

Citations. 26 CFR 54.9815-2715A1, A2, and A3; 29 CFR 2590.715-2715A1, A2, and A3; 45 CFR 147.210, 211, and 212; and 45 CFR 158.221. ERISA section 719; Internal Revenue Code section 9819; and Public Health Services Act section 2799A-4.

Effective Date. Phase One of the transparency regulations applies to plan years beginning on or after January 1, 2022. Phase Two applies to plan years beginning on or after January 1, 2023. Phase Three applies to plan years beginning on or after January 1, 2024. The CAA provisions on the furnishing of information by telephone apply to plan years beginning on or after January 1, 2022.

Enforcement. For health plans that are subject to ERISA, the U.S. Department of Labor and plan participants and beneficiaries may enforce compliance with these rules. Plans not subject to ERISA may be subject to enforcement by the U.S. Department of Health and Human Services (HHS). HHS shares responsibility for enforcement against insurers with state agencies. In addition, the Internal Revenue Service may impose an excise tax of $100 per day per affected individual under section 4980D of the Code for any failure to comply.

The regulatory agencies that enforce the transparency rules have announced that they would delay enforcement of Phase One until July 1, 2022, for plan years that begin before that date. The delay for prescription drugs may be even longer depending on when the agencies issue regulations to coordinate these transparency rules with certain prescription drug reporting rules in the CAA. The agencies also announced that their enforcement of the CAA requirement to make information available, including by telephone, will be delayed until January 1, 2023, to align with the Phase Two effective date. Technically, the delay by the agencies will not preclude individuals or states from seeking to enforce the new rules on or after the effective date, although the agency guidance encourages states to follow suit.

A plan or insurer will not be deemed to violate the rules if the applicable website is temporarily inaccessible or it makes an error or omission in a required disclosure provided that it has acted in good faith and with reasonable diligence to comply and promptly corrects the error or omission.

Plan Considerations. Plan sponsors cannot meet these requirements without the full cooperation of their health plan vendors and need to make appropriate arrangements with those vendors to comply. Sponsors of insured plans may meet the transparency requirements by entering into a written agreement with their insurer to meet the requirements. Sponsors of self-insured plans will be legally responsible for complying with the requirements, but may (and, as a practical matter, must) amend their agreements with applicable plan vendors to make them contractually responsible for compliance. Plans may rely on the information provided by those vendors unless they know or reasonably should know that the information is incomplete or inaccurate. Most often plan sponsors (and insurers and vendors) will want to make the information available through the insurer’s or vendor’s website. However, they should allow plan enrollees to link to that information from any website that the plan sponsor maintains that provides health plan information.

Ideally, the contract will be effective as of the dates each phase of the rules becomes effective. Vendors may seek to delay compliance until the date of agency enforcement and plan sponsors should consider how to address the interim period. Phase One of these requirements is the subject of two separate lawsuits that aim to prevent the rules from taking effect as a whole or with respect to prescription drug benefits.

Recommended Steps. Plan sponsors should consider taking the following actions:

• Enter into written contracts with applicable health plan insurers, third party administrators, and pharmacy benefit managers to provide the required information through their websites, to update the information in accordance with the new regulations, and to allow for a portal from the plan website to the vendor website to facilitate enrollees’ access to their own information.
• Establish a portal from the plan website to the vendor’s website for such information.
• Determine whether the vendor will comply by the effective date and, if not, what the vendor will do and be responsible for prior to its compliance. 

Lawyers at Ballard Spahr are prepared to assist you with questions that you may have.

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