Unpacking What Price Transparency Looks Like for Health Plans

August 10, 2023 - Consumers are struggling to understand and afford healthcare in the United States. A new federal requirement aimed at increasing healthcare price transparency aims to help, but payers can also use this newly available information to their advantage.  

While insured individuals with public and private plans generally report positive experiences with their health insurer, premiums and out-of-pocket costs pose barriers to care. A KFF poll found that four in ten insured adults reported skipping or delaying care in the past year due to cost. Additionally, 55 percent of adults with marketplace plans rated their insurance negatively regarding premiums.

CMS has implemented federal guidelines for health plans and providers to help improve price transparency and encourage competitive rates.

First, the Hospital Price Transparency rule required hospitals to publicly publish pricing information about the services they provide. Now, the Transparency in Coverage rule directs payers to publish cost-sharing information and in-network negotiated rates.

The federal government implemented both rules to increase healthcare price transparency for consumers and to enable researchers and other stakeholders to analyze the cost of care in America. But payers can leverage the publicly available pricing data to not only help their members understand medical costs but also optimize their own operations. 

What does Transparency in Coverage mean?

As of July 1, 2022, health plans must post three machine-readable files that include pricing information. Machine-readable files contain data digitally and can be imported or read by a computer system without human intervention. Health plans are required to update the files monthly.

The first file must include rates for all covered items and services provided by in-network providers. Depending on the reimbursement model, these rates include negotiated rates, underlying fee schedule rates used to determine cost-sharing, or derived amounts.

The second file consists of allowed amounts for and billed charges from out-of-network providers. The first two machine-readable files must include National Provider Identification (NPI) for each provider.

Finally, the third file must contain in-network negotiated rates and historical net prices for all covered prescription drugs at the pharmacy location level.

On January 1, 2023, plans were also required to provide an online price comparison tool allowing consumers to estimate their cost-sharing for 500 items and services. Phone and paper form estimates must be available upon request and cost estimates must be based on up-to-date cost-sharing information.

The final phase of the rule goes into effect on January 1, 2024, and requires health plans to provide an online tool for consumers to compare cost-sharing amounts for all items and services from different providers.

Through each phase of implementation, members and payers are gaining access to various sources of pricing data. 

How pricing data influences provider networks

Accurate health plan machine-readable files can help increase patient volumes for corresponding providers. Since machine-readable files include provider data, consumers can use the information to understand which hospitals and providers are in-network.

Additionally, plans that include comprehensive provider information could attract members who prioritize access to certain providers or specialists, helping to increase enrollment.

Contract negotiations between payers and providers largely hinge on reimbursement and pricing information. When providers can access health plans’ in-network rates, they are better positioned to negotiate higher reimbursement rates. This could lead payers to change their provider networks if they cannot agree on negotiations.

Similarly, providers may avoid contracting with certain health plans if their machine-readable files include rates deemed too low.

Geographic areas with limited competition may offer providers more leverage when negotiating reimbursement rates with payers.

Effective collaboration between payers and providers not only increases the chances of successful contract negotiations but also helps ensure data presented in machine-readable files is accurate. However, additional factors may impact the price transparency data.

Where machine-readable files are lacking

Machine-readable files contain a significant amount of information, making it hard for payers to analyze and interpret all the data, especially as data is refreshed each month. The files contain contracted rates for all services that providers are contracted to perform, whether they perform them or not, leading to large data sets of codes and costs that may also be inaccurate.

Given the size of the files, it may be hard to download and access them without the proper technology.

In addition, machine-readable files differ across health plans when it comes to formatting and standardization. Without consistency, it can be challenging to compare plan pricing.

Data quality can pose barriers for consumers and health plans. Sometimes the expected data is simply not there, like in cases when URLs are invalid or point to non-existent files. Contradicting data in the files can also raise concerns of inaccuracy.

Machine-readable files can contain incomplete data if the information is not updated on time, which may be common due to the technological challenges of navigating the files. Inaccurate data may also stem from the time-consuming process of sifting through large volumes of data.

Additionally, machine-readable files lack important demographic information about providers. The files typically do not include a provider’s name, address, or where they practice. This can cause issues when contracted rates apply to all providers in a multispecialty setting.

To overcome the problem of incomplete information, payers may have to access multiple machine-readable files to get the full view of data for strategic purposes.

Furthermore, without solid access to quality data, payers’ machine-readable files and price comparison tools will not be 100 percent accurate, thus impeding the purpose of the price transparency regulations.

Going forward

While payer compliance with the Transparency in Coverage rule could be better, it surpasses the number of hospitals complying with the Hospital Price Transparency rule, according to Turquoise Health.

Establishing standardized formats for machine-readable files, facilitating regular data updates, and improving accessibility could increase payer compliance with the regulation and improve the quality of the pricing data.

In addition, partnering with health IT companies with analytical capabilities can help payers make sense of the data they do have and turn it into actionable information.

Proper technology is critical for overcoming data challenges and payers should prioritize investing in analytical tools. Smaller organizations with constricted budgets may face additional barriers when it comes to technology investments, but analytics is necessary to establish accurate machine-readable files and compete with other plans.

Overcoming data issues can open the door to new opportunities for payers to improve their business models. For example, machine-readable files with complete data can facilitate payers’ access to their competitors’ pricing information, allowing them to negotiate better rates with providers and more confidently enter new markets. In addition, payers can utilize the data to promote membership and increase enrollment.

Payers can also use pricing data in conjunction with quality data to identify investments that will improve member experience and drive value for their plans.