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Transparency In Coverage Final Rule (TiC)

Welcome to payers joining providers in the price transparency compliance game. According to the Transparency in Coverage Final Rule (TiC), effective July 1, 2022, they must provide two unique publicly available machine-readable files (MRFs).

These MRFs must show in-network negotiated rates, out-of-network historical payments and charges, and in-network prescription drug rates and historical net prices. The prescription drug MRF has been delayed, but the other two MRFs are available and must be updated monthly.

In 2023, payers must provide members with an internet-based self-service tool (we call these Patient Estimate Tools (PET)) that calculates personalized out-of-pocket costs. The PET must display the underlying negotiated rates for an initial list of 500 shoppable services. In 2024, this tool must expand to include all covered items and services, including prescription drugs.

Spurred by the United States Department of Health and Human Services (HHS), Labor, and Treasury in October 2020, TiC requires most group health plans and health insurance issuers to disclose price and cost-sharing information to the public. The rule involved three phases, the first started on 7/1/2022, and the next two started on the first of subsequent years. Grandfathered plans, aka plans that were in existence as of 3/23/2010 and have stayed fundamentally the same, regardless of changes made through the Affordable Care Act (ACA) related to pre-existing conditions and other policy terms, are not included. This is because Grandfathered plans are not required to provide as thorough coverage and protections as the plans outlined in the ACA.

Phase One

For Phase One, required to be made public for plan years that begin January 1, 2022, or later, most non-grandfathered group health plan or insurance issuers offering coverage in the individual and group markets will be required to publicly post three machine-readable files that convey detailed pricing information:

  • File 1: Negotiated rates for all covered items and services between the plan and in-network providers
  • File 2: Billed charges from and historical patients to out-of-network providers 
  • File 3: In-network negotiated rates in addition to historical net prices for all prescription drugs covered by the plan at the granularity of a pharmacy location
    • As noted above, this prescription drugs file requirement has been indefinitely delayed

Phase 2

For Phase Two, required to be made public for plan years that begin 1/1/2023 or later, most non-grandfathered group health plan or insurance issuers offering coverage in the individual and group markets must provide a web-based self-service tool that calculates out-of-pocket cost information in addition to conveying underlying negotiated rates for an initial list of 500 shoppable services.

The intention is to provide a preliminary cost estimate before receiving services. Essentially, it provides what you would usually only receive after in the form of an Explanation Of Benefits (EOB). This must be made available to plan participants, beneficiaries, and enrollees, who may also request the estimates and rates in paper form.

Phase 3

Phrase 3, effective 1/1/2024, requires the same plans to expand their self-service tool to all covered items and services.

With the Transparency in Coverage final rule, HHS intends to provide consumers with timely and accurate estimates of cost-sharing liability so that they can both understand their expenses and shop and compare services before receiving care. 

Changes From Proposed to Final Rule

The changes between a proposed and final rule always yield interesting information. There were a few significant changes between the proposed and final Transparency in Coverage Final Rule.

  1. Initial estimates of cost for the added administrative burden to create the online self-service tool and machine-readable files were in the hundreds of millions – up to $870 million. In the final rule, that cost has been elevated from $5.7 billion to $7.9 billion.
  2. The proposed rule invited comments regarding whether to incorporate quality reporting data and/or require the development of an API. The United States Department of Health and Human Services (HHS) declined to require others, but will continue to evaluate both promoting access to quality data and an API.

File Formatting

The Hospital Price Transparency Final Rule included some relatively loose guidance regarding file types and formatting. As Turquoise Health has noted, many providers nonetheless ventured beyond the guardrails.

For TiC, guidance from CMS has been augmented. It has published a GitHub repository with more detailed file specifications and example files. The  provider rule required machine-readable files and suggested JSON, XML, or CSV. The coverage rule specifically excludes XLS/XLSX files as not meeting the definition due to being proprietary Microsoft file formats. It has specified dates should be in YYYY-MM-DD format (ISO 8601).

The file naming conventions are also well-covered on the GitHub repo. 

Borrowing from their excellent documentation (as of 4/12/2021):

Required Files

There are three required flat files associated with Transparency in Coverage:

  • In-Network Negotiated Rates
  • Out-Of-Network Allowed Amounts
  • In-network negotiated rates in addition to historical net prices for all prescription drugs covered by the plan at the granularity of a pharmacy location*

*This prescription drugs file requirement has been indefinitely delayed

In-Network Negotiated Rates File Under the finalized rules, a plan or issuer must disclose in-network provider negotiated rates for all items and services through a machine-readable file.

Out-Of-Network Allowed Amounts File Under the finalized rules, a plan or issuer must disclose certain data elements to the public, including the billed and allowed amounts for out-of-network providers, through a machine-readable file.

In-Network Prescription Drugs File – Under the finalized rules, a plan or issuer must disclose the in-network prescription drug’s historical net price and negotiated rate through a machine-readable file.

The associated names for those files are:

  • in-network-rates
  • allowed-amounts

File Naming Convention

The following is the required naming standard for each file: <YYYY-MM-DD>_<payer or issuer name>_<plan name>_<file type name>.json For payer or issuer’s names and plan names that have spaces (i.e. “healthplan 100”), those spaces would be replaced with dashes –

For example, the following would be the required naming for CMS:

  • 2020-01-05_cms_medicare_in-network-rates.json
  • 2020-01-05_cms_medicare_allowed-amounts.json
  • 2020-01-05_cms_medicare_prescription-drugs.json

An example of a plan named healthcare 100 with an issuer’s name issuer abc, the following would be the naming output:

  • 2020-01-05_issuer-abc_healthcare-100_in-network-rates.json
  • 2020-01-05_issuer-abc_healthcare-100_allowed-amounts.json
  • 2020-01-05_issuer-abc_healthcare-100_prescription-drugs.json

Grandfathered Plans

“Grandfathered” health plans are individual or job-based health insurance policies purchased on or prior to 3/23/2010. These plans were sold by insurance companies or agents and not through the ACA Marketplace. Thus, they may not include all the ACA protections and rights. Some ACA provisions apply – bans on preexisting conditions and lifetime and annual dollar limits in addition to covering dependents to age 26. Other provisions, such as covering essential health benefits or preventive services without cost-sharing, do not apply to “grandfathered” plans.

Plans can forfeit “grandfathered” designation if significant changes that reduce benefits or increase costs are made. A health plan has to make public whether or not it considers itself to fit the status.

According to KFF, as of 2020, approximately 19 million people are enrolled in or offered self-funded grandfathered plans, and an additional 4.5 million people are enrolled in state- or local-government grandfathered plans.

More here (HHS) and here (HHS).

Medical Loss Ratio (MLR) Rebates

The Medical Loss Ratio (MLR) is the percentage of premium payments that a health plan spends on claims and quality improvements versus administrative costs. The passage of the Affordable Care Act included a requirement that individual and small-group insurance carriers must spend at least 80% of premiums on medical expenses. For large-group plans and Medicare Advantage plans, it’s 85%. Profits and other expenses, largely administrative, cannot make up more than 20% or 15%, respectively, of premiums paid by members. If the administrative expenses exceed those amounts, the insurer must provide rebates to its members for the excess amount. From 2012 to 2020, insurers returned almost $8 billion of excess premiums.

With the Transparency in Coverage final rule, which comes with an anticipated high administrative burden, insurers can claim credit towards their MLR for “shared savings” when an enrollee selects a lower-cost, higher-value provider. The Final Rule expects insurers and consumers to save $154 million per year due to lower medical costs from the effort.

Shared Savings Credit

In an effort to recognize the increased administrative burden and expenses brought about by the rule, the United States Department of Health and Human Services (HHS) will allow insurers to take credit for the “shared savings” by adding them to the numerator of the MLR calculation. So, for a bad example, if they paid $85 million for care and quality improvement, $15 million of administrative expenses, and can claim $1 million in savings from price transparency lower cost/higher value programs, their MLR would be 86% (85 + 1/100) instead of 85% (85/100). Thus, it’s likely fewer MLR rebates will be paid, as the claiming of the savings will raise reported MLRs, reducing required rebates.