In October 2020, the U.S. Department of Health and Human Services, Department of the Treasury, and the Department of Labor (collectively “the Departments”) released the Transparency in Coverage Final Rules (TiC Final Rules).1 The TiC Rules required non-grandfathered group health plans and health insurance issuers (collectively referred to as “payers”) to publish certain information about the prices of healthcare services and estimates of members’ cost-sharing liabilities.
On April 19, 2022, the Departments published Frequently Asked Questions (FAQs) related to the TiC Final Rules.2 The answers provided in the FAQs substantially impact the interpretability and usability of the information available to consumers and other stakeholders.
Impact of the FAQs
The FAQs address a significant reporting challenge that payers raised to the Departments about reporting accurate dollar amounts for certain services where the negotiated rate cannot be determined in advance of the delivery of the item or service. The FAQs address how to report contractual rates for such items and services in the machine-readable files to be compliant with the TiC Final Rules.
Due to the contractual arrangement between a payer and a provider, it may not be possible for a payer to report an accurate dollar amount for items and services in advance of these items/services being provided, for various reasons. Two common reasons involve contracts where payment is expressed as a percentage of billed charge amounts, and contracts where the provider is otherwise not reimbursed on a fee-for-service basis. The FAQ addresses these situations as follows:
- For payers that have contracts with providers on a “percentage of billed charges” basis, the Departments will permit the payer to report the applicable percentage of billed charges as outlined in the contractual arrangement rather than an actual dollar amount. Payment arrangements based on a percentage of billed charges require the ultimate negotiated dollar payment amounts to be based on the specific gross charges (or chargemaster amounts) for each item or service rendered.
- For payers that have other “alternative reimbursement arrangements” that are not supported by the schema provided in the Departments’ technical implementation guidance,3 there will be an opportunity to describe the “formula, variables, methodology, or other information necessary to understand the arrangement” in an open text field in the file, in lieu of providing the actual dollar amounts. In recent years, the emergence of many different alternative reimbursement models has increased the complexity of the payer-provider contracting relationship. These arrangements may prevent accurate dollar amounts for contracted items and services from being known prior to the delivery of care.
These two changes will help payers to comply with the TiC Final Rules and will result in more complete reporting. In our experience, most payers will have at least some portion of their contractual arrangements with providers on a percent of billed charges basis or alternative reimbursement models. Contractual arrangements as a percent of billed charges are one of the more common reimbursement structures, and alternative reimbursement models represent a growing proportion of arrangements.
While these changes will make it easier for payers to comply with the TiC Final Rules and lead to more complete reporting, they will also make the data much more difficult for consumers and other stakeholders to use for decision-making and analysis.
Flexibility in reporting will require interpretation and additional contextualization of data to make accurate comparisons of negotiated rates across payers and providers. In some cases, such comparisons may not be possible at all. For example, the guidance outlined in the FAQ would consider the following information to be compliant with TiC rules:
Figure 1: Comparison of contracts based on a percent of billed charges approach
| Provider A | Provider B | |
|---|---|---|
| Payer 1 | 50% of billed charges | 40% of billed charges |
| Payer 2 | 45% of billed charges | 60% of billed charges |
A consumer would observe that Payer 2 pays a lower percentage of billed charges for services performed by Provider A, and Payer 1 pays a lower percentage of billed charges for services performed by Provider B. However, the ambiguity of each provider’s billed charges is such that the consumer is not able to determine the price of each configuration and would not be able to make a rational purchasing decision (either in choosing a payer or in choosing a provider). Without the corresponding billed charge information, this information is of little to no value to a consumer or other stakeholders trying to understand the expected costs.
The changes detailed in the FAQ acknowledge that contractual arrangements between payers and providers can be complex and may not conform to the Departments’ single schema. As a result, payers should be able to more accurately describe the structure of their reimbursement arrangements, which will provide valuable information to stakeholders about the prevalence of various structures (such as value-based purchasing in the commercial market, which has been difficult to measure to date).
In summary, while these changes represent additional flexibility to support payer compliance with the TiC Final Rules and provide insights regarding the reimbursement arrangements for payers, they decrease the usability of the data and increase the difficulty for consumers or other stakeholders to compare prices and understand the expected costs.
Additional background
One of the key components of the TiC Final Rules is the requirement for payers offering non-grandfathered coverage in the group and individual markets to disclose, on a public website, information regarding in-network rates for covered items and services in machine-readable files.4
The machine-readable file requirements of the TiC Final Rules are applicable for plan years (in the individual market, policy years) beginning on or after January 1, 2022. The Departments previously announced that they will defer enforcement of the requirements related to machine-readable files disclosing in-network and out-of-network data until July 1, 2022.5
The TiC Final Rules require plans and issuers to publish all applicable rates, which may include one or more of the following: negotiated rates, underlying fee schedule rates, or derived amounts for all covered items and services in the In-network Rate File. The Departments specify in the preamble to the TiC Final Rules that the In-network Rate File requirement applies to plans and issuers regardless of the type of payment model or models under which they provide coverage.6
1https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS-Transparency-in-Coverage-9915F.pdf
2https://www.cms.gov/sites/default/files/2022-04/FAQ-Affordable-Care-Act-Implementation-Part-53.pdf
3https://github.com/CMSgov/price-transparency-guide
41 26 CFR 54.9815-2715A3; 29 CFR 2590.715-2715A3; and 45 CFR 147.212; 85 FR 72158 (Nov. 12, 2020)
5ee FAQs about Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 49, Q 2, available at: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part49.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-49.pdf