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A New Era of Health Plan Transparency: 6 Things to Know

New regulations in the U.S. aim to peel back the curtain on how healthcare prices are set. This will drive employers to use data to make better decisions about the best coverage for their people.

 

Key Takeaways:

  1. The new U.S. healthcare plan transparency mandates will continue phased implementation through 2024.
  2. The push for more transparency has broad support and will transform the way we consume healthcare.
  3. Analyzing publicly available data will drive innovation and optimize care.
     

The latest U.S. regulations to improve transparency in how healthcare prices are set will come with a learning curve for many organizations.

Healthcare pricing has always been confusing and intimidating to even the savviest of consumers. Whether it’s firms trying to budget for the cost of future care or employees making informed plan choices during enrollment, knowing how much healthcare will cost involves predictions about the unknown.

Following the introduction of the new regulations, health plan sponsors must now post their negotiated prices for in- and out-of-network providers on a public website. The posted files should meet certain transparency standards and be updated regularly. Plan sponsors also must have a price comparison tool and comply with other transparency mandates.

The Centers for Medicare & Medicaid Services (CMS) issued its final rule on transparency in coverage back in late 2020, but its implementation was delayed until the middle of 2022. The phased implementation will continue through 2024.


Here are six things to know about this new era of health plan transparency:
 

1.  The push for transparency took a long time to come to fruition and now has broad support.  The new CMS rule has been described as a “game-changer” that has the potential to transform how we consume healthcare. Employers have been asking for this type of transparency for their plan participants for years. The push to create the new transparency laws was bipartisan, meaning a change of party control in Congress or the White House won’t undo the progress made.

 

2.  Transparency will (eventually) benefit plan sponsors.  In the past, getting any kind of price data required data use agreements, actuaries, and an infrastructure for summary and analysis. Now, the data will be publicly available, with opportunities to analyze, interpret and use it to improve outcomes. While it will take some time, faster and easier access to this data will empower plan sponsors to learn more about the coverage they offer. It will also benefit companies, allowing them to go beyond their own data and partner with a trusted advisor to learn more about how their plans stack up in the market and how they can provide the best coverage to their employees.

 

3.  The data has new and multiple practical applications.  It’s not uncommon to see huge variations in price, even in similar circumstances. The cost of some high-volume procedures, such as an MRI or knee replacement, can vary 300 percent in the same market. Under the new regulation, companies will be able to help their employees know what to expect. The fact that price data is no longer siloed and private will also allow companies to begin directing employees to lower cost providers.

 

Why Do Prices Vary so Much?

 Not all providers are equal. The reason for this is more than just the quality of the individual staff at a facility. Some other factors driving cost disparities and disconnects between cost and quality include:
  • Systemwide contracts — Prices are often negotiated systemwide, meaning a small 50-bed facility may charge the same as its 1,000-bed sister facility, even though the smaller facility lacks the personnel and updated equipment of the larger facility.
     
  • Branding — Hospitals build their reputation with high-visibility services like oncology or trauma, but that emphasis may not translate to higher volume departments like orthopedics. The overall brand reputation, however, supports the higher price.
     
  • Marketing — Healthcare is a competitive industry and hospital systems understand that patients are increasingly able to act like consumers. They have two levers to pull in that situation — lower their prices or provide more perceived value. Some facilities focus on the latter, like amenities for patients that seek to improve patient experience.


 

4.  Price transparency data is a work in progress.  The health plan price transparency requirement is a big improvement over the earlier hospital price transparency data, where compliance was low and inconsistent. However, even within the price transparency files there is much work to be done, starting with standardization. Health plans are only required to publish their own negotiated prices, and how a carrier defines an episode of care can vary. One insurer may pay a percentage of total charges, while others may pay on the number of days or a set amount for the entire episode of care.

 

5.  The future is price transparency plus quality data.  Once standardization of the pricing information has been introduced, adding outcome data and quality metrics could be truly revolutionary. Companies with the ability to cross-reference quality and price data will have the confidence to steer their employees to certain providers. It can also influence differences in where the care is given. For example, some providers administer certain chemotherapy treatments as an outpatient service, while others may do so in a doctor’s office or even a home care setting. This can account for big differences in both cost and quality.

 

6.  Transparency could unlock new dynamics in the market. An enormous data set is now publicly available. Once we can integrate quality measures, advanced analytics will allow us to drive innovation. This could lead to new products or solutions. It could also change the way those seeking care are able to behave like consumers. Companies need to move away from traditional analysis, emphasize quality and look for ways to help their employees optimize their care.

 

Next Steps for Navigating Healthcare Plan Transparency Compliance

Although the transparency guidelines are an enormous step forward, they are only the first step.

 

These transparency regulations are the beginning of a long journey.  But while we all work to lobby for better data in the future, companies can find small pieces of data to use today.

-Bob Tate, Senior Vice President, Aon Health Solutions

 

As more transparency deadlines emerge, companies will need help complying with the mandates. But more than that, companies looking to take full advantage of the new availability of data will need to analyze and contextualize that data in order to make better decisions. Working with an advisor can help plan sponsors navigate and maximize opportunities in this new era of transparency.

Find out more about health plan transparency and how Aon can help.