The Transparency Rules

For most of the history of employer coverage, negotiated rates were confidential and many employers were contractually barred from seeing what they paid. Three federal actions changed that, and together they are the precondition for everything in the rest of this course.

Machine-readable files

The Transparency in Coverage final rule requires that “plans and issuers will also be required to disclose on a public website their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.”

Since July 2022 this has produced public files containing negotiated rates for essentially every plan and provider combination in the country. The files are enormous and awkward to work with, which has created an analytics industry around them, but the underlying fact is that commercial prices are no longer secret.

The rule pairs this with a consumer-facing requirement to “give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability, through an internet based self-service tool.”

Hospital price transparency

Separately, CMS “already finalized requirements for hospitals to disclose their standard charges, including negotiated rates with third-party payers.” Hospital-published files and plan-published files can be compared against each other, which is how discrepancies get found.

The gag clause prohibition

The most consequential change for employers is the least visible. The Consolidated Appropriations Act prohibits group health plans from entering into any agreement with a provider, network, third-party administrator, or other service provider that would restrict the plan from:

1. “providing provider-specific cost or quality of care information or data, through a consumer engagement tool or any other means, to referring providers, the plan sponsor, participants, beneficiaries, or enrollees”
2. “electronically accessing de-identified claims and encounter information or data for each participant, beneficiary, or enrollee,” including on a per claim basis “financial information, such as the allowed amount,” provider name and clinical designation, and service codes

Plans must attest annually that they comply. The first attestation was due December 31, 2023, covering the period back to December 27, 2020.

Worth remembering: before this provision, a self-funded employer bearing the full financial risk for its claims could be contractually prevented from seeing the prices it was paying. That arrangement is difficult to defend on any theory, and its existence tells you a great deal about how the market functioned. The gag clause ban does not lower any price. What it does is make it possible for an employer to know what it is buying, which is the minimum precondition for buying differently.

What transparency has and has not done

Price data is now available. Prices have not converged, and the RAND findings in the previous lesson use exactly this kind of data to document persistent variation. Transparency is a precondition for purchaser action rather than a substitute for it, and the evaluation course would predict this: publishing information changes outcomes only when someone has both the capability and the incentive to act on it.

Key takeaways

• Transparency in Coverage requires public machine-readable files of in-network negotiated rates and out-of-network allowed amounts.
• Hospitals must separately publish standard charges including negotiated rates.
• The Consolidated Appropriations Act bans contract clauses restricting access to cost, quality, and de-identified claims data, with annual attestation.
• Transparency enables purchaser action; it has not by itself reduced prices.

Sources

• CMS, Transparency in Coverage Final Rule Fact Sheet (CMS-9915-F) (opens in a new tab)
• CMS, Gag Clause Prohibition Compliance Attestation (opens in a new tab)