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New Rules Aim for Hospital, Insurer Transparency

December 5, 2019 at 1:37 am

hospital bill online

The Trump administration on Nov. 15 announced two rules that would require more transparency in hospital pricing and health insurance out-of-pocket costs for enrollees.

The final rule on hospital pricing will require hospitals to publish their standard fees both on-demand and online starting Jan. 1, 2021, as well as the rates they negotiate with insurers. The administration also proposed rules that would require health insurers to provide their enrollees instant, online access to an estimate of their out-of-pocket costs for various services.

The latter are just proposed rules and will have to go through a comment period before final rules can be issued.

The two sets of rules are part of the Trump administration’s efforts to bring more transparency into the health care and insurance industry. They are in response to more and more consumers’ stories of serious financial strife after receiving surprise bills from hospitals and other providers, particularly if they had to go to a non-network physician or hospital.

Both rules could benefit health plan enrollees by giving them more information on hospital services, particularly if they are in high-deductible plans and can shop around for a future procedure, such as a mammogram or knee replacement surgery.

Hospital pricing transparency

In the original proposed regulations, the administration had proposed the effective date of the hospital price transparency rule as Jan. 1, 2020, but health providers said they would need more time to ramp up.

The new rules, effective Jan. 1, 2021, will require hospitals to publish in a consumer-friendly manner their standard charges price list of at least 300 “shoppable services,” meaning services that can be scheduled in advance, such as a CAT scan or hip replacement surgery.

The list must include 70 services or procedures that are preselected by the Centers for Medicare and Medicaid Services. Hospitals will have to disclose what they’d be willing to accept if the patient pays cash. The information will be updated every year.

Hospitals will be required to publish their charges in a format that can be read online. This rule could pave the way for apps that patients can use to compare services between hospital systems.

Under the rule, hospitals will have to disclose the rates they negotiate with third party payers.

The new rules face some uncertainty, however. The health care trade press has reported that a number of trade groups such as the American Hospital Association and the Federation of American Hospitals, among others, announced in a joint statement that they would sue the government, alleging that the new rules exceed the bounds of the CMS’s authority.

Out-of-pocket transparency

The proposed rule would require insurers to provide their health plan enrollees with instant online access to estimates of their out-of-pocket costs.

The regulations would require health insurers to create online tools their policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and products, such as:

  • Hospitalization
  • Doctor visits
  • Lab tests
  • Surgeries
  • Pharmaceuticals.

They would also be required to disclose on a public website negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital.

The proposed regs would also let insurers share cost savings with their enrollees if the individuals shop around for services that cost less than at other providers. This would give enrollees an incentive to shop around.

This proposed rule is also certain to face push-back from the insurance industry.

These out-of-pocket transparency regs are just proposals, so they have to go through the standard rule-making procedure of soliciting public comments before eventually issuing the final rules.

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Reference Pricing Can Reduce Medical Outlays, Costs

November 26, 2019 at 7:57 pm

patient hospitalIn an effort to coax health plan participants to use price-shopping behavior when deciding on where to have a procedure, more insurers are starting to roll out a system known as “reference pricing.”

With reference pricing, the health insurer imposes a limit on the amount it will pay for a particular procedure – a limit that is reasonable and allows access to care for patients. The price is usually a
median or average price in the local market.

When a health plan participant selects a provider that charges less than the cap, they will receive the standard coverage with little or no cost-sharing.

But, if they decide to use a provider that charges more than the cap, the participant will have to pay the entire difference out of pocket. These excess payments do not count towards the patient’s deductible or the annual out-of-pocket maximum.

Use of reference-based pricing rose from 11% to 13% among large employers in 2015, according to a study by Mercer Benefits.

Proponents of reference pricing say that it can reduce health care spending because it encourages people to shop for better deals and, eventually, encourages hospitals to lower their prices.

Organizations that have implemented reference pricing report lower outlays for procedures.

CalPERS, the pension fund for California state employees, in 2011 began reference pricing and asked its preferred provider organization, Anthem Blue Cross, to research the average costs for hip and knee replacements among hospitals and develop a program that ensures sufficient coverage by those
hospitals that meet a certain cost threshold.

The program set a maximum of $30,000 for these procedures.

The number of Anthem-CalPERS enrollees who chose a designated high-value hospital for their knee or hip replacement surgery increased from 50% between 2008 and 2010 to 64% in the first nine months of 2012, compared with little to no change among Anthem policyholders not enrolled in CalPERS.

Also, the average price for such procedures fell from more than $42,000 before the initiative to $27,148 in the first nine months of 2012.

The changes resulted in savings of about $5.5 million during the first two years of the reference pricing initiative, and the average cost to CalPERS for the procedures fell by 26%.

CalPERS says that after it implemented reference pricing, some of the hospitals that charged more than the payment limit significantly reduced their prices for the procedure.

These price reductions have increased; the number of California hospitals charging prices below the CalPERS $30,000 reference limit rose from 46 in 2011 to 72 in 2015.

Limits of reference pricing

To be clear, reference pricing cannot be applied to all procedures.

It should only be used for procedures or products that health plan enrollees can shop for, and when they have time to compare choices based on price and quality. This can include:

  • Scheduled procedures like the aforementioned knee replacements
  • Ambulatory surgical procedures
  • Lab tests
  • Imaging
  • Pharmaceuticals

What it should not be used for:

  • Emergency procedures
  • Unique components of care that the patient can’t select independently, like a lab test during a visit to a doctor
  • Complex medical conditions

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