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New rule requires health plans to publicly disclose pricing for medical services

by John R. Fischer, Senior Reporter | November 03, 2020
Health plans must provide consumers with an online shopping tool that enables them to compare rates negotiated between plans and providers, starting in 2023
Most private health plans will be required to publicly disclose pricing and cost-share information for medical services, announced CMS this week in a final rule regarding price transparency in healthcare.

Starting January 1, 2023, health plans must issue an online shopping tool that allows individuals to view the rates between their provider and plan and personalized estimates of their out-of-pocket cost for 500 of the most shoppable items and services. The rule is part of an executive order made by President Donald Trump and aligns with a similar form of legislation that will require providers to publicly disclose pricing and rates negotiated between them and insurance companies, starting on January 1, 2021.

“Hidden healthcare prices have produced a dysfunctional system that serves special interests but leaves patients out in the cold,” said CMS administrator Seema Verma in a statement. “Price transparency puts patients in control and supports competition on the basis of cost and quality, which can rein in the high cost of care. CMS’ action represents perhaps the most consequential healthcare reform in the last several decades.”

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Under the rule, health plans and health insurance issuers in individual and group markets must provide personalized information on enrollee cost-sharing in an easy-to-understand manner, and disclose the rates they pay healthcare providers for specific services. Following the launch of their online tools, health plans must show the costs for remaining procedures, drugs, durable medical equipment and any other item or service needed, starting on January 1, 2024.

In addition, plans are required to make publicly available standardized data files by January 1, 2022 and update them at least once a year. Access to this data will enable the development of private sector solutions to help patients make decisions about their care and help people who are uninsured or shopping for health insurance understand the pricing of items and services under health insurance coverage.

Matt Fiedler, a fellow at Brookings Institution for USC-Brookings Schaeffer Initiative for Health Policy, believes the rule is unlikely to alter competition among insurance providers or have a big impact on where consumers seek care.

“Many insurers already offer price shopping tools to their enrollees, so this is not fundamentally new, and these tools are not always used when they are available,” he told HCB News. “The available evidence suggests that the rule might cause some patients to seek out modestly lower priced providers, but I would expect the effects to be reasonably small in the aggregate.”

He asserts instead that the biggest impacts of the rule will be from its requirement that insurers publish prices they have negotiated with health care providers. “In principle, this type of disclosure could directly affect the prices providers and insurers negotiate. I suspect that those effects will be reasonably small, but there is considerable uncertainty on that point, and one can even spin out scenarios where price disclosure increases prices.”

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