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What the Transparency in Coverage Final Rule Means for Reducing Healthcare Costs

Historically speaking, health plan transparency in the United States has been sorely lacking. The Transparency in Coverage Final Rule requires insurers and health plans to disclose negotiated rates with in-network providers and allowed amounts for out-of-network providers — here’s what it means for employers.

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There’s nothing quite like the surprise of receiving a medical bill with more zeros than you imagined — particularly if you’re fully insured and visited an in-network facility. Unfortunately, it’s a common conundrum for Americans.

According to KFF, about 20% of ER visits and 17% of inpatient admissions at in-network facilities result in out-of-network charges, which put patients at risk of surprise bills and, you guessed it, medical debt. In fact, nearly 10% of U.S. adults carry at least $250 in medical debt, and an estimated $140 billion in unpaid bills go to collections.

It’s no wonder 65% of employees say they worry about their finances. A health crisis (which is stressful enough on its own) could easily trigger a financial crisis.

How did we get into this mess? And more importantly, how do we get out? The answer, of course, isn’t completely obvious. Medical debt is one of the most complex challenges our country faces, though we can certainly point to a lack of transparency rules for health plans as a major contributing factor. Luckily, the federal government is shedding some light on this long-obscured area.

New Rules on Health Plan Transparency

On July 1, 2022, the Transparency in Coverage final rule went into effect. Issued by the Centers for Medicare and Medicaid Services, this rule orders insurers and health plans to disclose the pricing information for all covered medical services and items. Insurers are also instructed to include the rates they’ve negotiated with providers as well as the allowed amount (i.e., the maximum rates they’ll pay for any given service) and the billed amount (i.e., the actual amount the providers charged) for any out-of-network provider.

As far as rollout goes, health plans and insurers must supply pricing information for 500 standard items and services by Jan. 1, 2023. And by 2024, all covered items and services must be accompanied by accurate pricing information. The Transparency in Coverage rule follows the No Surprises Act, which was implemented in January 2022 and requires private health insurance companies to cover specific out-of-network bills at the same rates as in-network services.

How This Rule Will Help Reduce Healthcare Costs

When armed with this information before receiving care, your employees can more easily compare prices, shop around for the best deal, and calculate (and budget for) out-of-pocket healthcare costs. This is a level of health plan transparency that Americans have desperately needed but sorely lacked. For these reasons, the Transparency in Coverage rule is an exciting step in the right direction.

That said, it’s important to stay apprised of any new developments or unanticipated outcomes of the rule. While some economists believe that this level of health plan transparency could prompt providers to raise their rates if they consider themselves underpaid, increased transparency in health costs should theoretically help reduce the cost of healthcare. After all, when the rates that insurers negotiate with providers are easily attainable, employers paying for health benefits could enjoy increased leverage to demand lower rates.

Paytient’s Take on Health Plan Transparency

Like most people working to lessen the burden of medical expenses and debt, the Paytient team is always excited about increased transparency regarding healthcare costs. That said, it’s not clear how complete or useful this data will be.

Similar healthcare transparency rules have delivered ho-hum results. As of February 2022,only 14% of hospitals were compliant with rules passed in 2021 that required them to list billed charges for a variety of services. In looking at these data, we find that hospitals simply list their billed charges (which nobody pays) and then apply a blanket “discount rate” across the board that may or may not reflect reality.

We look forward to a day when consumers can easily visit a hospital or insurance plan website and see exactly what they will be expected to pay for a service at a given facility. Until that day comes, the uncertainty around amounts owed for services yet to be rendered will continue causing people to avoid necessary care. This will only drive medical expenses further up, negatively affecting patient health outcomes.

Until the happy day comes when price transparency is a given, Paytient will be here to remove any anxiety associated with not knowing how much a patient might owe. By giving people the power to pay for care, we’re improving experiences for patients who simply want to stay healthy.

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