In October 2020, the Departments of Labor, Treasury, and Health and Human Services (collectively, Departments) released the final rules on the “transparency in coverage” requirements. These rules, among other things, require group health plans to disclose detailed pricing information to the public and cost-sharing estimates to participants before they receive care. While the participant disclosures are not required until 2023, the public disclosure requirements go into effect for plans beginning on or after January 1, 2022. Though 2022 is still far off, these new rules will likely require plans to implement systems that are not in place today. We outline steps below that employers can take to prepare.

Required Disclosures

In June 24, 2019, President Trump issued an Executive Order on Price Quality and Transparency, which directed the Departments to propose regulations requiring hospitals, insurers, and group health plans to provide pricing information to consumers before they receive care. In October 2020, the Departments issued the Final Rule on Transparency in Coverage (“Transparency Rule”) which applies to group health plans and insurers. 

The Transparency Rule imposes disclosure obligations on non-grandfathered group health plans (including fully insured, level funded, and self-insured plans) and health insurers. The rules do not apply to grandfathered group health plans, excepted benefits (e.g., stand-alone dental and vision), health reimbursement arrangements (HRAs) or other account-based plans, or short-term limited-duration insurance.

The Transparency Rule requires plans to provide two main disclosures:

  • Disclosures to the Public: Plans that begin on or after January 1, 2022 must post pricing information (for free) on the plan’s or insurer’s website, which must be updated monthly. Disclosures must contain specific content and must be provided on three “machine readable files,” and must include:
    • Negotiated rates for all items and services with in-network providers (except prescription drugs);
    • Historical payments to, and billed charges from, out-of-network providers during a specified period; and
    • Negotiated rates for prescription drugs furnished by in-network providers during a specified period.
  • Disclosures to Plan Participants, Beneficiaries, and Enrollees: Plans must provide plan participants with real-time, personalized out-of-pocket cost estimates for requested covered items and services by a particular provider or providers. This disclosure must be made through a user-friendly online self-service tool or by paper, upon request. Plans that begin on or after January 1, 2023 must provide estimates for an initial list of 500 items and services. Plans that begin on or after January 1, 2024 must provide estimates for all items and services.

The Transparency Rule requires plans to divulge a substantial amount of detailed and real time information that they were not previously required to disclose. The Departments, recognizing the burden of complying with the new requirements, gave plans and carriers time to prepare by phasing in the rule over a three-year period. We reviewed the Transparency Rule in more detail in our prior blog.

Steps Employers Can Take to Prepare

Employers sponsoring group health plans subject to the Transparency Rule will be subject to new disclosure requirements. For the upcoming 2022 plan year, employers must address how their group health plans will provide the required disclosures to the public. For the 2023 and 2024 plan year, employers will again need to address how their group health plans will provide the required disclosures to plan participants.

Below, we outline what steps employers can take to prepare for the new requirements, based on the type of group health plan they sponsor.

Fully Insured Employers

Fully insured employers can contract with their carrier or a third party to provide the required disclosures. If a contract is entered into, the carrier (not the employer) will be held liable for any failure to provide disclosures.

Employer Takeaways:

  • Employers should reach out to their group health plan carriers to ensure they are preparing to comply with the public disclosure requirements by 2022 and participant disclosure requirements by 2023.
  • Employers should ensure carrier contracts include provisions that make the carrier (not the employer) responsible for providing the disclosures and make the carrier liable for any failure to do so. If no such provision is included, employers should request a separate written agreement from their carrier.
  • Employers should be aware of the website where the public disclosures will be posted (starting in 2022) and online-service tool for participants (starting in 2023).

Self-Insured/Level Funded Employers

Self-insured and level-funded employers can contract with their third-party administrator (TPA) to provide the required disclosures. It is important to note that even if an employer enters into such an agreement, the employer (not the TPA) will be held liable for failure to comply and may be subject to an enforcement action under ERISA and a $100 per day excise tax (though the rule provides a safe harbor for plans acting in good faith that correct errors or omissions). Employers could, however, enter into contractual agreements whereby a TPA agrees to indemnify the employer in the event they fail to provide disclosures.

Employer Takeaways:

Self-insured and level funded employers should reach out to their TPA to discuss whether they will be able to provide the required disclosures. It is important for employers to ensure their TPA is capable of meeting the specific requirements outlined under the Transparency Rule, as the employer can ultimately be held liable for failures to comply. For plan years beginning in 2022, employers should ensure any contractual agreement to provide disclosures to the public address the following concerns:

  • Ensure TPA is providing disclosures with the specific information and formatting required on three “machine readable files;”
  • Ensure TPA is updating the information on a monthly basis;
  • Determine where the information will be posted; and
  • Determine any indemnity provisions or other protections if the TPA fails to provide the required disclosures.

Employers should also check with their TPA to determine whether they are working to make participant disclosures available by 2023. Employers will need to outline a contractual agreement with the TPA on providing the participant disclosures, as well.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.