As you know, both the Affordable Care Act from 2010 (ACA) and the Consolidated Appropriations Act of 2020 (CAA, 2021) contain various transparency rules and requirements upon group health plans. Some of the rules are similar; others vary and have different effective dates.
Thankfully, the Departments of Labor, Treasury, and Health and Human Services (collectively, the Departments) issued FAQ Part 49 to reconcile some of these issues.
In November of 2020, the Departments promulgated numerous rules to create greater transparency in health coverage requirements as required under the ACA. The rules disseminate price and benefit information directly to consumers and to the public, enabling consumers to evaluate health care options and to make cost-conscious decisions. The Departments rely on the legal authority provided in 2715A of the Public Health Service Act (42 USCA § 300gg-15) and section 1311(e) of the Patient Protection and Affordable Care Act (42 USCA 18031(e)(3)). While the rules went into effect January 11, 2021, the Departments were set to begin enforcement January 1, 2022.
Meanwhile, on December 27, 2020, the Further Consolidated Appropriations Act, 2021 (PL 116-260) (CAA, 2021) was signed into law. The CAA, 2021, in part, provides protections against surprise billings and also contains numerous transparency rules. These rules are similar to the ACA transparency in coverage rules, but have varying terms and effective dates.
The Departments have decided to delay enforcement of certain provisions to reconcile contradictions between the ACA’s transparency in coverage rules and those provided under CAA, 2021. See FAQ Part 49.
Below is a summary of the Departments’ guidance as well as new dates by which plans and issuers must comply.
Machine Readable Files
As it pertains to public disclosure, the ACA rules require that certain non-grandfathered group health plans and health insurance issuers offering non-grandfathered coverage in the group and individual markets disclose in three machine readable files on a public website:
- their in-network provider rates for covered items and services (enforcement begins July 1st, 2022);
- out-of-network allowed amounts and billed charges for covered items and services (enforcement begins July 1st, 2022); and
- negotiated rates and historical net prices for covered prescription drugs (enforcement deferred until further notice).
See 85 FR 72158 (Nov. 12, 2020). Machine-readable files are defined as: a digital representation of data or information in a file that can be imported or read by a computer system for further processing without human intervention, while ensuring no semantic meaning is lost. The files must be accessible free of charge, without having to establish a user account, password, or other credentials, and without having to submit any personal identifying information such as a name, email address, or telephone number. Plans and issuers have flexibility to publish the files in the locations of their choosing based upon their superior knowledge of their website traffic and the places on their website where the machine-readable files would be readily accessible by intended users.
Generally, the machine-readable files must contain the following content elements:
FOR ALL FILES
– name and identifier for each coverage option (Ex: EIN or HIOS ID)
– billing codes or other common payer code identifiers (Ex: a CPT code, HCPCS code, DRG or NDC)
– national provider identifiers (NPI), tax identifier numbers (TIN) and place of service codes
FOR IN-NETWORK RATE FILES
– rates that apply to each item or service that is associated with the last date of the contract term or the contract expiration date for each provider as identified by NPI, TIN, and Place of Service Code
– For contractual arrangements under which a plan or issuer agrees to pay an in-network provider a percentage of billed charges and is not able to assign a dollar amount to an item or service prior to a bill being generated, plans and issuers may report a percentage number, in lieu of a dollar amount.
– In situations in which alternative reimbursement arrangements are not supported by the schema, or in instances where the contractual arrangement requires the submission of additional information to describe the nature of the negotiated rate, plans and issuers may disclose in an open text field a description of the formula, variables, methodology, or other information necessary to understand the arrangement.
FOR ALLOWED AMOUNT FILES
– historical out-of-network allowed amounts for covered items and services
FOR PRESCRIPTION DRUG FILES
– negotiated rates for prescription drugs (rates for prescription drugs should not be included in the other two files)
– historical net prices of prescription drugs (the retrospective average amount a plan or issuer paid for a prescription drug, inclusive of any reasonably allocated rebates, discounts, chargebacks, fees, and any additional price concessions received by the plan or issuer with respect to the prescription drug)
PRACTICE NOTE: While the ACA rules do not apply to grandfathered plans, the CAA, 2021 transparency rules do!
Price Comparison Tools
Plans and issuers are required to develop price comparison information for a list of health-related items and services and make it available to plan participants, beneficiaries, and enrollees through an internet-based self-service tool, and in paper form upon request. See 26 CFR 54.9815-2715A2(b), 29 CFR 2590.715-2715A2(b), and 45 CFR 147.211(b).
- Departments have provided a list of 500 items and services that plans and insurers must include in their self-service tools. Enforcement will begin January 1, 2023. A list of the items can be found in table 1 of the preamble of the final rule.
- By January 1, 2024, plans and insurers must include the price information for all items and services in their self-service tool.
To fulfill the requirements of the cost-sharing rules, several items of content are required, including: an estimate of the cost sharing liability; a participant’s, beneficiary’s, or enrollee’s accumulated amount; in net-work rates (including negotiated rates, underlying fee schedule rates and prescription drug rates); out of network allowed amounts; items and services content list; notice of prerequisites of coverage; and a disclosure notice.
PRACTICE NOTE: The CAA, 2021 added price comparison tool requirements as well (by telephone or Internet website) of the plan or issuer with respect to plan year, geographic region and participating providers to compare the amount of cost-sharing required for a specific item/service. See PHSA 2799A-4; IRC 8919; ERISA 719.
Insurance Identification Cards
Plans and issuers are required to include applicable deductibles, applicable out-of-pocket maximum limitations, and telephone numbers and web addresses for individuals to receive consumer assistance on plan ID cards issued to participants, beneficiaries and enrollees. This requirement has been in effect since January 1st, 2022. The Departments have not issued further guidance on an enforcement date but expresses that plans and issuers are expected to implement the ID card requirements using a good faith, reasonable interpretation of the law. See Code section 9816(e), ERISA section 716(e), and PHS Act section 2799A–1(e), as added by section 107 of division BB of the CAA.
Good Faith Estimates
Providers and facilities, upon an individual’s request or scheduling of items or services, are required to inquire if the individual is enrolled in a health plan or health insurance coverage, and to provide a notification of the good faith estimate of the expected charges for furnishing the scheduled item or service and any items or services reasonably expected to be provided in conjunction with those items and services, including those provided by another provider or facility, with the expected billing and diagnostic codes for these items and services. See PHS Act section 2799B–6, as added by section 112 of division BB of the CAA.
Providers and facilities must provide this good-faith estimate information to the plans of individuals who have coverage. And for those who don’t have coverage or who don’t wish to make an insurance claim with their coverage, this information must be provided to the individual. As of now, enforcement is deferred.
Advanced Explanation Of Benefits
When plans and issuers receive a good faith estimate from a provider or facility regarding a covered individual’s request or scheduling of an item or service, the plan or issuer must send the participant, beneficiary, or enrollee an advanced explanation of benefits. The explanation must contain:
- the network status of the provider or facility;
- the contracted rate for the item or service, or if the provider or facility is not a participating provider or facility, a description of how the individual can obtain information on providers and facilities that are participating;
- the good faith estimate received from the provider;
- a good faith estimate of the amount the plan or coverage is responsible for paying, and the amount of any cost-sharing for which the individual would be responsible for paying with respect to the good faith estimate received from the provider; and
- disclaimers indicating whether coverage is subject to any medical management techniques.
Note: The last content element for the explanation is a disclosure advising recipients that the information provided based on the good faith estimate is only an estimate of costs and that all items and services are subject to change. See Code section 9816(f), ERISA section 716(f), and PHS Act section 2799A-1(f), as added by section 111 of division BB of the CAA.
As of now, enforcement is deferred.
Prohibition on Gag Clauses on Price and Quality Information – CAA, 2021
The CAA, 2021 prohibits group health plans and issuers from entering into agreements with health care providers, networks or association of providers, TPAs, or other services providers which offer access to a network of providers if that agreement directly or indirectly restricts a group health plan or insurer from:
- Providing provider-specific cost or qualify of care to referring providers, the plan sponsor, participants or beneficiaries, or individual eligible to become participants or beneficiaries under the plan;
- Electronically accessing de-identified claims data, including financial information, provider information, service codes, or other data included in claim or encounter transactions; or
- Sharing such information or data with a business associate.
Group health plans must annually submit to the Secretary an attestation that such plan is in compliance with these rules.
However, in FAQ Part 49 Q/A-7, the Departments indicated that they will not be issuing regulations on this issue. Instead, plans and issuers are expected to implement these requirements using a good faith and reasonable interpretation of the statute. Additionally, the Departments to intend to issue guidance explain how plans should submit their attestation starting in 2022.
Accurate Provider Directory Information – CAA, 2021
The CAA, 2021 also added the requirements that plans must provide accurate provider directories and update them regularly. See new Code section 9820(a) an d(b), ERISA section 720(a) and (b), and PHSA section 2799A-5(a) and (b). Plans must respond to participant and beneficiary requests about provider network participation status. If a participant, beneficiary, or enrollee receives services or is furnished an item from an out-of-network provider but was incorrectly given information that the provider was in-network, only in-network levels can be charged by the plan and the plan must count these cost-sharing amounts toward any in-network deductible or in-network out-of-pocket maximum. This is effective for plan years beginning on or after January 1, 2022.
In FAQ Part 49, Q/A-8, the Departments indicate that they will not be providing regulations prior to the effective date. Plans must use good faith efforts to comply. Plans will not be penalized if the plan sponsors limit cost-sharing to in-network amounts if wrong information is given as above.
Balance Billing Disclosures – CAA, 2021
Code section 9820(c), ERISA section 720(c), and PHS Act section 2799A-5(c) were added by CAA, 2021 and require plans to make certain disclosures regarding balance billing protections to participants, beneficiaries, and enrollees. In general, plans must make publicly available, post on a public website of the plan, and include on each Explanation of Benefits information regarding the No Surprise Billing law including relevant state laws and contact information for state and federal agencies in case of violations. The Departments issued a model notice to assist with the disclosure requirements. These rules are effective for plan years beginning on or after January 1, 2022.
FAQ Part 49 Q/A-9 similarly states that regulations were not to be issued prior to the effective date and plans must use a good faith, reasonable interpretation of the law.
Continuity of Care – CAA, 2021
Continuity of care protections are set forth in CAA, 2021. These ensure continuity of care in cases of an individual with benefits under a group health plan when termination of certain contractual relationships result in change in provider or facility network status. See Code section 9818, ERISA section 718, and PHSA sections 2799A-3 and 2799B-8.
FAQ Part 49, Q/A-10 states that while these requirements are also effective January 1, 2022, regulations won’t be issued until later. Such guidance will include prospective applicability date to afford plans and other entities with a reasonable amount of time to comply with any new requirements. Plans are again expected to use a good faith, reasonable interpretation of the law.
Grandfathered Health Plans – CAA, 2021
While certain provisions of the ACA are not applicable to grandfathered health plans, the CAA, 2021 does not include such an exception. Therefore, while transparency rules under the ACA were not applicable, grandfathered plans must be prepared to comply under the CAA. See FAQ Part 49, Q/A-11.
Prescription Drug Pricing – CAA, 2021
Under the CAA, 2021, Plan sponsors must submit numerous information regarding prescription drug expenses to Departments including:
- Plan year beginning and ending dates;
- Enrollment census information, including the number of enrollees and each state where the plan is offered; and
- Specific information regarding the 50 most frequently dispensed brand drugs (and the total number of paid claims for each), the 50 most expensive drugs annually (and the annual amount spent for each), and the 50 drugs with the greatest yearly increase in expense from one plan year to the next (and the change in cost for each drug per year).
Plans must also report other information, including the average monthly premiums, prescription expenditures and impact of drug manufacturer rebates on expenditures.
In FAQ Part 49, Q/A-12, the Departments state that the intend to issue regulations to address these pharmacy benefit and drug cost reporting requirements. Until such guidance is issued, the Departments strongly encourage plans to start working to ensure they are in a position to report the 2020 and 2021 plan year data by December 27, 2022.
PRACTICE TIPS AND TAKEAWAYS…
Undeniably, plan sponsors will not have the detailed information to comply and must rely on their insurers and TPAs. However, this regulatory guidance makes clear thatplan sponsors are ultimately responsible and must ensure the transparency rules are followed!
The transparency rules do set forth protections for insured arrangements when the group health plan requires the insurer to provide such information via a written agreement. If insurer fails to comply, then the insurer violates transparency disclosure requirements, not the group health plan.
It’s a bit more difficult for self-funded arrangements. The group health plan here too can enter into a written agreement requiring the TPA to provide the information. However, the plan is still responsible if the TPA fails to comply.Therefore, it is imperative to have an indemnification agreement with the TPA.
Plans failing to comply with the transparency rules could be subject to an enforcement action under ERISA and to the $100 per day excise tax penalty under Section 4980D of the Code (which applies to any failure to comply with the ACA’s market reforms).
Therefore, plan sponsors should immediately ensure their insurers and/or TPAs are prepared to comply with these rules and should enter into written agreements with each, as well as add indemnification language to protect themselves from potential penalties due to noncompliance.
This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.
Lauren D. Harrington is an associate attorney at Fraser Trebilcock focusing on Employment Law. You can reach her at 517.377.0874, or email her at firstname.lastname@example.org.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or email@example.com.