Employers take note ... you're ultimately responsible
The Trump administration has finalized regulations on health plan transparency (after proposing regulations (opens a new window) in 2019) that will require group health plans, and health insurers in the individual and group markets, to disclose a variety of cost data and member cost sharing to plan enrollees before they access services, and to post that information on publicly available websites.
The regulations, issued jointly by the Departments of the Treasury, Labor and Health and Human Services, are intended to help reduce healthcare costs by introducing greater price disclosure to influence consumer behavior and drive competition. These new regulations may help healthcare consumers identify the cost of the nonemergency services they are purchasing and how their out-of-pocket costs will be affected by their decisions. However, these regulations come with a steep hassle cost to employers: whether insured or self-insured, the employer plan sponsor has the ultimate responsibility to ensure compliance with these rules, due to take effect for plan years beginning in 2022.
Lockton comment: Consumer-directed health plans – putting more responsibility on enrollees’ shoulders and encouraging them to compare healthcare providers’ price and quality metrics – have been part of our lexicon for many years now, but a lack of transparency with respect to those metrics has always been a brake on those good intentions.
These newly final regulations are designed to operate in tandem with regulations (opens a new window), issued in final form months ago, aimed at the hospital industry to make the costs of hospital services transparent. Historically this information has been difficult for plan participants to find, making the consumer-directed plan designs much less effective. More importantly, balance billing and surprise billing issues have taken center stage politically in the last few years, so the transparency push is one aspect to address those concerns. All of these can be considered together as part of the Trump administration’s push to affect healthcare costs.
The final regulations will require health plans1 to provide cost-sharing information upon request to plan enrollees (or their authorized representatives), including an estimate of the individual’s cost-sharing liability for covered items or services furnished by specific providers. The plan must disclose this information before the items or services are provided. In addition, the plan must make this cost information publicly available.
The rules make it clear that for health plans that are sponsored by employers, the employers are the parties responsible for providing this information to plan participants or causing it to be provided.
While the regulations permit employers to contract with their insurers or third-party claims administrators (TPAs) to provide that information to enrollees, the employers remain ultimately liable in the event the required information is not provided. There is one exception: for insured plans, if the insurer agrees to provide the disclosures via a written agreement, the employer will not be responsible if the disclosures are not made. However, there is no similar opportunity for self-funded employers to shift ultimate responsibility.
Lockton comment: This provision, laying ultimate responsibility at the employer’s feet, is going to be difficult for many employers to accept. Employers are unlikely to have the required information, and certainly do not control it in any way. Insured and self-funded employers will want to shift ultimate responsibility through contractual language, including indemnity provisions. We can foresee some contentious negotiations regarding the terms of service agreements as we approach the effective date of the regulations.
There is some comfort to employers in the fact that the rules concede that while the required information should be accurate (or an accurate estimate) at the time the information is sought, the plan cannot guarantee that at the time an item or service is obtained it will be available for the precise cost identified by the plan earlier, or even that the plan then covers the item or service.
More on effective dates
The new rules’ general effective date is for plan or policy years beginning on or after Jan. 1, 2022. There is a list of 500 items and services for which price estimates must be available, effective for plan or policy years beginning on or after Jan. 1, 2023, and price estimates must be available for other items or services covered by the plan effective for plan or policy years beginning on Jan. 1, 2024.
Lockton comment: The full initial list of 500 items and services is included in the regulations. The list was developed by the agencies based on information the agencies believe is already commonly available in existing online tools. The list includes items and services such as mammography, prostate cancer screening, knee replacements, skin tab removal, various surgeries, X-rays, blood tests, vaccines and office visits.
More on required disclosure
Health plans will be required to disclose cost-sharing information to enrollees (or their authorized representatives) upon request, including an estimate of such individual’s cost-sharing liability for covered items or services furnished by a specific provider. Employer plans and insurers would also be required to make such information available on an internet website and, if requested, through non-internet means, thereby allowing individuals to obtain an estimate and understanding of their out-of-pocket expenses and effectively shop for medical items and services.
The required information is already available –often, readily available – to group plan enrollees. The main difference under the rule is that the information must be available prior to the items or services being obtained. The agencies even made note that the information is generally provided in explanations of benefits that plans and insurers send after items or services are obtained. Now the cost information, or at least an estimate, needs to be available before the services are rendered.
Lockton comment: The rules also include proposals to require plans and insurers to disclose in-network provider negotiated rates, and historical out-of-network allowed amounts, through an internet website, thereby allowing the public to have access to health insurance coverage information that can be used to understand healthcare pricing and potentially dampen the rise in healthcare spending.
The enrollee cost-sharing information that plans and insurers must disclose is lengthy and specific. The rules require estimates, accurate at the time provided, of the individual’s cost-sharing liability for a requested item or service and the amounts that the individual has already expended toward the deductible or out-of-pocket limit, as well as the in-network negotiated rates for the service and any out-of-network allowed amounts. The communication to the enrollee must also include a lengthy disclosure regarding the accuracy of the estimate and that the actual charges may be different.
Methods for providing the required information
The default method of making the information available is via an “internet-based self-service tool,” but the plan must also make the information available in paper form by mail upon request.
Lockton comment: Employers have been frustrated for many years that they cannot provide plan information electronically other than in a manner that meets increasingly arcane ERISA requirements (opens a new window). Recently, the Labor Department proposed new rules (opens a new window) that would liberalize the requirements for retirement plans. The rules proposed here, in the final transparency rules, for the use of electronic methods to provide the required disclosures also suggest regulators are seeking ways to make electronic distribution more viable for all required plan disclosures. Hopefully we’ll soon see a liberalization of the general rules for making required ERISA disclosures electronically.
When an enrollee requests the information on paper, the same information must be made available, without any fee, and must be mailed within two business days after any such request is received. The plan can limit the number of providers for whom cost information can be sought in a single request to no fewer than 20 providers.
Health plans may provide consumers the option to receive the information through other methods, such as by phone, face-to-face, facsimile or email, but must respond at least as rapidly as with the paper method.
In addition to providing very specific information to plan enrollees, the regulations require employer plans to disclose much of their plan information on websites accessible by the public. The regulations require the group health plan or health insurer to make available the required information on an internet website in three machine-readable files that are clearly dated and updated monthly.
Lockton comment: “Machine readable” means a digital representation of data or information in a file that can be imported or read by a computer system for further processing without human intervention while ensuring no semantic meaning is lost.
The information must be very precise with respect to in-network providers, billing codes, fee schedules and negotiated rates. Similarly, the out-of-network-related information must include allowed amounts and historical billed charges for quarterly periods that are no more than six months old. Again, each allowed amount must be very specific with respect to the provider and the item or service covered.
Lockton comment: No plan sponsor will have this information or be in any position to post and maintain this information. By necessity, employers will have to rely on their carriers and TPAs to carry out this process. Nevertheless, the regulations again place ultimate responsibility for compliance on the plan sponsor, allowing sponsors to contract with third parties to meet the obligations but not to shift ultimate liability for failure, except to insurers per written agreements.
The regulations do not explicitly state the penalties for violation of the new rules. They do rely on provisions of the Affordable Care Act and Public Health Service Act (PHSA) as the authority for the issuance of the regulation. In general, plans that are required to meet PHSA requirements are potentially liable for penalties of $100 per day per violation for failure to comply with those mandates. Moreover, for employer plans, the mandate is likely tied to their fiduciary duties under ERISA, including the fiduciary duty to maintain and administer their plans for the benefit of participants and their beneficiaries.
What should employers do now?
Generally speaking, the rules don’t go into effect before plan years beginning in 2022. Between now and then, plan sponsors will want to dialogue with their insurers and TPAs and begin negotiating responsibility for fulfilling the various disclosure obligations, the timeline for implementation, cost and indemnity.
 The final regulations cover non-grandfathered group health plans and health insurance issuers offering non-grandfathered coverage in the individual and group markets. We will refer to “health plans” generally unless there is reason to distinguish between such plans.
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.