How New Proposed Rules About Health Care Pricing Transparency Could Affect Your Small Business

Health care pricing transparency has been an elusive goal for many years, but the federal government appears poised to make progress. The Senate is currently considering S.1895, titled the Lower Health Care Costs Act, which you can read in full or summarized section by section. This comprehensive, bipartisan piece of legislation has undergone changes since being introduced in June 2019, but its goal is the same — to, among other things, protect consumers from surprise medical bills and improve health care transparency.

The act is divided into five titles. Title III specifically centers on improving transparency in health care, including allocating $20 million to create a new non-government, nonprofit entity that would be specifically tasked with increasing transparency in health care costs.

But there are also extensive provisions in other parts of the bill that would improve health care pricing transparency by eliminating surprise balance bills and modifying some of the current rules that apply to pharmaceuticals. Here’s what you need to know to prepare your business for this piece of legislation.

Improving Transparency in Health Care

The Lower Health Care Costs Act takes a multifaceted approach to improving health care pricing transparency, with some provisions written to directly focus on transparency and others that would target transparency via additional regulations.

The bill suggests changes aimed at increasing the number of insurers that offer tiered provider networks and incentivize enrollees to use lower-cost, higher-quality medical providers. It would also require insurers to maintain portals or apps where enrollees could access data relating to claims, provider quality and costs, and estimated out-of-pocket costs.

The Lower Health Care Costs Act intends to ban gag clauses that prevent employers from accessing their insurer’s provider quality and cost data. The bill’s sponsor, Sen. Lamar Alexander, R-Tenn., has noted that some insurers currently have contracts that prevent employers from knowing, for example, that the cost of a knee replacement at one hospital might be more than double the cost of the same procedure at another facility.

Under this legislation, medical facilities would be required to provide patients with a detailed list of services they received while at the facility upon discharge. S.1895’s rules would require providers to bill patients within 45 days, and require health plans to disclose broker compensation details.

Pharmaceuticals: Improved Transparency and Lower Costs

S.1895 also seeks to reduce barriers that keep less expensive generic drugs out of the market. The bill would have health insurers and pharmacy benefit managers (PBMs) provide employers with detailed reports regarding prescription utilization, pricing and lower-cost alternatives.

In addition, PBMs would have to limit how much they charge employers — specifically, to no more than the amount the PBM pays the pharmacy that dispenses the drug. They’d also be required to make any manufacturer rebates available to the employer.

Overall, predictions for this bill from the Congressional Budget Office (CBO) expect health plan costs for pharmaceuticals to be slightly lower under S.1895. This improved transparency for pharmacy benefits may be particularly beneficial for smaller health plans, as they’re less likely to have access to this level of transparency under current rules.

Protecting Consumers From Surprise Out-of-Network Bills

A headline provision in S.1895 is a strong set of rules to protect consumers from surprise balance billing. Right now, this key area of health care pricing transparency is only addressed in a patchwork, state-by-state fashion — and state regulations don’t apply to self-insured plans, which are instead regulated under federal law.

Surprise balance billing describes when a patient receives a bill for out-of-network services, even if using an out-of-network provider was unavoidable. This includes emergency situations — such as transportation via air ambulance — as well as instances where a patient seeks care at an in-network facility but unknowingly receives treatment from providers who aren’t in the network.

S.1895’s rules would have the insurer calculate the patient’s cost-sharing amounts (such as their copay, deductible, coinsurance and total out-of-pocket cost) based on the plan’s in-network coverage rules. Then, the insurer would pay the out-of-network provider the median amount of standard in-network charges. This approach has widespread support from employers, but some physician groups oppose mandating median in-network payment rates as full payment for out-of-network providers.

Questions Your Employees Might Have

Rather than imposing new employer health care requirements, S.1895 primarily focuses on drafting rules and regulations for insurers and PBMs — which largely benefits employers and employees.

However, the increased media coverage of the legislation might create some questions for employees about how greater health care pricing transparency could affect them. You should be prepared for employees to ask about the following subjects.

Will I Still Be Able to See My Doctor?

Avoid making too many promises when you discuss how employees’ health plan networks might change in the future — there’s never a guarantee that a given provider will stay in the network. However, you can explain that S.1895 would not require insurers to modify their networks or switch to tiered network structures. Rather, it would prevent provider-insurer contracts that don’t allow for those kinds of provisions.

How Will This Affect Our Health Insurance Premiums and Out-of-Pocket Costs?

The aforementioned CBO analysis of S.1895 anticipates lower insurance premium reductions due to the bill’s expansion of tiered networks, protections against surprise balance billing and improvements to pharmacy benefits. The consumer portal or app for claims, cost and provider data required by the legislation, should it pass, will have an associated expense. Employers are expected to absorb that cost in the form of higher premiums. But overall, health insurance premiums are projected to be lower under S.1895 than they would otherwise be. Employers can choose to pass the savings on to employees through higher compensation, more robust health benefits, lower premiums or increased contributions to HRAs or HSAs.

This legislation’s ban on surprise balance billing would directly translate to reduced out-of-pocket costs for enrollees who end up receiving emergency out-of-network care or ancillary out-of-network services at an in-network facility. The provision that reduces the time to bring lower-cost medications to the market and limits PBM charges could also result in lower prescription drug costs for plan enrollees. Meanwhile, putting transparency tools in the hands of employees should make it easier for them to comparison shop based on estimated costs and provider quality.

How Soon Would These New Rules Take Effect?

Depending on the provision in question, new rules could take effect between six months and two years after the legislation is enacted. If the legislation is enacted in 2019, some changes would begin in 2020, while others would stay on hold until 2021.

Whether the legislation ultimately passes or not, the questions it raises for your employees create an opportunity for you to solidify your employees’ understanding of their coverage, make them aware of possible changes to your offerings, and help them avoid surprise medical bills and high health care costs with the resources currently available to them.

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