Transparency in Coverage

Federal RegisterNov 12, 2020

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[TD 9929]

RIN 1545-BP47

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB93

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147 and 158

[CMS-9915-F]

RIN 0938-AU04

Transparency in Coverage

AGENCY:

Internal Revenue Service, Department of the Treasury; Employee Benefits Security Administration, Department of Labor; Centers for Medicare & Medicaid Services, Department of Health and Human Services.

ACTION:

Final rule.

SUMMARY:

The final rules set forth requirements for group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request to a participant, beneficiary, or enrollee (or his or her authorized representative), including an estimate of the individual's cost-sharing liability for covered items or services furnished by a particular provider. Under the final rules, plans and issuers are required to make this information available on an internet website and, if requested, in paper form, thereby allowing a participant, beneficiary, or enrollee (or his or her authorized representative) to obtain an estimate and understanding of the individual's out-of-pocket expenses and effectively shop for items and services. The final rules also require plans and issuers to disclose in-network provider negotiated rates, historical out-of-network allowed amounts, and drug pricing information through three machine-readable files posted on an internet website, thereby allowing the public to have access to health coverage information that can be used to understand health care pricing and potentially dampen the rise in health care spending. The Department of Health and Human Services (HHS) also finalizes amendments to its medical loss ratio (MLR) program rules to allow issuers offering group or individual health insurance coverage to receive credit in their MLR calculations for savings they share with enrollees that result from the enrollees shopping for, and receiving care from, lower-cost, higher-value providers.

DATES:

Effective date:

The final rules are effective on January 11, 2021.

Applicability date:

See the

SUPPLEMENTARY INFORMATION

section for information on the applicability dates.

FOR FURTHER INFORMATION CONTACT:

Deborah Bryant, Centers for Medicare & Medicaid Services, (301) 492-4293. Christopher Dellana, Internal Revenue Service, (202) 317-5500. Matthew Litton or Frank Kolb, Employee Benefits Security Administration, (202) 693-8335.

Customer Service Information:

Individuals interested in obtaining information from the Department of Labor (DOL) concerning employment-based health coverage laws may call the Employee Benefits Security Administration (EBSA) Toll-Free Hotline at 1-866-444-EBSA (3272) or visit DOL's website (

http://www.dol.gov/ebsa

). In addition, information from HHS on private health insurance for consumers can be found on the Centers for Medicare & Medicaid Services (CMS) website (

www.cms.gov/cciio

) and information on health reform can be found at

http://www.healthcare.gov

SUPPLEMENTARY INFORMATION:

I. Background

The final rules require group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request, to a participant, beneficiary, or enrollee, which, unless otherwise indicated, for the purpose of the final rules includes an authorized representative, and require plans and issuers to disclose in-network provider rates, historical out-of-network allowed amounts and the associated billed charges, and negotiated rates for prescription drugs in 26 CFR part 54, 29 CFR part 2590, and 45 CFR part 147. HHS also finalizes amendments to its MLR program rules in 45 CFR part 158.

A. Statutory Background and Enactment of PPACA

The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) was enacted on March 30, 2010 (collectively, PPACA). As relevant here, PPACA reorganized, amended, and added to the provisions of part A of title XXVII of the Public Health Service (PHS) Act relating to health coverage requirements for group health plans and health insurance issuers in the group and individual markets. The term group health plan includes both insured and self-insured group health plans.

PPACA also added section 715 to the Employee Retirement Income Security Act of 1974 (ERISA) and section 9815 to the Internal Revenue Code (Code) to incorporate the provisions of part A of title XXVII of the PHS Act, PHS Act sections 2701 through 2728, into ERISA and the Code, making them applicable to group health plans, and health insurance issuers providing coverage in connection with group health plans.

1. Transparency in Coverage

Section 2715A of the PHS Act provides that group health plans and health insurance issuers offering group or individual health insurance coverage must comply with section 1311(e)(3) of PPACA, which addresses transparency in health coverage and imposes certain reporting and disclosure requirements for health plans that are seeking certification as qualified health plans (QHPs) that may be offered on an Exchange. A plan or coverage that is not offered through an Exchange (as defined by section 1311(b)(1) of PPACA) is required to submit the information required to the Secretary of HHS and the relevant state's insurance commissioner, and to make that information available to the public.

Paragraph (A) of section 1311(e)(3) of PPACA requires a plan seeking certification as a QHP to make the following information available to the public and submit it to state insurance regulators, the Secretary of HHS, and the Exchange:

• Claims payment policies and practices,

• periodic financial disclosures,

• data on enrollment,

• data on disenrollment,

• data on the number of claims that are denied,

• data on rating practices,

• information on cost-sharing and payments with respect to any out-of-network coverage, and

• information on enrollee and participant rights under Title I of PPACA.

Paragraph (A) also requires a plan seeking certification as a QHP to submit any “[o]ther information as determined appropriate by the Secretary.”

Paragraph (C) of section 1311(e)(3) of PPACA requires plans, as a requirement of certification as a QHP, to permit individuals to learn the amount of cost sharing (including deductibles, copayments, and coinsurance) under the individual's coverage that the individual would be responsible for paying with respect to the furnishing of a specific item or service by an in-network provider in a timely manner upon the request of the individual. Paragraph (C) specifies that, at a minimum, such information must be made available to the individual through an internet website and through other means for individuals without access to the internet.

Together these statutory provisions require the overriding majority of private health plans

to disseminate a substantial amount of information to provide transparency in coverage. The portions of the final rules that require plans and issuers to disclose cost-sharing information upon request, to a participant, beneficiary, or enrollee implement paragraph (C) of section 1311(e)(3) of PPACA. The portions of the final rules that require plans and issuers to disclose in-network provider rates, historical out-of-network allowed amounts and the associated billed charges, and negotiated rates for prescription drugs implement paragraph (A) of section 1311(e)(3) of PPACA. The requirements to disclose out-of-network allowed amounts specifically implements the requirement in section 1311(e)(3)(A)(vii) to provide information on “payments with respect to any out-of-network coverage.” In addition to payment information on out-of-network charges, the Secretary of HHS determined that payment information on in-network rates and prescription drugs is also appropriate information to require plans and issuers to disclose to provide transparency in coverage under section 1311(e)(3)(A)(ix).

As of 2018, private, non-grandfathered health plans that must comply with these statutory provisions covered more than 92 percent of the almost 177 million people covered by private health coverage. The remaining 7.7 percent were covered by grandfathered health plans or were enrolled in short-term limited duration coverage or health care sharing ministries.

See

Kaiser Family Foundation, Health Insurance Coverage of the Total Population in 2018,

https://www.kff.org/other/state-indicator/total-population/?dataView=1&currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

, last accessed October 5, 2020.

PPACA's transparency in coverage requirements were enacted in coordination with a set of requirements that transformed the regulation of private market health plans and issuers. These requirements for the first time apply a comprehensive framework for regulating private health coverage through Federal law.

Prior to PPACA, Federal law relied on states to be the primary regulators of health insurance, but applied only a limited set of Federal requirements to govern private health coverage. Where Federal law regulated private health coverage, there was a substantial variation in how these regulations applied, depending on whether private health coverage was self-insured group coverage, large group insurance coverage, small group insurance coverage, or individual insurance coverage. To establish a comprehensive framework for regulating private health coverage, PPACA first set out a series of requirements on “Improving Coverage” that generally apply to group health plans and health insurance issuers offering group or individual health insurance coverage.

These requirements ranged from the prohibition on lifetime or annual dollar limits in section 2711 of the PHS Act to the requirement to cover out-of-network emergency services in section 2719A of the PHS Act and include the transparency in coverage requirements in section 2715A of the PHS Act.

By including transparency in coverage in this set of requirements that apply to most private coverage, Congress established transparency as a key component to PPACA's comprehensive framework for regulating private health coverage.

See

Jost, T.S. “Loopholes in the Affordable Care Act: Regulatory gaps and border crossing techniques and how to address them.” St. Louis University Journal of Health Law and Policy, Washington & Lee Legal Studies Paper No. 2011-16. August 15, 2011 (explaining that “[t]he Affordable Care Act was meant to regulate health care plans comprehensively” and providing further details on the scope of PPACA). Available at:

https://scholarlycommons.law.wlu.edu/wlufac/265/.

Patient Protection and Affordable Care Act, Public Law 111-148, 124 Stat. 119 (2010), section 1001.

In addition to these requirements, PPACA's “Improving Coverage” requirements include, among other things: The prohibition on rescissions in section 2712 of the PHS Act; the requirement to cover preventive health services without cost sharing requirements in section 2713 of the PHS Act; the extension of coverage to dependents up to age 26 in section 2714 of the PHS Act; the requirement to provide a summary of benefits and coverage in section 2715 of the PHS Act; quality reporting requirements in section 2717 of the PHS Act; and appeals process requirements in section in 2719 of the PHS Act.

Transparency was included as an important and transformative element in other leading comprehensive health reform proposals.

See

Porter, M. and Teisberg, E.

Redefining Health Care.

Harvard Business School Press. Boston, MA. 2006. (“Perhaps the most fundamental role of government in enabling value-based competition is to ensure that universal, high-quality information on provider outcomes and prices for every medical condition is collected and disseminated. This single step will have far-reaching and pervasive effects throughout the system . . . .”).

On March 27, 2012, HHS issued the Exchange Establishment final rule that implemented sections 1311(e)(3)(A) through (C) of PPACA at 45 CFR 155.1040(a) through (c) and 156.220.

The Exchange Establishment final rule created standards for QHP issuers to submit specific information related to transparency in coverage. QHPs are required to post and make data related to transparency in coverage available to the public in plain language and submit this same data to HHS, the Exchange, and the relevant state insurance commissioner. In the preamble to the Exchange Establishment final rule, HHS noted that “health plan standards set forth under the final rules are, for the most part, strictly related to QHPs certified to be offered through the Exchange and not the entire individual and small group market. Such policies for the entire individual and small and large group markets have been, and will continue to be, addressed in separate rulemaking issued by HHS, and the Departments of Labor and the Treasury.”

77 FR 18310 (Mar. 27, 2012).

2. Medical Loss Ratio

Section 2718(a) of the PHS Act, as added by PPACA, generally requires health insurance issuers offering group or individual health insurance coverage (including a grandfathered health insurance plan) to submit an annual report to the Secretary of HHS that details the percentage of premium revenue (after certain adjustments) expended on reimbursement for clinical services provided to enrollees under health coverage and on activities that improve health care quality. The proportion of premium revenue spent on clinical services and quality improvement activities is called the MLR. Section 2718(b) of the PHS Act requires an issuer to provide annual rebates to enrollees if its MLR falls below specified standards (generally 80 percent for the individual and small group markets, and 85 percent for the large group market). HHS published an interim final rule to implement the MLR program in the December 1, 2010

Federal Register

(75 FR 74863). A final rule was published in the December 7, 2011

Federal Register

(76 FR 76573). The MLR program requirements were amended in final rules published in the December 7, 2011

Federal Register

(76 FR 76595), the May 16, 2012

Federal Register

(77 FR 28790), the March 11, 2014

Federal Register

(79 FR 13743),

the May 27, 2014

Federal Register

(79 FR 30339), the February 27, 2015

Federal Register

(80 FR 10749), the March 8, 2016

Federal Register

(81 FR 12203), the December 22, 2016

Federal Register

(81 FR 94183), the April 17, 2018

Federal Register

(83 FR 16930), the April 25, 2019

Federal Register

(84 FR 17454), and the February 6, 2020

Federal Register

(85 FR 7088).

B. Benefits of Transparency in Health Coverage and Past Efforts To Promote Transparency

PPACA's transparency in coverage requirements can help ensure the accurate and timely disclosure of information appropriate to support an efficient and competitive health care market. A well-functioning, competitive market depends on information being available to buyers and sellers.

As President Trump's “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First” explains: “To make fully informed decisions about their health care, patients must know the price and quality of a good or service in advance.” Yet, as the Executive order then notes, “patients often lack both access to useful price and quality information and the incentives to find low-cost, high-quality care.” The lack of this information is widely understood to be one of the root problems causing dysfunction within America's health care system.

Porter, M. and Teisberg, E.

Redefining Health Care.

Harvard Business School Press. Boston, MA. 2006, pg. 54. (“Information is fundamental to competition in any well-functioning market. It enables buyers to shop for the best value and allows sellers to compare themselves to rivals. Without relevant information, doctors cannot compare their results to best practice and to other providers. And without appropriate information, patient choice has little meaning.”).

The Departments of Labor, HHS, and the Treasury (Departments) are of the view that transparency in health coverage requirements will strengthen America's health care system by giving health care consumers, researchers, regulators, lawmakers, health innovators, and other health care stakeholders the information they need to make, or assist others in making informed decisions about health care purchases. Health care consumers include various persons and entities that finance health care needs through the purchase of insurance. Health care consumers also include uninsured persons without health coverage who must pay out-of-pocket for health care items and services and uninsured persons who may be shopping for health coverage. Employers that sponsor health plans for their employees and government programs that provide health care services and benefits to consumers are also health care consumers.

By requiring the dissemination of price and benefit information directly to consumers and to the public, the transparency in coverage requirements will provide the following consumer benefits:

• Enables consumers to evaluate health care options and to make cost-conscious decisions;

• strengthens the support consumers receive from stakeholders that help protect and engage consumers;

• reduces potential surprises in relation to individual consumers' out-of-pocket costs for health care services;

• creates a competitive dynamic that may narrow price dispersion for the same items and services in the same health care markets; and

• puts downward pressure on prices which, in turn, potentially lowers overall health care costs.

The goal of the final rules is to deliver these benefits to all consumers and health care stakeholders through greater transparency in coverage.

Comments received in response to the proposed rules on transparency in coverage (discussed in more detail later in this preamble) have strengthened the Departments' view that this price transparency effort will equip the public with information to actively and effectively participate in the health care system as consumers.

The majority of commenters acknowledged the importance of the availability of health care pricing information and appropriate tools to assist consumers in health care decision-making and managing health care costs. For these reasons and those explained in more detail below in this preamble, the Departments continue to be of the view that price transparency efforts are crucial to providing consumers (individual and institutional) with meaningful and actionable pricing information in an effort to contain the growth of health care costs.

84 FR 65464 (Nov. 27, 2019).

1. Transparency Provides Necessary Information for Consumers To Make More Informed Health Care Spending Decisions

As explained in the report, “Reforming America's Healthcare System Through Choice and Competition,” consumers have an important role to play in controlling costs, but consumers must have meaningful information in order to create the market forces necessary to achieve lower health care costs.

When consumers seek care, they do not typically know whether they could have received the same service from another provider at lower prices. Third-party payers negotiate prices on the consumer's behalf and reimburse costs directly to health care providers, concealing the actual price from the consumer at the point of care. After receiving care, consumers typically receive an Explanation of Benefits (EOB), which details the price charged by the provider, contracted or negotiated rate, and consumer cost sharing. Often, only after services are rendered is the cost of care disclosed to the consumer.

Azar, A.M., Mnuchin, S.T., and Acosta, A. “Reforming America's Healthcare System Through Choice and Competition.” United States, Department of Health and Human Services. December 3, 2018. Available at:

https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf

Historically, there has been little to no incentive for some consumers to consider price and seek lower-cost care.

Rapidly rising health care spending in the past 20 years, however, has led to consumers shouldering a greater portion of their health care costs through increases in out-of-pocket expenses.

Id.

Claxton, G., Levitt, L., Long M. “Payments for cost sharing increasing rapidly over time.” Peterson-Kaiser Health System Tracker. April 2016. Available at:

https://www.healthsystemtracker.org/brief/payments-for-cost-sharing-increasing-rapidly-over-time/

Since 1970, per capita out-of-pocket expenditures have nearly doubled due to a number of factors.

These factors include increased enrollment in high deductible health plans (HDHPs) and accompanying health savings accounts (HSAs), and increased plan and issuer reliance on payments towards deductibles comprising the proportion of total cost-sharing payments.

As explained in the preamble to the proposed rules, these shifts in plan design and enrollment are correlated with consumers bearing a greater share of their overall health care costs in the private health insurance market than in previous years.

From 2002 to the enactment of PPACA in 2010,

nationally, the percentage of private sector employees enrolled in a health plan with a deductible increased from 47.6 percent to 77.5 percent and continued to increase to 86.6 percent in 2019.

Average family deductibles for private sector employees grew from $958 in 2002 to $1,975 in 2010, and then to $3,655 in 2019—an 85 percent increase since the enactment of PPACA.

These changes represent a substantial increase in the amount that consumers must pay for health care before insurance begins to cover items or services.

Deductibles made up 52 percent of cost-sharing spending in 2016, up from 30 percent in 2006, while copays dropped from 43 percent to 17 percent of cost-sharing payments over the same period.

The gradual shift away from copayments, which are predictable to the consumer through their set dollar amounts for each covered item or service, to deductibles and coinsurance, has increased the need for consumers to know the negotiated price in order to plan ahead and budget for out-of-pocket costs. Over time, price disclosure can improve consumers' ability to better manage costs of utilized health care for a variety of health care plans. Increased enrollment in HDHPs and the shift to coinsurance across plan and benefit designs means that consumers have a vested interest in learning the costs of care prior to paying for items or services, as they are responsible for paying out-of-pocket expenditures, which are directly dependent on the negotiated or contractual price.

“Out-of-pocket spending.” Peterson-KFF Health System Tracker. May 2020. Available at:

https://www.healthsystemtracker.org/indicator/access-affordability/out-of-pocket-spending/

HDHP as defined in section 223(c)(2) of the Code;

see also

Claxton, G., Levitt, L., Long, M. “Payments for cost sharing increasing rapidly over time.” Peterson-KFF Health System Tracker. April 2016. Available at:

https://www.healthsystemtracker.org/brief/payments-for-cost-sharing-increasing-rapidly-over-time/

84 FR 65464, 65465 (Nov. 27, 2019).

See

“Medical Expenditure Panel Survey. Insurance Component National-Level Summary Tables.” United States Department for Health and Human Services Agency for Healthcare Research and Quality. Available at:

https://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables_search.jsp?component=2&subcomponent=1.

Id.

McCarthy-Alfano, M., et al. “Measuring the burden of health care costs for working families.” Health Affairs. April 2, 2019. Available at:

https://www.healthaffairs.org/do/10.1377/hblog20190327.999531/full/.

Claxton, G. et al. “Increases in cost-sharing payments continue to outpace wage growth.” Peterson-KFF Health System Tracker. June 15, 2018. Available at:

https://www.healthsystemtracker.org/brief/increases-in-cost-sharing-payments-have-far-outpaced-wage-growth/

These trends in designing health plans have led to consumers bearing an increased share of their health care costs. The fact that more consumers are bearing greater financial responsibility for the cost of their health care provides an opportunity to establish a more consumer-directed and consumer-driven health care market. Eighty-eight percent of consumers support requirements for providers and issuers to disclose prices prior to care.

If consumers have better pricing information and can shop for health care items and services more efficiently, they can increase competition and demand for lower prices.

However, consumers generally have little information regarding negotiated rates or out-of-network costs until after services are rendered. There is also wide variability in health care prices for the same service.

As a result, it can be difficult for consumers to estimate potential out-of-pocket costs.

“Harvard CAPS Harris Poll.” Harvard University. May 2019. Available at:

https://harvardharrispoll.com/wp-content/uploads/2019/06/HHP_May19_vF.pdf?utm_source=hs_email&utm_medium=email&_hsenc=p2ANqtz--NgSdTYggGUP4tWyR2IEQ7i8TCg1s3DcHuQyhErIgkX3KFUi3SFgl9OZKm4-JUOOi9tmMQ

https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf

Cooper, Z., et al. “The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured.”

The Quarterly Journal of Economics,

Vol. 134. Issue 1. February 2019. September 4, 2018. Available at:

https://academic.oup.com/qje/article/134/1/51/5090426?searchresult=1

2. Transparency Strengthens Stakeholders' Ability To Support Consumers

Making price transparency information publicly available strengthens the work of other health care stakeholders that help provide care or promote access to care to consumers, or otherwise aim to protect consumers and their interests in the health care system. These entities include researchers, regulators, lawmakers, patient and consumer advocates, and businesses that provide consumer support tools and services. A key aspect of transparency in coverage is to make health care pricing information more accessible and useful to consumers by making the information available to persons and entities with the requisite experience and expertise to assist individual consumers and other health care purchasers to make informed health care decisions.

With information on pricing, these other health care stakeholders can better fulfill each of the unique roles they play to improve America's health care system for consumers. For instance, with pricing information researchers could better assess the cost-effectiveness of various treatments; state regulators could better review issuers' proposed rate increases; patient advocates could better help guide patients through care plans; employers could adopt incentives for consumers to choose more cost-effective care; and entrepreneurs could develop tools that help doctors better engage with patients.

3. Transparency Reduces the Potential for Surprise Billing

Making the price of care available to consumers before they receive care can reduce the potential for consumers to be surprised by the price of a health care item or service when they receive the bill after receiving care. However, accessible pricing information holds special value for insured consumers.

Surprise billing has become a substantial concern for insured consumers, in particular, consumers who receive a bill from an out-of-network provider when they thought an in-network provider was treating them. While price transparency alone is not a complete solution to this problem, the disclosure of pricing directly to consumers could help mitigate some unexpected health care costs. As just noted, making pricing information public can also strengthen other health care stakeholders' ability to protect consumers. In the case of surprise billing, public information on pricing for in-network and out-of-network services could allow stakeholders to develop better tools to help patients avoid surprises and improve oversight of health insurance issuers, plans, and providers.

See

Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health & Human Services. Secretary of Health and Human Services' Report on: Addressing Surprise Medical Billing, at p. 3. July 2020. (recognizing that HHS regulatory action to encourage price transparency by insurers “can serve as the backbone for a more comprehensive surprise billing solution”). Available at

https://aspe.hhs.gov/system/files/pdf/263871/Surprise-Medical-Billing.pdf

4. Transparency Increases Competition and Contains Costs

Without transparency in pricing, market forces cannot drive competition. This lack of competition in many health care markets is demonstrated by significant, unexplained variations in prices for procedures, even within a single region.

For example, studies of price variation within California and nationally suggest that there is substantial opportunity for increased transparency to save money by shifting patients from high to lower-cost providers.

The Departments are of the

view that consumers will take advantage of increased transparency to shop for their health care if price transparency is put into place nationwide.

Many empirical studies have investigated the impact of price transparency on non-health care markets, with most research showing that “price transparency leads to lower and more uniform prices, a view consistent with predictions of standard economic theory.”

Studies suggest that consumers want and will use actionable pricing information to shop for more cost-effective care.

For example, when automobile prices were presented transparently on the internet, inclusive of the dealer invoice price, the consumers who did not like the traditional bargaining process were able to reduce spending overall by 1.5 percent.

Another study demonstrated the public display of life insurance prices for comparison led to a 5 percent decrease in the consumer price.

Price transparency also reduced price dispersion across other markets, such as the airline industry, which saw a reduction in price dispersion from 18 percent in 1997 narrowing to 0.3-2.2 percent in 2002 for fares available at multiple travel websites.

These lessons from other markets suggest that more thoroughly implementing price transparency across the health care industry could increase competition to provide lower costs and limit price variation.

Id.

Boynton, A., Robinson, J. “Appropriate Use of Reference Pricing Can Increase Value.” Health Affairs Blog. July 7, 2015. Available at:

https://www.healthaffairs.org/do/10.1377/

hblog20150707.049155/full/

;

see also

Sinaiko, A., Rosenthal, M. “Examining a Health Care Price Transparency Tool: Who Uses it, and How They Shop for Care.” 35 Health Affairs 662. April 2016. Available at:

https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2015.0746

See

Gordon, D., et al. “Health Care Consumer Shopping Behaviors and Sentiment: Qualitative Study.” Journal of Participatory Medicine. Volume 12. No. 2. 2020. Available at:

https://jopm.jmir.org/2020/2/e13924/

(study demonstrating that consumers already engage in “behaviors related to seeking, comparing, or knowing the prices of care” regardless of the presence of price transparency tools).

Austin, D.A., and Gravelle, J.G. “Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector.” United States Congress Congressional Research Service. April 29, 2008. Available at:

https://crsreports.congress.gov/product/pdf/RL/RL34101

;

see also

Grennan, M., Swanson, A. “Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining.” 128 Journal of Political Economy. April 2020 (Citing research in consumer goods showing that information can help decision making when buyers have imperfect information on costs.). Available at:

https://www.nber.org/papers/w22039

;

see also

84 FR 65464, 65466 (Nov. 27, 2019).

Semigran, H.L., et al. “Patients' Views on Price Shopping and Price Transparency.” The American Journal of Managed Care. June 26, 2017. Available at:

https://www.ajmc.com/view/patients-views-on-price-shopping-and-price-transparency

Zettlemeyer, F., Morton, F.S., and Silva-Risso, J. “How the internet Lowers Prices: Evidence from Matched Survey and Automobile Transaction Data.” Journal of Marketing Research. May 2006. Available at:

https://doi.org/10.1509%2Fjmkr.43.2.168

Brown, J., and Goolsbee, A. “Does the internet Make Markets More Competitive? Evidence from the Life Insurance Industry.” Journal of Political Economy, vol. 110, June 2002, pp. 481-507.

Clemons, E.K., Hann, I., and Hitt, L. “Price Dispersion and Differentiation in Online Travel: An Empirical Investigation,” Management Science, vol. 48, no. 4, 2001, pp. 521-39;

see also

“Occupational Labor Statistics.” United States Bureau of Labor Statistics. Available at:

https://www.bls.gov/oes/current/oes_stru.htm

84 FR 65464, 65466 (Nov. 27, 2019).

Despite the general absence of price transparency in the health care sector, there is research showing how price transparency leads to lower and more uniform pricing in health care markets. For instance, as noted in the preamble to the proposed rule, research shows patients saved $7.9 million and issuers saved $36 million on imaging services in New Hampshire after the state launched a website publishing health prices for most consumers with private health insurance.

One study found use of a telephone- and email-based tool to search for health care prices reduced the price paid by 10 to 17 percent and reduced the prices paid for care on average by 1.6 percent.

Another study of a program that provided health plan participants, beneficiaries, or enrollees with price and quality information to help select high-value imaging services found an increase in the use of lower-cost facilities.

This consumer behavior prompted higher-cost facilities to lower their prices, which resulted in a 30 percent reduction in the price variation between low- and high-cost facilities.

These studies, as well the numerous studies highlighted in subsequent sections of this rule, offer substantial evidence that price transparency in health care markets will result in consumer benefits similar to those that result from transparency in other markets.

Id.

Lieber, E. “Does It Pay to Know Prices in Health Care?” American Economic Journal: Economic Policy. February 2017. Available at

https://pubs.aeaweb.org/doi/pdfplus/10.1257/pol.20150124

Wu, S.J. et al. “Price transparency for MRIs increased use of less costly providers and triggered provider competition.” Health Affairs. August 2014. Available at:

https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2014.0168

Id.

5. The Final Rules Will Fill Gaps Left by State and Private Transparency Efforts

Currently, the information that consumers need to make informed decisions based on the prices of health care services is not readily available or is presented in a manner that makes it challenging to understand. As noted in the preamble to the proposed rules, the 2011 Government Accountability Office (GAO) report, “Health Care Price Transparency: Meaningful Price Information is Difficult for Consumers to Obtain Prior to Receiving Care,” found that the lack of transparency in health care prices, coupled with the wide pricing disparities for particular procedures within the same market, can make it difficult for consumers to understand health care prices and to shop effectively based on cost.

The report also explored various price transparency initiatives, including tools that consumers could use to generate price estimates before receiving a health care service. The report notes that pricing information displayed by tools varies across initiatives, in large part due to limits reported by the initiatives in their access or authority to collect certain necessary price data. In particular, the report notes the lack of public disclosure of rates negotiated between providers and third-party payers. The GAO report, therefore, recommended that HHS determine the feasibility of, and the next steps for, making estimates of out-of-pocket costs for health care services available to consumers.

84 FR 65464, 65466-65467 (Nov. 27, 2019);

see also

GAO-11-791 at p. 28 (Sep. 2011).

States have been at the forefront of transparency initiatives and have adopted a variety of approaches to improve price transparency.

More than half of the states have passed legislation establishing price transparency websites or mandating that health plans, hospitals, or physicians make pricing information available to patients.

For example, as of September 2020, thirty one states have enacted laws that provide participants, beneficiaries, and enrollees with at least partial protection against the practice of “balance billing.”

At least eighteen states have All-Payer Claims Databases. However, state transparency requirements are generally not applicable to self-insured group health plans, which cover approximately 58.7

percent of private-sector workers.

As a result, the data collected under state law does not include data from self-insured plans, and a significant portion of consumers may not have access to information on their plans.

De Brantes, F., et al. “Price Transparency & Physician Quality Report Card 2017.” Catalyst for Payment Reform. Available at:

https://www.catalyze.org/product/2017-price-transparency-physician-quality-report-card/

Frakt, A., and Mehrotra, A. “What Type of Price Transparency Do We Need in Health Care?” Annals of Internal Medicine. April 16, 2019. Available at:

https://www.acpjournals.org/doi/10.7326/M19

Kona, M. “State Balance-Billing Protections.” The Commonwealth Fund. September 16, 2020. Available at:

https://www.commonwealthfund.org/publications/maps-and-interactives/2020/sep/state-balance-billing-protections.

“Report to Congress: Self-Insured Health Benefit Plans 2019: Based on Filings through Statistical Year 2016.” March, 2019. Available at:

https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-report-on-self-insured-group-health-plans-2019.pdf

;

see also

Fronstin, P. “Self-Insured Health Plans: Recent Trends by Firm Size 1996-2018.” Employee Benefit Research Institute. No. 488. August 1, 2019. Available at:

https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_488_selfinsur-1aug19.pdf?sfvrsn=bd7e3c2f_6

In response to state action and consumer demands for more information on health care pricing, and to align with increased price transparency in other markets, health insurance issuers and self-insured plans have moved to increase price transparency. For example, some plans are using price transparency tools to incentivize employees to make cost-conscious decisions when purchasing health care services. Most large issuers have comparative cost information, which includes rates that plans and issuers have negotiated with in-network providers and suppliers.

However, many existing tools are either insufficient in the amount of detail they provide or the level of accuracy available. In order to expand price transparency to all consumers, Federal action is therefore necessary to establish standards and universal access to this information. In preparation for writing the proposed rules, the Departments met with over 50 stakeholders including plans, issuers, and third-party tool developers. Several stakeholders provided demonstrations of their tools to the Departments. The Departments note that over 90 percent of plans offer some version of a price comparison tool.

However, many of the plans and issuers that the Departments met with, who did not have a tool serve large portions of participants, beneficiaries, and enrollees. It is therefore the Departments' understanding that there are still millions of insured Americans that do not have access to any type of health care pricing tool. Also based on these demonstrations, the Departments are of the view that many price transparency tools on the market only offer wide-range estimates or average estimates of pricing that use historical claims data and do not always take into account the accumulated amount a participant, beneficiary, or enrollee has paid toward their deductible or out-of-pocket limit (sometimes referred to as an “accumulator”). The Departments are of the view that wide-range estimates are of limited value to consumers, given that they may not accurately reflect an individual's plan design and benefits, and that ranges should be replaced by actual estimated out-of-pocket costs, in order to allow the consumer to meaningfully predict costs. In addition, the inclusion of negotiated rates in these tools could help show the changes to a participant's, beneficiary's, or enrollee's costs if they have a future need for the same service, conditioned on the level of fulfillment of any cost-sharing responsibilities. This could help the consumer better understand the full value of the health care they are considering and how the cost may be different in the future when the participant's, beneficiary's, or enrollee's accumulator resets in a new plan year. Information on quality and results are also important for assessing the value of care.

Through this increased availability of information and consumer comprehension, transparent pricing can apply pressure on providers to demonstrate and improve quality and health care results. Providers may likely then be in the position of having to justify their costs relative to alternative options.

“Study: Health Plans Implement Price Transparency Tools for Consumers.” ACA International. April 2016. Available online at:

https://www.expressrecovery.com/file/86c228ef-245f-45cb-abd7-a30edbdec1f3

See additional discussion of quality information in section II.C.1 of the preamble.

The Departments are of the view that existing price transparency tools often function in a way that makes them difficult for users to navigate. These tools often display information that makes it difficult to compare one plan against another, understand the scope of services covered and their costs, and interpret the terminology plans and issuers use. Consumers may be discouraged by these difficult user interfaces and may be less likely to make fully informed decisions with their healthcare choices. Research demonstrates that poor or confusing user interfaces will lead users to abandon engagement with the hosting website.

The Departments are of the view that it is important to establish a minimum set of standards regarding what is acceptable so that consumers can fully utilize all relevant information. Tools that provide consistent information to every consumer across all markets, and that base cost estimates on accurate and recent information, will be a significant improvement over all or most existing options. Accuracy and consistency are intended to give consumers confidence that the information presented by these tools will not change significantly from the prices they are ultimately charged. Reliability should assure consumers that information in these tools accurately reflects plans' and issuers' best estimates of consumer out-of-pocket costs. The availability of these tools across most private markets will ensure broad access for all participants, beneficiaries, or enrollees to the intended outcomes and potential benefits of the final rules. The Departments anticipate that participants, beneficiaries, and enrollees will become accustomed to having access to this standardized information, no matter what private market plan or coverage they choose, which will make them more comfortable with using this information in health care purchasing decisions. The Departments further anticipate and encourage plans and issuers to include additional functionality and innovation in existing price transparency tools, but a baseline is necessary to give participants, beneficiaries, and enrollees the confidence that, regardless of the tool they use, they can expect the same standard information and functionality.

Georgiou, M. “User Experience Is the Most Important Metric You Aren't Measuring.” Entrepreneur. March 1, 2018. Available at:

https://www.entrepreneur.com/article/309161

C. Stakeholder Feedback and Prior Actions in Support of Transparency

In the HHS 2020 Notice of Benefit and Payment Parameters (2020 Payment Notice) proposed rule,

HHS sought input on ways to provide consumers with greater transparency regarding their own health care data, QHP offerings on the Federally-facilitated Exchanges (FFEs), and the cost of health care services.

Additionally, HHS sought comment on ways to further implement section 1311(e)(3) of PPACA, as implemented by 45 CFR 156.220(d), under which, upon the request of an enrollee, a QHP issuer must make available in a timely manner the amount of enrollee cost sharing under the enrollee's coverage for a specific service furnished by an in-network provider. HHS was particularly interested in what types of data would be most useful to improving consumers' abilities to make informed health care decisions, including decisions related to their coverage specifications and ways to

improve consumer access to information about health care costs.

84 FR 227 (Jan. 24, 2019).

The term “Exchanges” means American Health Benefit Exchanges established under section 1311 of PPACA.

See

section 2791(d)(21) of the PHS Act.

Commenters on the 2020 Payment Notice overwhelmingly supported the idea of increased price transparency. Many commenters provided suggestions for defining the scope of price transparency requirements, such as providing costs for both in-network and out-of-network health care, and providing health care cost estimates that include an accounting for consumer-specific benefit information, like progress toward meeting deductibles and annual limitations on cost sharing, as well as remaining visits under visit limits. Commenters expressed support for implementing price transparency requirements across all private markets and for price transparency efforts to be a part of a larger payment reform effort and a provider empowerment and patient engagement strategy. Some commenters advised HHS to carefully consider how such policies should be implemented, warning against Federal duplication of state efforts and requirements that would result in plans and issuers passing along increased administrative costs to consumers and cautioning that the proprietary and competitive nature of payment data should be protected.

In the summer and fall of 2018, HHS hosted listening sessions related to the goal of empowering consumers by ensuring the availability of useable pricing information. The listening sessions included a wide representation of stakeholders including providers, issuers, researchers, and consumer and patient advocacy groups. Attendees noted that currently available pricing tools are underutilized, in part because consumers are often unaware that they exist,

and even when used, the tools sometimes convey inconsistent and inaccurate information.

Miller, S. “Healthcare Shopping Tools Often Go Unused.” Society for Human Resource Management. May 19, 2016. Available at:

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/health-care-shopping.aspx

Attendees also commented that tool development could be expensive, especially for smaller health plans, which tend to invest less in technology because of the limited return on investment. Attendees further commented that most tools developed to date do not allow for comparison shopping. Attendees stated that existing tools usually use historical claims data, which results in broad, sometimes regional, estimates, rather than accurate and individualized prices. In a national study, there was alignment among patients, employers, and providers in wanting to know and discuss the cost of care at the point of service.

However, attendees noted pricing tools are rarely available when and where consumers are likely to make health care decisions, for example, during interactions with providers. Thus, patients are not able to consider relevant cost issues when discussing referral options or the tradeoffs of various treatment options with referring providers. With access to patient-specific cost estimates for services furnished by particular providers, referring providers and their patients could take pricing information into account when considering clinically appropriate treatment options. Separately, CMS has met with members from several state Departments of Insurance to discuss the limits to state authority to require price transparency in a meaningful way and the benefits and drawbacks of All Payer Claims Databases (APCDs). During these discussions, it became clear that APCDs' reliance on historical claims data that is not necessarily linked to a specific plan or issuer limits the utility of such databases for consumers. These conversations helped clarify the types of price transparency information necessary to empower consumers.

“Let's Talk About Money.” University of Utah Health Home. Available at:

https://uofuhealth.utah.edu/value/lets-talk-about-money.php

CMS has pursued initiatives in addition to the final rules to improve access to the information necessary to empower consumers to make more informed decisions about their health care costs, including a multi-step effort to implement section 2718(e) of the PHS Act. Section 2718(e) of the PHS Act requires each hospital operating within the United States, for each year, to establish (and update) and make public (in accordance with guidelines developed by the Secretary of HHS) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act (SSA). In the Fiscal Year (FY) 2015 Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System (IPPS/LTCH PPS) proposed and final rules, CMS reminded hospitals of their obligation to comply with the provisions of section 2718(e) of the PHS Act and provided guidelines for its implementation.

At that time, CMS required hospitals to either make public a list of their standard charges or their policies for allowing the public to view a list of those charges in response to an inquiry. In addition, CMS stated that it expected hospitals to update the information at least annually, or more often as appropriate, to reflect current charges. CMS also encouraged hospitals to undertake efforts to engage in consumer-friendly communication of their charges to enable consumers to compare charges for similar services across hospitals and to help them understand what their potential financial liability might be for items and services they obtain at the hospital.

79 FR 27978, 28169 (May 15, 2014) and 79 FR 49854, 50146 (Aug. 22, 2014), respectively.

In the FY 2019 IPPS/LTCH PPS proposed and final rules, CMS again reminded hospitals of their obligation to comply with section 2718(e) of the PHS Act and announced an update to its guidelines.

The updated guidelines, which have been effective since January 1, 2019, require hospitals to make available a list of their current standard charges (whether in the form of a “chargemaster” or another form of the hospital's choice) via the internet in a machine-readable format and to update this information at least annually, or more often as appropriate.

83 FR 20164, 20548 (May 7, 2018) and 83 FR 41144, 41686 (Aug. 17, 2018), respectively.

In response to stakeholder feedback and in accordance with Executive Order 13877, issued on June 24, 2019,

CMS took another important step toward improving health care value and increasing competition in the Calendar Year 2020 Hospital Outpatient Policy Payment System (OPPS) Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates: Price Transparency Requirements for Hospitals to Make Standard Charges Public final rule (Hospital Price Transparency final rule) by codifying regulatory requirements that implement section 2718(e) of the PHS Act, as well as a regulatory scheme under section 2718(b)(3) of the PHS Act that enables CMS to enforce those requirements.

The price transparency disclosure requirements that CMS finalized in the Hospital Price Transparency final rule will be effective on January 1, 2021, and they require hospitals to make publicly available, as applicable, their gross charges (as found in the hospital's chargemaster), payer-specific negotiated charges, discounted cash prices, and de-identified minimum and maximum negotiated charges for all items and services they provide through a single online machine-readable file that is updated at least once annually. Additionally, the Hospital Price

Transparency final rule requires hospitals to display online in a consumer-friendly format, as applicable, the payer-specific negotiated charges, discounted cash prices (or, to the extent one does not exist for a shoppable service, the undiscounted gross charge) and de-identified minimum and maximum negotiated charges for as many of the 70 shoppable services selected by CMS that the hospital provides and as many additional hospital-selected shoppable services as are necessary for a combined total of at least 300 shoppable services (or if the hospital provides fewer than 300 shoppable services, then for as many as the hospital provides). The rule defines a shoppable service as a service that can be scheduled by a health care consumer in advance and further explains that a shoppable service is typically one that is routinely provided in non-urgent situations that does not require immediate action or attention to the patient, thus allowing patients to price shop and schedule such a service at a time that is convenient for them.

84 FR 30849 (Jun. 27, 2019). The Executive order was issued on June 24, 2019 and was published in the

Federal Register

on June 27, 2019.

84 FR 65524 (Nov. 27, 2019).

84 FR 65524, 65564 (Nov. 27, 2019).

In addition to making pricing information available for items and services provided by hospitals, the Administration has also been engaged in increasing transparency of prescription drug pricing and lowering the costs of prescription drugs. Four Executive orders direct CMS and other HHS agencies to develop and issue tools, models, and several regulations to increase competition and lower patients' drug costs.

The actions directed in these Executive orders supplement those CMS has already taken to increase drug-pricing transparency and lower drug costs. Through the Drug Spending Dashboard, CMS publishes data on Medicare and Medicaid spending for prescription drugs in an interactive web-based tool so researchers and consumers can easily sort the data to identify trends. Over the past four years, CMS has expanded this dashboard to include reporting on payments for prescription drugs in their first year on the market and information on the drugs' manufacturers.

Through the Part D Senior Savings model, beginning January 1, 2021, CMS is testing a change to the Manufacturer Coverage Gap Discount Program (the “discount program”) to allow Part D sponsors to offer a Part D benefit design that includes predictable copays in the deductible, initial coverage, and coverage gap phases for a broad range of insulins included in the Model by offering supplemental benefits that apply after manufacturers provide a discounted price.

“Trump Administration Announces Historic Action to Lower Drug Prices for Americans.” United States Department of Health and Human Services. July 24, 2020. Available at:

https://www.hhs.gov/about/news/2020/07/24/trump-administration-announces-historic-action-lower-drug-prices-americans.html

“CMS Releases Enhanced Drug Dashboards Updated with Data for 2018.” Centers for Medicare & Medicaid Services.” December 19, 2019. Available at:

https://www.cms.gov/newsroom/press-releases/cms-releases-enhanced-drug-dashboards-updated-data-2018

;

see also

“CMS Updates Drug Dashboards with Prescription Drug Pricing and Spending Data.” Centers for Medicare & Medicaid Services. March 14, 2019. Available at:

https://www.cms.gov/newsroom/press-releases/cms-updates-drug-dashboards-prescription-drug-pricing-and-spending-data

“Part D Senior Savings Model.” Centers for Medicare & Medicaid Services. Available online at:

https://innovation.cms.gov/innovation-models/part-d-savings-model

CMS issued regulations addressing prescription drug transparency,

including a regulation implementing the statutory prohibition on pharmacist gag clauses,

helping to ensure patients have information on lower cost alternatives or that they can save money by paying cash. As part of the Calendar Year (CY) 2018 Medicare Physician Fee Schedule, CMS adopted a policy that all FDA-approved Part B biosimilars would be assigned their own HCPCS codes. Under this revised coding policy, CMS pays for separately payable Part B biosimilars based on its own Average Sales Price (ASP) plus 6 percent of the ASP of its reference product. This policy change was made to promote a stable and robust biosimilars market that drives competition and lowers prices.

See

84 FR 23832 (May 23, 2019) (HHS final rule finalizing policies that aimed to “increase transparency of drug pricing and drug price increases, giv[e] beneficiaries and prescribers tools to help improve adherence, lower prescription drug costs, and minimize beneficiary out-of-pocket costs”);

see, for example,

42 CFR 423.128 (requiring additional information in Part D explanations of benefits to increase transparency); 42 CFR 423.160 (requiring adoption of e-prescribing standards to increase transparency).

42 CFR 423.120(a)(8)(iii);

see also

Verma, S. “Memorandum to All Part D Plan Sponsors: Unacceptable Pharmacy Gag Clauses.” Centers for Medicare & Medicaid Services. May 17, 2018. Available at:

https://downloads.cms.gov/files/2018-05-17.pdf

In the CY 2019 Medicare Advantage and Part D final rule, CMS adopted a policy to allow for certain low-cost generic drugs to be substituted onto plan formularies at any point during the year, so beneficiaries immediately benefit and have lower cost sharing.

The Modernizing Part D and Medicare Advantage To Lower Drug Prices and Reduce Out-of-Pocket Expenses rule

finalized in May 2019 requires Part D plans to implement, no later than January 1, 2021, a real-time benefit tool that can be integrated into at least one prescriber's electronic prescribing or EHR system to provide patient-specific formulary and benefit information, including cost sharing.

The rule also requires that beginning January 2021, the Explanation of Benefits document that Part D enrollees receive each month must include information on drug price increases and lower-cost therapeutic alternatives. In June 2020, CMS proposed

further policy changes that would begin removing barriers to value-based purchasing arrangements between drug manufacturers and payers.

Value-based payments for prescription drugs has the potential to increase patient access to new medicines by holding prescription drug manufacturers accountable for outcomes their drug achieves, as well as creating alternatives to traditional cost controls that may impede patient access.

“CMS lowers the cost of prescription drugs for Medicare beneficiaries.” Centers for Medicare & Medicaid Services. April 2, 2018. Available at:

https://www.cms.gov/newsroom/press-releases/cms-lowers-cost-prescription-drugs-medicare-beneficiaries

84 FR 23832 (May 23, 2019).

“CMS Takes Action to Lower Prescription Drug Prices and Increase Transparency.” Centers for Medicare & Medicaid Services. May 16, 2019. Available at:

https://www.cms.gov/newsroom/press-releases/cms-takes-action-lower-prescription-drug-prices-and-increase-transparency

“Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements (CMS 2482-P) Fact Sheet. Centers for Medicare & Medicaid Services. June 17, 2020. Available at:

https://www.cms.gov/newsroom/fact-sheets/establishing-minimum-standards-medicaid-state-drug-utilization-review-dur-and-supporting-value-based

85 FR 37286 (Jun. 19, 2020).

Verma, S. “CMS's Proposed Rule On Value-Based Purchasing For Prescription Drugs: New Tools For Negotiating Price For The Next Generation Of Therapies.” Health Affairs. June 17, 2020. Available at:

https://www.healthaffairs.org/do/10.1377/hblog20200617.728496/full/

As part of its effort to incentivize states to pursue innovative responses to rising drug prices, CMS approved nine states' (and the District of Columbia's) plan amendment proposals to negotiate supplemental rebate agreements involving value-based purchasing arrangements with drug manufacturers.

These supplemental rebate agreements allow states to link payment for prescription drugs to the value delivered to patients. Increasing states' flexibility empowers them to develop policies that are effective and responsive to local conditions and price “hot spots” that lower costs, increase

the predictability of expenses, and improve access for patients.

“Medicaid State Plan Amendments.” Centers for Medicare & Medicaid Services. Available online at:

https://www.medicaid.gov/medicaid/medicaid-state-plan-amendments/index.html

As it currently stands, and despite ongoing Federal efforts to improve price transparency, there continues to be a lack of standardized pricing information to assist consumers in the private market when shopping for health care items and services. While there are several efforts across states, 33 still do not have comprehensive statewide price transparency initiatives,

and as noted earlier, sometimes cannot legally require private market plans and issuers to provide real-time, out-of-pocket cost estimates to participants, beneficiaries, and enrollees.

LaPointe, J. “Few States Have Robust Healthcare Transparency Laws.” RevCycle Intelligence. May 11, 2020. Available at:

https://revcycleintelligence.com/news/few-states-have-robust-healthcare-price-transparency-laws

The Departments have concluded that the Hospital Price Transparency final rule and the other efforts described earlier in this section cannot result in enrollees receiving complete price estimates for health care items and services because, as the GAO concluded, complete price estimates require pricing information from both providers and health insurance issuers.

In other words, this rule complements existing State, Federal, and private sector price transparency efforts by ensuring that pricing information is available from both hospitals and payers in both the public and private markets and by expanding transparency to pricing information for health care items and services provided outside of a hospital setting. As a result of these rules, regardless of where a consumer seeks information, be it their plan or issuer, or their hospital, they will have guaranteed access to up to date and accurate pricing information. In addition, because section 2718(e) of the PHS Act applies only to items and services provided by hospitals the Hospital Price Transparency final rule does not address price transparency with respect to items and services provided by other health care providers. Accordingly, the Departments have concluded that additional price transparency efforts are necessary and required under the statute to empower a more price-conscious and responsible health care consumer, promote competition in the health care industry, and lower the overall rate of growth in health care spending.

GAO-11-791 (Sep. 2011).

This view is consistent with the legislative history of PPACA. As initially introduced in the Senate on November 19, 2009, PPACA included only the requirement on hospitals to disclose standard charges included in section 2718. On December 1, 2009, in comments supporting the hospital transparency requirement, Sen. Max Baucus noted, “I think the same should also apply to physicians so people have a better idea what they will pay or their insurance company will pay for these procedures.”

https://www.congress.gov/111/crec/2009/12/08/CREC-2009-12-08.pdf

. Sections 2715A and 1311(e)(3)(C) were then amended to PPACA on December 19 in the final managers amendment before passage in the Senate. Available at:

https://www.congress.gov/111/crec/2009/12/19/CREC-2009-12-19.pdf

The Departments are of the view that the disclosures required under the final rules are necessary and appropriate to more fully implement section 2715A of the PHS Act and section 1311(e)(3)(C) of PPACA to ensure that consumers have ready access to the information they need to estimate their potential out-of-pocket costs for health care items and services before that service is rendered or that item is delivered. The final rules are also intended to empower consumers by incentivizing market innovators to help consumers understand how their plan or coverage pays for health care and to shop for health care items and services based on price, which is a fundamental factor in any purchasing decision.

D. Executive Order

On June 24, 2019, President Trump issued Executive Order 13877, “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.” Section 3(b) of Executive Order 13877 directed the Secretaries of the Departments to issue an advance notice of proposed rulemaking (ANPRM), consistent with applicable law, soliciting comment on a proposal to require health care providers, health insurance issuers, and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care. The Departments considered the issue, including by consulting with stakeholders, and determined that an NPRM, rather than an ANPRM, would allow for more specific and useful feedback from commenters, who would be able to respond to specific proposals.

E. Proposed Rules

In response to Executive Order 13877 and to also implement legislative mandates under sections 1311(e)(3) of PPACA and section 2715A of the PHS Act, the Departments published an NPRM entitled “Transparency in Coverage” on November 27, 2019 (to be codified at 26 CFR part 54, 29 CFR part 2590, and 45 CFR part 147) (the proposed rules) with comments requested by January 14, 2020.

In response to requests from stakeholders, the Departments extended the comment period 15 days, to January 29, 2020.

The proposed rules set forth proposed requirements for group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request to a participant, beneficiary, or enrollee, including an estimate of an individual's cost-sharing liability for covered items or services furnished by a particular provider. The Departments proposed that plans and issuers be required to make such information available on an internet website and, if requested, through non-internet means, thereby allowing a participant, beneficiary, or enrollee to obtain an estimate and understanding of the individual's out-of-pocket expenses and effectively shop for items and services. The proposed rules also included proposals to require plans and issuers to disclose in-network provider negotiated rates, and historical out-of-network allowed amounts through two machine-readable files posted on an internet website, thereby allowing the public to have access to health coverage information that can be used to understand health care pricing and potentially dampen the rise in health care spending.

84 FR 65464 (Nov. 27, 2019).

85 FR 276 (Jan. 3, 2020).

The proposed rules also included requests for information (RFIs) on topics closely related to the rulemaking. Due to the design and capability differences among the information technology (IT) systems of plans and issuers, as well as difficulties consumers experience in deciphering information relevant to health care and health insurance, the Departments sought comment on additional price transparency requirements that could supplement the proposed requirements for disclosing cost-sharing information to participants, beneficiaries, or enrollees and the proposed requirements for public disclosure of negotiated rates and historical allowed amount data for covered items and services from out-of-network providers. Specifically, the Departments sought comment on whether plans and issuers should be required to disclose information necessary to calculate a participant's, beneficiary's, or enrollee's cost-sharing liability through a publicly-available, standards-based application programming interface (API).

Such a requirement would build off a final rule, “Medicare and Medicaid Programs; Patient Protection and Affordable Care Act; Interoperability and Patient Access for Medicare

Advantage Organization and Medicaid Managed Care Plans, State Medicaid Agencies, Children's Health Insurance Program (CHIP) Agencies and Chip Managed Care Entities, Issuers of Qualified Health Plans in the Federally-Facilitated Exchanges and Health Care Providers” (CMS Interoperability & Patient Access final rule), that CMS published on May 1, 2020.

That rule requires Medicare Advantage organizations, Medicaid and CHIP Fee-for-Service programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers in the FFEs to provide enrollees with access to select data, including claims data, through a standards-based API that conforms to the technical standards adopted in the Office of the National Coordinator for Health Information Technology (ONC) 21st Century Cures Act final rule at 45 CFR 170.215. The CMS Interoperability & Patient Access final rule requires certain entities, such as FFE QHP issuers, to provide certain data through a standards-based API. The Departments appreciate the comments received in response to the API RFI and will use the comments to inform the need for future rulemaking regarding whether plans and issuers should be required to disclose information necessary to calculate cost-sharing liability through a publicly-available, standards-based API. HHS will also monitor the implementation of the CMS Interoperability & Patient Access final rule to inform any such future rulemaking.

85 FR 25510 (May 1, 2020).

The proposed rule also included RFIs on how provider quality measurements and reporting in the private health insurance market may be used to complement cost-sharing information for plans and issuers in the private health insurance market. The Departments sought comment on how existing quality data on health care provider items and services could be leveraged to complement the proposals in the proposed rules. The primary goal of the proposed and final rules is making information available to address the absence of price transparency in the health care market; the final rules do not address health care quality at this time.

HHS also proposed to amend its MLR program rules using the authority under section 2718(c) of the PHS Act, under which the standardized methodologies for calculating measures of the activities reported under section 2718(a) of the PHS Act shall be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans. Specifically, HHS proposed to recognize the special circumstances of a different and newer type of plan for purposes of MLR reporting and calculations for plans that share savings with consumers who choose lower-cost, higher-value providers. HHS proposed to amend 45 CFR 158.221 to add a new paragraph (b)(9) to allow any such “shared savings” payments made by an issuer to an enrollee as a result of the enrollee choosing to obtain health care from a lower-cost, higher-value provider, to be factored into an issuer's MLR numerator, beginning with the 2020 MLR reporting year (for reports filed by July 31, 2021).

The Departments requested comments on all aspects of the proposed rules, as well as a number of specific issues. The Departments received over 25,000 comments in response to the proposed rules from a range of stakeholders, including plans and issuers, health care providers, prescription drug companies, employers, state regulators, health IT companies, health care policy organizations and think tanks, and individuals. No requests for a public hearing were received. The Departments received a number of comments and suggestions that were outside the scope of the proposed rules that are not addressed in the final rules (for example, regarding hospital prices, other methods for reducing health care and prescription drug costs, consumer education and provider directories). After careful consideration of the comments, the Departments are finalizing the proposed rules with certain modifications made in response to comments. These modifications are discussed later in this preamble.

F. Legal Authority

Several commenters questioned the Departments' legal authority regarding various aspects of the proposed rules. The Departments are of the view that the legal authorities identified earlier in this preamble are sufficient to support the final rules.

1. Statutory Authority Under Section 1311(e)(3) of PPACA

Several commenters contended that section 1311(e)(3)(A)(ix) of PPACA does not give the Departments statutory authority to require that plans and issuers make the rates they have negotiated with providers and out-of-network allowed amounts publicly available. The commenters noted that section 1311(e)(3)(A) of PPACA enumerates eight specific categories of information subject to the transparency in coverage mandate followed by a ninth “catchall” category consisting of “other information as determined appropriate by the Secretary.”

These commenters maintained that the Secretary of HHS's authority under section 1311(e)(3)(A)(ix) of PPACA is insufficient to support a requirement to publicize negotiated rates because they are not sufficiently similar to the other categories of information identified under section 1311(e)(3)(A) of PPACA.

See

section 1311(e)(3)(A)(i) through (viii) of PPACA.

The Departments disagree with these comments and are of the view that the information required to be disclosed under this rule fits squarely within the scope of information that plans and issuers may be required to disclose under section 1311(e)(3)(A)(ix) of PPACA and section 2715A of the PHS Act. Section 1311(e)(3)(A)(i) to (viii) of PPACA outlines specific information and data that must be submitted to the Exchange, the Secretary of HHS, the relevant State insurance commissioner, and the public on an accurate and timely basis. In addition, section 1311(e)(3)(A)(ix) of PPACA requires health plans to submit “other information as determined appropriate by the Secretary.” Under established principles of statutory construction, when a general term follows a list of specific terms in a statute, the general term is construed to encompass subjects of a similar character to the specific terms. The principle of

ejusdem generis

guides courts in evaluating a catch-all at the end of a list. Therefore, when a statute allows an implementing agency to exercise its discretion by adding additional items to a list, the implementing agency is empowered to add additional items as long as those items are of similar character to the items enumerated in the statute.

In this case, the statutory list includes information and data useful to evaluate the coverage offered by plans and issuers with an emphasis on business practices, financial stability, and consumer experience. The list also includes information useful to regulators and the public in general to evaluate plans' and issuers' business practices and activity in the market. Given that the list includes some disclosures that are more immediately useful to individual consumers and others that are more immediately useful to regulators, the catchall provision is reasonably and best read as Congress' recognition that the Secretary of HHS (and, therefore, the Departments, by virtue of their joint authority under section 2715A of the PHS Act) would need broad flexibility to require the

disclosure of information as appropriate to deliver the transparency necessary for consumers to understand their coverage options and for regulators to hold plans and issuers accountable.

See Norfolk & Western R. Co.

Train Dispatchers,

499 U.S. 117, 128-29 (1991).

It is important to note that Congress considered one amendment that would have only required public disclosure at least annually of in-network allowed charges and expected allowed charges for out of network without allowing the Secretary discretion to add to the content of the required disclosure.

Instead of adopting this prescriptive approach, Congress required public disclosure of a broader set of information that similarly included payments for out-of-network services, as well as providing the Secretary discretion to require disclosure of other information. While Congress did not specifically include in-network allowed charges in the provision enacted, the discretion they provided suggests they understood that the Secretary might later find that requiring the disclosure of additional information, including information considered by Congress, might be useful and appropriate. That Congress considered and rejected a more prescriptive approach strongly suggests Congress intended that the Secretary have the ability to mandate more particularized disclosures in the future, including the disclosure of in-network negotiated rates.

Congressional Record 155: 183 (December 8, 2009) p. S12716. Available at:

https://www.congress.gov/111/crec/2009/12/08/CREC-2009-12-08-senate.pdf

See, for example, Lehman

Nakshian,

453 U.S. 156, 167-8 (1981) (citing a rejected amendment to a Federal statute as evidence of Congressional intent).

A plan's or issuer's negotiated rates provide important information to help consumers both evaluate their options before buying coverage and, after choosing coverage, evaluate how to use their coverage when they need care. Those shopping for coverage will benefit from knowing how effectively a plan or issuer negotiates rates; for example, by comparing the rates one plan or issuer pays a provider for a particular item or service that this consumer knows they, or their family, will need in the future, which can then allow them to shop and compare which plans and issuers offer the most value. Once coverage is obtained, knowing negotiated rates upfront will ensure consumers covered under a variety of plan designs and coverage options to, in each case, have access to the information they need to obtain health care services in an efficient, cost-effective manner, when considering available options for a shoppable service. As discussed earlier in this preamble, making negotiated rates public also strengthens other health care stakeholders' ability to support consumers. Because negotiated rates provide important information to help people—including consumers, regulators and the general public—evaluate the coverage offered by a plan or issuer, it clearly falls within the scope of information already required under section 1311(e)(3)(A) of PPACA. As discussed in more detail later in this section, out-of-network allowed amounts likewise provide vital information to help evaluate coverage.

Out-of-network allowed charges also provide consumers with important information. Consumers may opt for out-of-network services for numerous reasons, such as the unavailability of an in-network provider who can meet certain medical needs, an existing relationship with an out-of-network provider, the recommendation of another provider, or personal convenience. Disclosure of estimates of out-of-network allowed amounts is essential to the ability of consumers considering out-of-network services to form an estimate of their potential liability. Limiting transparency in pricing requirements to only providers under contract with a carrier would prevent transparency for all such services, contrary to the plain language of the statute.

Indeed, the language of the statute (for example, the requirement of section 1311(e)(3)(B) of PPACA that the intended audience, including individuals with limited English proficiency, can readily understand and use because that language is concise, well-organized, and follows other best practices of plain language writing) indicates an intention to assist consumers by enhancing their ability to make cost-conscious decisions; this is an essential component of establishing and maintaining robust market competition with costs that are reasonable and plausibly tethered to standard market discipline. As the preamble to the proposed rules observed, there is substantial evidence that increased price transparency provides consumers and the public at large with the information that is necessary to improve market efficiency.

For these reasons, the Departments are of the view that requiring disclosure of estimates of out-of-network allowed amounts, which reflect out-of-network benefits under a plan, is well within both the text and spirit of the statute and its aims to assist consumers in selecting providers, evaluating market options, increasing competition, and reducing market disparities. The Departments have identified these requirements as beneficial to the ongoing efforts of employers and regulators to aid consumers, and as consistent with the goals of the statute; thus, the Departments reject the assertion of commenters that these purposes are beyond the scope of the statute.

Section 1311(e)(3)(A)(vii) of PPACA.

84 FR 65464, 65489, 65495 (Nov. 27, 2019);

see also

Austin, D.A., and Gravelle, J.G. “Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Healthcare Sector.” United States Congress Congressional Research Service. July 24, 2007. Available at:

https://fas.org/sgp/crs/secrecy/RL34101.pdf;

see also

Brown, Z.Y. “Equilibrium Effects of Health Care Price Information.” 100 Rev. Econ. & Stat. 1 (2018). Available at:

http://www-personal.umich.edu/~zachb/zbrown_eqm_effects_price_transparency.pdf; see also

Enthoven, A. Market Forces and Efficient Health Care Systems. Health Affairs, Vol. 23, No. 2. Available at

https://www.healthaffairs.org/doi/full/10.1377/hlthaff.23.2.25

Several commenters asserted that the specific justifications the Departments cite as support for mandating the disclosure of negotiated rates are unrelated to the purposes authorized by statute. They asserted that those purposes—assisting consumers in selecting health care providers, assisting consumers in evaluating options in the market, increasing competition and reducing disparities in the market, assisting employers, and assisting state regulators—have no relationship to the statutory purpose of providing transparency in coverage for consumers. Moreover, commenters stated that the statute does not authorize the use of price transparency mechanisms to affect issuer and provider rate negotiations or health care costs generally, to assist employers in negotiations, or to aid state regulators in their duties. The Departments, however, find ample support in PPACA evidencing the relationship between the purposes intended to be served by this final rule, the overall purposes of PPACA, and the PPACA's price transparency measures, including section 1311(e)(3).

The purposes underlying the final rule's requirement to disclose negotiated rates are directly tied to providing transparency in coverage to consumers. The negotiated rate information that the final rules require to be disclosed pursuant to the Departments' authority under section 1311(e)(3)(A)(ix) of PPACA, and section 2715A of the PHS Act, is directly relevant to providing consumers with transparent pricing information sufficient to allow them to assess, in advance of receiving services, their liability under a health plan or

health coverage in the numerous instances in the course of any plan year in which the negotiated rate will determine all or a portion of a consumer's liability. This is important information that helps consumers under a wide variety of plan designs and cost-sharing arrangements in both choosing and using coverage. The Departments are requiring the disclosure of cost information to further the goal of price transparency and are doing so under the authority of section 1311(e)(3) of PPACA.

Two commenters suggested that the proposal to require the release of negotiated rates in machine-readable format is not authorized under the statute. The statute mandates that transparency in coverage information “shall be provided in plain language . . . that the intended audience, including individuals with limited English proficiency, can readily understand and use because it is concise, well-organized, and follows best practices of plain writing.”

These commenters contended that machine-readable information is not plain language that is accessible or understandable to the typical consumer, and is therefore not within the scope of information authorized for public disclosure under section 1311(e)(3)(B) of PPACA.

Section 1311(e)(3)(B) of PPACA.

The Departments disagree with this assertion. Consistent with the statute, the final rules require the machine-readable files to include a plain language description for each billing code. The proposed requirement that two data files be provided in “machine-readable format”—one containing negotiated rates and the other containing out-of-network allowed amounts—is a purely operational consideration intended to ensure that the file data can be imported or read by a computer system directly, without altering the data, and without reliance on proprietary software.

Under section 1311(e)(3)(B) of PPACA, the “plain language” requirement concerns information to be made available to the public, the “intended audience,” per the statute. The Departments require the publication of data in machine-readable files so that the required information may be presented to all members of the intended audience in a concise, well-organized manner that follows best practices of plain writing relevant to the intended audience.

84 FR 65464, 65481 (Nov 27. 2019).

The Departments explain elsewhere in the preamble that the intended audience for the information required to be published under the final rules includes all consumers and purchasers of health care items and services, including individual consumers, employers, and government health care programs. The intended audience also includes health care stakeholders such as researchers, legislators, and regulators, as well as application developers who could make the information usable and easily understood by laypersons. Accordingly, application developers will be able to access the data in a format that is easily used and understood using skills common to application developers. This same expertise allows such innovators to incorporate large data sets into easy-to-use internet-based tools and mobile applications that will present information to laypersons in easy-to-understand, plain language that is sufficiently concise and well-organized. The Departments are of the view that providing the files in machine-readable format is an effective and necessary mechanism to ensure that price transparency information be made available to all members of the intended audience in a consistent, understandable, plain language format, as the statute requires.

One commenter suggested that the disclosures to the public required under section 1311(e)(3)(A) of PPACA consist of aggregated data only and do not contemplate or allow public disclosure of specific rate and price information. The Departments disagree. While it is true that several of the data elements listed under section 1311(e)(3)(A) of PPACA are general in nature, such as financial disclosures and enrollment data, this fact does not compel the conclusion that all elements listed must be construed as requiring aggregated information. As noted above, the list encompasses information and data useful to the evaluation of plans and issuers by all varieties of health care consumer, including individuals, employers, and government programs. Certain elements provide information specific to the benefits and protections a plan or issuer's coverage provides to an individual, including claims payment policies and information on enrollee rights under the law. In particular, the data element listed at section 1311(e)(3)(A)(vii) of PPACA encompasses “information on cost sharing and payments with respect to any out-of-network coverage,” which, by its plain terms, does not contemplate general or cumulative information.

The final rules specify the nature of the information that must be made available pursuant to sections 1311(e)(3)(A)(vii) and (ix) of PPACA, and the manner in which it is to be made available to fully implement the goals and purposes of the statute. Section 1311(e)(3)(C) of PPACA concerns disclosures to participants, beneficiaries, and enrollees receiving services from participating providers only, whereas section 1311(e)(3)(A) of PPACA concerns disclosures to the public generally and incorporates out-of-network payment information as well. Taken together, and as implemented under the final rules, the statute and regulatory schemes cover all persons seeking health pricing information in a given market, and advance the purposes of enhancing competition, reducing price disparities, and ultimately lowering costs through transparency in coverage.

Ultimately, by adding section 2715A of the PHS Act and section 1311(e)(3) of PPACA through the manager's amendment prior to passing PPACA in the Senate, Congress made transparency a key component of the PPACA's comprehensive framework for regulating private health coverage through Federal law. Notably, in contrast to the amendment rejected by Congress discussed earlier in this preamble, the transparency in coverage provisions signed into law provide a far more comprehensive and expansive approach toward providing transparency. The law covers nearly all private health plans, requires disclosure by plans through an internet website, requires disclosures to more entities, requires a broader set of information disclosures, and provides additional discretion to expand information disclosures. By taking this approach, Congress recognized both the importance and the complexity of requiring transparency. The discretion provided under the statute ensures that the Departments can accommodate changes in technology and health care markets, as well as build on the information disclosures specifically itemized in the statute.

A commenter also contended that the proposal to require issuers to make estimates of out-of-network allowed amounts available through the internet-based self-service tool is not authorized by the statute. This commenter asserted that section 1311(e)(3)(C) of PPACA only authorizes a requirement that payers make available information concerning cost-sharing obligations with respect to items or services furnished by a participating provider, not by out-of-network providers.

The Departments disagree and are of the view that the statute fully supports a requirement that plans and issuers make available information concerning cost-sharing obligations with respect to

items or services furnished by out-of-network providers. The information to be made available under section 1311(e)(3) specifically includes “[i]nformation on cost sharing and payments with respect to any out-of-network coverage,” as well as “[o]ther information as determined appropriate by the Secretary.”

While section 1311(e)(3)(C) of PPACA focuses primarily on providing information to enrollees, section 1311(e)(3)(A) of PPACA authorizes the Departments to make certain out-of-network information available to the public, which includes participants, beneficiaries, and enrollees. Thus the Departments reasonably determined that section 1311(e)(3)(A) and (C), together, authorize the requirement that plans and issuers provide cost estimates for covered items and services provided by out-of-network providers.

Section 1311(e)(3)(A) of PPACA;

see also

Section 1311(e)(3)(A)(vii) and (ix) of PPACA.

2. Constitutional Concerns

Several commenters asserted that requiring issuers to make rates they have negotiated with providers available to the public constitutes compelled commercial speech in violation of the First Amendment to the Constitution, and an unlawful taking of trade secrets without just compensation in violation of the Fifth Amendment. Commenters cited various reasons for their belief that the requirement in the proposed rules to disclose negotiated rates to the public could not survive constitutional scrutiny.

Several commenters contended that the proposed requirement constituted compelled commercial speech, and that the rationale the Departments articulated to justify the proposed requirement failed to meet the legal standard necessary to justify such action. One commenter asserted that a standard of constitutional scrutiny higher than that relevant to compelled commercial speech applies to the requirement to publish negotiated rates because, the commenter contended, the disclosure of negotiated rates does not propose a future commercial transaction. Some commenters challenged the proposed rules on the basis that negotiated rates have little or no relevance or value to consumers attempting to ascertain their potential liability for a particular service at a given point in time in the future because negotiated rates do not reflect the terms of different plan designs or the status of the individual consumer at a given point in time in relation to cost-sharing obligations, in particular any annual deductible.

Two commenters asserted that the requirement to publicly disclose negotiated rates would go well beyond the stated goal of providing notice to participants, beneficiaries, and enrollees of cost-sharing liability for covered services because it calls for negotiated rates to be available to the public generally, not just to enrolled consumers inquiring about their coverage. They also claimed that disclosure of negotiated rates would be extremely burdensome because fulfilling the mandate would require the disclosure of millions, or even billions, of data points. One commenter asserted that because the requirement to publish negotiated rates would not be useful to consumers in all situations, the requirements in the proposed rules were not narrowly tailored enough to survive constitutional scrutiny.

Some commenters also contended that the Departments' other stated interests in mandating the publication of negotiated rates, including lowering prices, increasing competition, and informing decision-making in the market generally, are not authorized under relevant statute; therefore, the breadth of these requirements is overly burdensome and inclusive of information not necessary to advance the goals of the statute. These commenters concluded that, to the extent the mandated publication of negotiated rates is calculated to advance those purposes, they are not sufficiently tailored to statutory goals to survive constitutional scrutiny.

a. First Amendment Compelled Speech

The Departments disagree that the proposed rules and the final rules run afoul of the First Amendment and would not survive constitutional scrutiny. As the United States Supreme Court recognized in

Zauderer

Office of Disciplinary Counsel,

471 U.S. 626 (1985) and recently confirmed in

National Institute of Family and Life Advocates

Becerra,

138 S. Ct. 2361, 2372, 2376 (2018) (“

NIFLA

”), required disclosures of factual, uncontroversial information in commercial speech are subject to more deferential First Amendment scrutiny. Under the approach articulated in

Zauderer,

courts have upheld required disclosures of factual information in the realm of commercial speech where the disclosure requirement reasonably relates to a government interest and is not unjustified or unduly burdensome such that it would chill protected speech.

See, e.g., Am. Meat Inst.

U.S. Dept. of Agric.,

760 F.3d 18, 27 (D.C. Cir. 2014);

Mass. Ass'n of Private Career Sch.

Healey,

159 F. Supp. 3d 173, 201 (D. Mass. 2016).

The Departments articulated substantial governmental interests in proposing these requirements: Assisting consumers of health care services in understanding the costs for which they will be liable for covered services prior to the delivery of the services; assisting other consumers of health care, such as employers and government health benefits programs, in evaluating and negotiating coverage options and obtaining the most value for health care dollars; and supporting a market-driven health care economy that is sustainable. The preamble to the proposed rules also explained how the information required to be disclosed under the proposed rules is of substantial value to consumers, including health plan participants, beneficiaries, and enrollees who have and have not satisfied their annual deductible or reached their maximum out-of-pocket limit, and that remains true under the final rules. For such consumers who have not met their deductibles, knowledge of negotiated rates is necessary for estimating their out-of-pocket costs because these consumers generally will be responsible for paying the full negotiated rate for health care items and services until they reach their deductible (or the maximum annual limit on cost sharing).

As the Departments noted earlier in the preamble, between the enactment of PPACA and 2019, average family deductibles for private sector employees increased by 85 percent, up to $3,655 in 2019.

Consumers in the private health insurance market are increasingly responsible for a greater share of their health care costs through higher deductibles and shifts from copayments to coinsurance.

The final rules will give health care consumers and stakeholders information vital to their roles in creating and supporting a sustainable market-driven health care economy.

See

https://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables_search.jsp?component=2&subcomponent=1

The preamble to the proposed rules contains a detailed discussion regarding increases in deductibles.

See

84 FR 65464, 65465 (Nov. 27, 2019) (citing Ray, M., Copeland, R., Cox, C. “Tracking the rise in premium contributions and cost-sharing for families with large employer coverage,” Peterson-Kaiser Health System Tracker. August 14, 2019. Available at:

https://www.healthsystemtracker.org/brief/tracking-the-rise-in-premium-contributionsand-cost-sharing-for-families-with-large-employercoverage/

.).

The final rules also will provide critical information to consumers who have satisfied their deductibles or reached their out-of-pocket limit. These consumers may wish to base their health care spending decisions on underlying prices to avoid excess spending by their issuer or employer that could lead to premium increases, increased out-of-pocket obligations, or lower employer contributions toward employer-sponsored coverage. Knowing the rates negotiated by other issuers in their geographic market will assist consumers during open enrollment, as they search for a plan that may lower their out-of-pocket costs in the coming year.

The government also has a substantial interest in assisting other health care spenders, such as employers and government benefits programs, to make coverage choices that drive value for the public. Given the size and scope of the country's health care market and the fact that choices made by employers and benefits programs operate at scale to direct health care spending, the government can increase the value of health care expenditures by ensuring those entities have access to accurate information. Providing employers and government benefit programs with actionable data may also help drive down total health care spending, as issuers compete to offer higher-value programs.

The government's interest in promoting a sustainable health care economy driven by market forces is substantial, as reflected in section 1311(e) of PPACA. As of 2018, U.S. health care spending had reached $3.6 trillion, or $11,172 per person and accounted for 17.7 percent of the nation's Gross Domestic Product.

Given the scope of the market and the earlier-discussed data suggesting that price transparency and market forces can drive down health care costs, the government's interest in increasing price transparency is substantial.

“Historical National Health Expenditure Data.” Centers for Medicare and Medicare Services. Available at:

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical

Each of the three interests identified above is furthered by the final rules. For individuals, the data provided will permit them to compare prices for health care items and services and allocate their funds accordingly. For benefit plans and employers, the information provided will guide decision-making about which coverage options to offer, and which providers or third parties, like pharmacy benefit managers (PBMs), to contract with. For the health care economy as a whole, the Departments are of the view (based on available data) that transparency and market forces will drive savings and reduce expenditures. Accordingly, the Departments continue to hold the view that the final rules serve substantial government interests.

Furthermore, the requirement to provide these disclosures does not unduly burden plan or issuer speech because nothing in the final rules would “drown out [a plans' or issuers'] own message” or “effectively rule out” any mode of communication.

See NIFLA,

138 S. Ct. at 2378. Plans and issuers remain free to communicate with consumers using methods and media they have always used or may choose to use in the future.

The Departments further disagree that the final rules would be subject to a standard of constitutional scrutiny higher than that applied to compelled commercial speech. For First Amendment purposes, commercial speech is speech “related solely to the economic interests of the speaker and its audience.”

Cent. Hudson Gas & Electric Corp.

Pub. Serv. Comm'n of N.Y.,

447 U.S. 557, 561 (1980). Price information concerning the cost of health services is related solely to the economic interests of providers and the consumers who seek their services. The speech in question here, therefore, is commercial speech.

Furthermore, the disclosure of negotiated rates is one concerning “purely factual and uncontroversial information about the terms [

i.e.,

the price] under which services are available.”

See Zauderer,

471 U.S. at 651;

see also

Cerullo, M. “As medical costs soar, more Americans turn to crowdfunding.” CBS News. February 21, 2020. Available at:

https://www.cbsnews.com/news/health-care-costs-crowdfunding-medical-bills/

Moreover, plans' and issuers' expectations of confidentiality in information provided as a condition of participation in a highly regulated industry (for example, health insurance) are substantially diminished by the highly regulated nature of the industry.

See, e.g., Ruckelshaus

Monsanto Co.,

467 U.S. 986, 1007 (1984) (noting that expectations are necessarily adjusted in areas that “ha[ve] long been the source of public concern and the subject of government regulation”);

Me. Educ. Ass'n Benefits Trust

Cioppa,

695 F.3d 145 (1st Cir. 2012) (discussing a Maine law requiring health issuers to disclose loss information);

Franklin Mem'l Hosp.

Harvey,

575 F.3d 121, 128 (1st Cir. 2009) (holding that a claimant's investment-backed expectations were “tempered by the fact that it operate[d] in the highly regulated hospital industry”).

Plans and issuers are already subject to extensive regulation under Federal and state law. As noted by the 1st Circuit in

Pharmacy Care

Rowe:

PBMs serve as intermediaries between pharmacies and health benefit plans, including plans covered by ERISA. PBMs contract with pharmacies to establish pharmacy networks and contract with health benefit plans to provide access to those pharmacy networks. When a participant in a health benefit plan fills a drug prescription at a network pharmacy, the PBM pays the pharmacy at the rate negotiated in the contract between the PBM and the pharmacy (less any copayment by the participant), and the health benefit plan then reimburses the PBM at the rate negotiated in the contract between the PBM and the health benefit plan.

If [regulated parties] truly assumed that they would be free from disclosure requirements . . . this would be more wishful thinking than reasonable expectation. Whether or not the law strikes the right economic balance between competing producer and consumer interests, it is no more a taking than the requirement that public corporations disclose private corporate information about financial prospects to the public through regular SEC filings.

Pharm. Care Mgmt. Ass'n

Rowe,

429 F.3d 294, 316 (1st Cir. 2005) (joint concurring opinion representing the opinion of the court). The Court further stated: “Given the absence of a full-scale taking and the presence of a traditional regulatory interest, it is enough to defeat the takings claim that no reasonable investment-backed expectation is present at all.”

Id.

at 315;

see also

Austin, A.D., and Gravelle, J.G. “Congressional Research Service Report to Congress: Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Healthcare Sector.” July 24, 2007. Available at:

https://fas.org/sgp/crs/secrecy/RL34101.pdf; see also

Brown, Z.Y. “Equilibrium Effects of Health Care Price Information.” 100 Rev. Econ. & Stat. 1. Available at:

http://www-personal.umich.edu/~zachb/zbrown_eqm_effects_price_transparency.pdf

;

see also

Enthoven, A. “Market Forces and Efficient Health Care Systems.” Health Affairs, Vol. 23, No. 2. Available at

https://www.healthaffairs.org/doi/full/10.1377/hlthaff.23.2.25

This preamble (as well as the preamble to the proposed rules) cites substantial research indicating that increased price transparency increases competition and lowers costs, leads to

more uniform pricing within markets, and increases overall market efficiency.

102

This preamble also cites an abundance of evidence indicating that industry and other stakeholders believe that increased price transparency will enhance competition and benefit consumers. As stated earlier in this preamble in relation to comments regarding the First Amendment, the information the final rules require to be disclosed is clearly identified and has a direct nexus to the government's legitimate and substantial interest in ensuring that consumers have sufficient information to calculate out of pocket costs for health care items and services and ultimately assess whether the payment terms of plans and coverages are fair, reasonable, or advantageous to the consumer. Furthermore, in the Impact Estimates of the Transparency in Coverage Provisions and Accounting Table section later in this preamble, the Departments identify ranges of relevant factors and categories of information that the Departments have attempted to quantify, as well as those factors and categories that the Departments cannot quantify at this time. Nevertheless, the Departments are of the view that those determinations are reasonable and sufficiently thorough, and that the Departments' expectations regarding the impacts of the final rules are not speculative.

102

84 FR 65464, 65466-67 (Nov. 27, 2019).

5. Other Legal Concerns

Several commenters asserted that requiring issuers to make negotiated prices public could violate various state laws, principles of common law, and tort laws concerned with the protection of trade secrets and proprietary business information. Several commenters specifically stated that the proposal would violate the Uniform Trade Secrets Act (UTSA)

103

as adopted by several states.

103

The Uniform Trade Secrets Act is a model statute that a majority of states have adopted in some form. The UTSA is promulgated by the Uniform Law Commission. S

ee generally,

Uniform Trade Secrets Act with 1985 Amendments, Nat'l Conference of Commissioners on Uniform State Laws, August 1985. UTSA has been adopted in some form by 48 states. New York and North Carolina are the exceptions.

See

“Trade Secrets Act.” Uniform Laws Commission. Available at:

https://www.uniformlaws.org/committees/community-home?CommunityKey=3a2538fb-e030-4e2d-a9e2-90373dc05792

The Departments understand these concerns and appreciate that States have passed laws and regulations that may address the same or similar information the final rules require to be publicly disclosed, or disclosed to participants, beneficiaries, or enrollees. The final rules will preempt these laws, to the extent they conflict with Federal law and would prevent application of Federal requirements, as required under section 1321(d) of PPACA and section 2724(a) of the PHS Act. The Departments discuss this issue in more detail later in this preamble in the context of addressing federalism considerations.

Moreover, the Departments are also of the view that negotiated rates do not constitute trade secrets as defined under the UTSA and under principles of tort law. A trade secret under the UTSA is “information, including a formula, pattern, compilation, program, device, method, technique, or process” that “derives independent economic value. . . from not being generally known [or] readily ascertainable by proper means by . . . other persons who can obtain economic value from its disclosure [and] is the subject of efforts to . . . maintain its secrecy.”

104

Critically, and as discussed earlier, negotiated rates are routinely disclosed to beneficiaries in EOBs.

104

See

Uniform Trade Secrets Act with 1985 Amendments, Nat'l Conference of Commissioners on Uniform State Laws, August, 1985; Restatement (First) of Torts section 757 (1939).

To the extent the final rules require disclosure of trade secrets, the activity that supports a cause of action under tort law includes obtaining the information by improper means or a breach of confidence.

105

No such scenario is implicated where the disclosure is made pursuant to a regulatory mandate authorized by statute. In this context, the disclosure is a legal obligation, and so the disclosure is by definition proper and made in the absence of any duty of confidence.

105

Restatement (First) of Torts section 757 (1939) (“

GENERAL PRINCIPLE.

One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if (a) he discovered the secret by improper means, or (b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him, or (c) he learned the secret from a third person with notice of the facts that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other, or (d) he learned the secret with notice of the facts that it was a secret and that its disclosure was made to him by mistake.”).

Finally, even if negotiated rates could constitute trade secrets under a state's law, state law cannot invalidate the authority Congress granted to the Departments under section 1311(e)(3) of PPACA to require disclosure of negotiated rates and other information that the Departments determine appropriate to create a level of transparency in coverage sufficient to address chronic issues in American health care markets, including rising health care prices.

Several commenters asserted that making negotiated rates public would violate contractual arrangements between virtually all issuers and providers, in particular contractual provisions that prohibit disclosure of negotiated rates. One commenter noted that this would, at a minimum, require a considerable effort to amend many existing contracts.

The Departments understand that changes in applicable laws and regulations may necessitate changes to certain business and contractual relationships over time. The Departments are of the view, however, that the final rules are necessary to advance the interests of consumers and to fulfill the goals of the relevant statutes. The Departments also anticipate that in most cases, affected contracts include clauses that specifically anticipate the possibility of future changes to applicable law or regulations. Additionally, even if a contract between a provider and a payer includes a provision prohibiting the public disclosure of its terms, it is the Departments' understanding that such contracts typically include exceptions if a particular disclosure is required by Federal law. Finally, as the Supreme Court has found, “[c]ontracts, however express, cannot fetter the constitutional authority of Congress. Contracts may create rights of property, but when contracts deal with a subject matter which lies within the control of Congress, they have a congenital infirmity. Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them.”

Norman

Balt. & Ohio R.R. Co.,

294 U.S. 240, 307-08 (1935) (“If the regulatory statute is otherwise within the powers of Congress . . . its application may not be defeated by private contractual provisions.”)

; see also Connolly,

475 U.S. at 224.

Several commenters contended that the proposed rules would be inconsistent with certain Executive orders. One commenter contended that Executive Order 13877, which the Departments cited as the impetus for the proposed rules, directs the agencies to “require . . . health insurance issuers . . . to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” The commenter asserted that this directive does not rationally encompass a requirement that issuers make public all negotiated rates and allowed amounts.

The commenter also asserted that the proposed rules are incompatible with section 3(b) of Executive Order 13877, which provides that any rulemaking be “consistent with applicable law,” in that the proposed rules run contrary to antitrust law as well as prohibitions against disclosing trade secrets.

The Departments disagree with these comments. First, Executive Order 13877 clearly states that it is “not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.” Executive Order 13877, Sec. 8(c). Thus, an Executive order cannot form the basis of a challenge to a rulemaking. Second, for all the reasons detailed earlier in this preamble, the Departments are of the view that the final rules are necessary and appropriate measures that are sufficiently narrowly tailored to meet the stated goals of the Executive order. Making public the negotiated rates and out-of-network allowed amounts is essential for consumers to obtain useful information about out-of-pocket costs they are likely to incur before receiving services. Due to the prevalence of high deductibles throughout markets nationwide, this information will be crucial for a significant cohort of persons enrolled in health plans to be able to anticipate costs in advance of each plan year. For the public, access to information concerning allowed amounts is essential to obtain reliable advance estimates of personal liability to facilitate cost-conscious choices that enhance competition and lower overall costs. Finally, as described later in this preamble, the Departments considered many alternatives to the proposed and final rules. The Departments are of the view that the final rules are a straightforward implementation of the mandate of section 1311(e)(3) of PPACA, and that the choices taken in particular instances are well calculated to effectively and fully implement the goals of the authorizing statutes. Moreover, the regulations provide tools and information to consumers that are critical to their ability to access meaningful price information, including the personal liability associated with a substantial portion of health care services. This directly facilitates the meaningful engagement of consumers with their own health care and protects patients from the likelihood of unanticipated health care costs. As such, the regulations fulfill the mandate of Executive Order 13877.

For the foregoing reasons, the final rules adopt the majority of the provisions in the proposed rules, with certain modifications, as described in detail in the following sections of this preamble.

II. Overview of the Final Rules Regarding Transparency—the Departments of the Treasury, Labor, and Health and Human Services

The Departments are finalizing price transparency requirements set forth in the final rules in 26 CFR 54.9815-2715A1, 54.9815-2715A2, and 54.9815-2715A3, 29 CFR 2590.715-2715A1, 2590.715-2715A2, and 2590.715-2715A3, and 45 CFR 147.210, 147.211, and 147.212. The final rules separate the proposed regulations all contained in 26 CFR 54.9815-2715A, 29 CFR 2590.715-2715A, and 45 CFR 147.210, into three separate regulations for each of the Departments. The regulations set forth the scope and relevant definitions in 26 CFR 54.9815-2715A1, 29 CFR 2590.715-2715A1, and 45 CFR 147.210 (which correspond with paragraph (a) of the proposed regulations). The regulations at 26 CFR 54.9815-2715A2, 29 CFR 2590.715-2715A2, and, 45 CFR 147.211 (which correspond with paragraph (b) of the proposed regulations) include: (1) A requirement that group health plans and health insurance issuers in the individual and group markets disclose to participants, beneficiaries, or enrollees upon request, through a self-service tool made available by the plan or issuer on an internet website, cost-sharing information for a covered item or service from a particular provider or providers, and (2) a requirement that plans and issuers make such information available in paper form, upon request. As explained in more detail later in this preamble, the final rules adopt a three-year, phased-in approach with respect to the scope of the requirement to disclose cost-sharing information. Plans and issuers must make cost-sharing information available for 500 items and services identified by the Departments for plan years (in the individual market, for policy years) beginning on or after January 1, 2023, and must make cost-sharing information available for all items and services for plan years (in the individual market, for policy years) beginning on or after January 1, 2024.

The regulations at 26 CFR 54.9815-2715A3, 29 CFR 2590.715-2715A3, and 45 CFR 147.212 (at paragraph (c) of the proposed regulations) require that plans and issuers disclose pricing information to the public through three machine-readable files. One file requires disclosure of payment rates negotiated between plans or issuers and providers for all covered items and services. The second file will disclose the unique amounts a plan or issuer allowed, as well as associated billed charges, for covered items or services furnished by out-of-network providers during a specified time period. To reduce the complexity and burden of including prescription drug information in the negotiated rate machine-readable file, the final rules require a third file that will include pricing information for prescription drugs. The final rules modify the applicability date for these provisions to plan years (in the individual market, policy years) beginning on or after January 1, 2022.

The provisions proposed at paragraph (d) of the proposed regulations are finalized in 26 CFR 54.9815-2715A2 and 54.9815-2715A3, 29 CFR 2590.715-2715A2 and 2590.715-2715A3, and 45 CFR 147.211 and 147.212 with non-substantive editorial changes for increased readability, and with effective dates reflecting the phased approach to implementation mentioned earlier and discussed in more detail later in this preamble.

In addition to splitting the final rules into three separate regulations for each Department, the Departments have added severability clauses to the final rules to emphasize the Departments' intent that, to the extent a reviewing court holds that any provision of the final rules is unlawful, the remaining rules should take effect and be given the maximum effect permitted by law. The final rules provide that any provision held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, shall be severable from the relevant section and shall not affect the remainder thereof or the application of the provision to persons not similarly situated or to dissimilar circumstances.

To streamline the final rules, the Departments have removed definitions of terms that are defined in the applicable statute or elsewhere in such statutes' implementing regulations and have revised certain definitions to provide more clarity. Finally, based on comments received, the Departments have reassessed the associated burden estimates in the Economic Impact Analysis and Paperwork Burden section of this preamble.

A. Definitions

The final regulations at 26 CFR 54.9815-2715A1(a), 29 CFR 2590.715-2715A1(a), and 45 CFR 147.210(a) (paragraph (a) of the proposed regulations) set forth definitions that are applicable to the regulations at 26 CFR 54.9815-2715A2, 29 CFR 2590.715-

2715A2, and 45 CFR 147.211 (paragraph (b) of the proposed regulations) and 26 CFR 54.9815-2715A3, 29 CFR 2590.715-2715A3, 45 CFR 147.212 (paragraph (c) of the proposed regulations). The Departments have revised the proposed definitions of some terms and included new defined terms in order to clarify the final requirements of 26 CFR 54.9815-2715A2, 29 CFR 2590.715-2715A2, and 45 CFR 147.211, and 26 CFR 54.9815-2715A3, 29 CFR 2590.715-2715A3, and 45 CFR 147.212. Comments on the definitions in the proposed rule focused on concerns regarding consistency of definitions across related government programs, the general need for increased clarity in relation to some proposed definitions, and the need for resolution of perceived ambiguities in the proposed definitions. In response to these comments, the Departments are not finalizing certain proposed definitions that are already defined in existing, pertinent regulations. The Departments are finalizing revised versions of other proposed definitions to clarify their meaning, as well as the policies and requirements adopted in the final rules.

Commenters recommended aligning definitions in the proposed regulations with those in other existing regulations to avoid conflicts. In light of these recommendations, the Departments are not finalizing the proposed definition of “participant” under 26 CFR 54.9815-2715A1, 29 CFR 2590.715-2715A1, or 45 CFR 147.210 because the term is already defined in the Departments' regulations at 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR 144.103. Likewise, the Departments are not finalizing the proposed definition of “beneficiary” under proposed 45 CFR 145.210 and 29 CFR 2590.715-2715A1, because the term is already defined under HHS regulation at 45 CFR 144.103 and in statute at ERISA section 3(8). The Departments, however, are finalizing the definition of “beneficiary” proposed under 26 CFR 54.9815-2715A(a) (now at 26 CFR 54.9815-2715A1), because the term is not otherwise defined in Treasury Regulations or the Code. Finally, the Departments are not finalizing the proposed definition for “qualified health plan” at 45 CFR 145.210 since the term is not used in the regulation text.

Some commenters requested clarification of the terms “participants” and “beneficiaries” because the proposed rules' definitions of these terms included individuals who may become eligible for a plan or coverage, and as the proposed rules envisioned personalized feedback to “participants” and “enrollees” it would be impossible to provide such information to an individual not currently enrolled in a plan or coverage. The Departments agree. However, instead of modifying existing, applicable definitions for “participants” and “beneficiaries,” the final rules, at 26 CFR 54.9815-2715A2, 29 CFR 2590.715-2715A2, and 45 CFR 147.211, and this preamble below clarify to whom these disclosures are required.

One commenter recommended the Departments define the term “in-network provider” in the final rules to clearly exclude device suppliers and manufacturers that, the commenter suggested, have not traditionally been considered in-network providers and whose price information is of limited value to consumers. The Departments do not agree that device suppliers and manufacturers should be excluded. Based on the numerous public comments from individuals who support broad price transparency for all covered items and services, the Departments are of the view that pricing information for all covered items and services should be available, including pricing for durable medical equipment (DME) or other medical devices that are supplied to a participant, beneficiary, or enrollee by a provider under a contract with a plan or issuer. To clarify, the final rules define in-network provider to mean any provider of items and services with which the plan or issuer, or a third-party for a plan or issuer, has a contract setting forth the terms under which a covered item or service may be provided to a participant, beneficiary, or enrollee. The Departments broadened this definition to clarify that even where a provider and a plan or issuer have a limited rate agreement of some kind, or a rate agreement covering DME, those providers should be considered in-network providers for purposes of the final rules. Additionally, if a plan or issuer enters into a contract or has such payment arrangements, then the pricing information for the specific covered items or services subject to that contract or payment arrangement are required to be disclosed as part of the internet self-service tool and machine-readable files.

The proposed regulations included a definition for “negotiated rate” to mean the amount a group health plan or health insurance issuer, or a third party on behalf of a plan or issuer, has contractually agreed to pay an in-network provider for covered items and services, pursuant to the terms of an agreement between the provider and the plan or issuer, or a third-party on behalf of a plan or issuer. Consistent with the proposed and final definitions of “items and services,” plans and issuers are required to disclose “negotiated rates” for encounters, procedures, medical tests, supplies, prescription drugs, durable medical equipment, and fees (including facility fees) to participants, beneficiaries, and enrollees through the internet-based self-service tool (and in paper form) as well as to the public through a machine-readable file. One commenter requested the Departments clarify the meaning of “negotiated rate” for prescription drugs, noting that they assumed the Departments expected plans and issuers to provide the drug price negotiated by a PBM on behalf of the plan. Another commenter asserted that the “negotiated rate” of prescription drugs for disclosure should be the price patients will see at the point-of-sale, meaning the undiscounted price of the drug, plus dispensing fees. Conversely, another commenter stated that dispensing fees are not paid by enrollees or used in determining cost-sharing liability. Other commenters suggested that the Departments grant plans and issuers flexibility in determining the appropriate rate for disclosure, as plans and issuers use a variety of different benchmarks, such as the Average Wholesale Price (AWP), or Wholesale Acquisition Cost (WAC) which may be considered as the “negotiated rate” for the purpose of determining cost-sharing liability under the plan or coverage.

In the final rules, the Departments have revised the definition of “negotiated rate” to mean the amount a plan or issuer has contractually agreed to pay for a covered item or service, whether directly or indirectly through a third party administrator (TPA) or PBM, to an in-network provider, including an in-network pharmacy or other prescription drug dispenser, for covered items or services. The final rules adopt the proposed definition with two key modifications. First, the term “third party” from the proposed definition is expanded in the final rules to explicitly refer to “third-party administrator or pharmacy benefit manager.” Second, the final definition of “negotiated rate” specifically notes that the term in-network provider includes an in-network pharmacy or other prescription drug dispenser. The purpose of these modifications is to confirm the commenter's inference that in the case of prescription drugs, the plan or issuer should include the price negotiated for that plan or issuer by a PBM. Furthermore, the “negotiated rate” in the final rules is intended to be broad enough to account for different plan

designs and benchmarks for determining negotiated rates.

The final rules also add definitions for the following terms that were not included in the proposed regulations: “billed charge,” “copayment assistance,” “derived amount,” “historic net price,” “national drug code,” and “underlying fee schedule.” The addition of these definitions is discussed later in this preamble.

One commenter noted that the Departments have proposed definitions for “accumulated amounts,” “cost-sharing liability,” and “cost-sharing information” that are unique to the proposed rules and, in some cases, differ from definitions of similar terms used in other related regulations. In particular, this commenter recommended that all definitions should explicitly recognize that cost sharing can be paid by or on behalf of an enrollee, participant, or beneficiary, since that is how cost sharing is defined by HHS regulation. The commenter also requested that the Departments clarify the proposed definition of “accumulated amounts” and suggested revising the definition to state clearly that accumulated amounts are the “amount of financial responsibility a participant, beneficiary, or enrollee has incurred, whether satisfied by or on behalf of the participant, beneficiary, or enrollee. . . .”

The Departments recognize that cost sharing may be paid by a third-party on behalf of an enrollee, participant, or beneficiary. However, the Departments are of the view that some plans and issuers do not count cost-sharing liability payments made by a third-party towards a participant's, beneficiary's, or enrollee's accumulated amounts, and modifying the definitions as suggested by the commenter could cause confusion in the context of the final rules.

The Departments have added disclosure requirements that are discussed in detail elsewhere in this preamble to address this concern. The definitions being finalized also include non-substantive editorial changes from the proposed regulations for readability to the following terms; “accumulated amounts,” “billing code,” “bundled payment arrangement,” “cost-sharing liability,” “cost-sharing information,” “covered items or services,” “item or services,” and “out-of-network allowed amount.”

The definitions identified as new or substantively modified in this section, as well as those that are being finalized as proposed, are discussed further in relation to the requirements of 26 CFR 54.9815-2715A2, 29 CFR 2590.715-2715A2, and 45 CFR 147.211 and 26 CFR 54.9815-2715A3, 29 CFR 2590.715-2715A3, and 45 CFR 147.212 throughout this preamble.

B. Requirements for Disclosing Cost-Sharing Information to Participants, Beneficiaries, and Enrollees

The final rules are intended to enable participants, beneficiaries, and enrollees to obtain an estimate of their potential cost-sharing liability for covered items and services they might receive from a particular health care provider, consistent with the requirements of section 2715A of the PHS Act and section 1311(e)(3)(C) of P

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