Transparency in Coverage Cost-Sharing Disclosures

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Overview 

The Affordable Care Act requires “transparency in coverage” cost-sharing disclosures to be made by group health care plans and health insurers. To this end, regulations issued jointly by the IRS, DOL, and HHS require most group health plans and insurers in the group and individual markets to disclose in-network provider negotiated rates, historical out-of-network allowed amounts for providers, and in-network negotiated rates and historical net prices for all covered prescription drugs.    

These disclosures must be made through three machine-readable files posted on an internet website in a standardized format and searchable in order to provide full public access to the information.  

The regulations apply as of plan years beginning January 1, 2022, although regulatory enforcement has been deferred until July 1, 2022. 

Who is Subject to the Transparency in Coverage Disclosure Requirement? 

The disclosure requirements apply to most traditional group health plans, including both insured and self-insured plans. The disclosure requirements do not apply to grandfathered plans, account-based plans, excepted benefits, or short term, limited duration insurance.  

To prevent unnecessary duplication of efforts, the regulation includes a special rule whereby a group health plan satisfies the disclosure requirement if the carrier offering the coverage is required to provide the information pursuant to a written agreement between the plan sponsor and the insurer.  

A self-insured plan may agree with a TPA or PBM to assist in fulfilling the disclosure requirement but must monitor the other party to ensure compliance.  

Content Requirements 

The transparency in coverage regulations require plans and insurers to make public disclosure of (a) applicable rates with in-network providers; (b) data outlining the different billed charges and allowed amounts a plan or insurer has paid for covered items or services furnished by out-of-network providers (including prescription drugs); and (c) negotiated rates and historical net prices for prescription drugs furnished by in-network providers.  

The first posted file must show negotiated rates for all covered items and services between the plan and in-network providers. The second file must show both the historical payments to, and billed charges from, out-of-network providers. The third file will detail the in-network negotiated rates and historical net prices for all covered prescription drugs by plan at the pharmacy-location level.  

The information required under this provision must be furnished in “plain language,” which the ACA defines to mean – “Language 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.”  

Public Disclosures – Delivery Methods and Timing 

The In-Network Rate file, Allowed Amounts file, and Prescription Drug file are required to be disclosed as “machine readable files.”  

The machine-readable 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 or email address.   

A plan must update monthly the information required to be included in each machine-readable file and must clearly indicate the date the files were most recently updated. 

Individual Disclosures – Content Requirement  

In addition to the public disclosure requirements, individualized cost-sharing disclosures are required. More specifically, the transparency in coverage regulations 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. Accordingly, the rules require group health plans and insurers to disclose certain information relevant to a determination of a consumer’s out-of-pocket costs for a particular healthcare item or service in accordance with specific method and format requirements, upon the request of a participant, beneficiary, or enrollee (or his or her authorized representative). 

The cost-sharing information is required to be disclosed to the participant, beneficiary, or enrollee in “plain language.” The regulations define plain language to mean written and presented in a manner calculated to be understood by the average participant, beneficiary, or enrollee. 

Individual Disclosures – Delivery Methods and Timing 

Health plans and insurers subject to the transparency in coverage requirements described above must provide certain cost-sharing information in a timely manner on request by an individual. The regulations elaborate that group health plans and insurers must make the cost-sharing information available to participants, beneficiaries, and enrollees (or their authorized representatives) in two ways: (a) Through a self-service tool that meets certain standards and is available on an internet website; and (b) in paper form. 

Plan Sponsor Compliance Steps 

The transparency in coverage cost-sharing disclosure requirements are imposed upon both group health care plans and insurers. In most cases, an employer plan sponsor will not have access to (and therefore cannot provide) the detailed claims information required under either the public or the individual disclosure requirement. Additionally, there may be overlapping disclosure obligations under the Consolidated Appropriations Act, 2021 transparency provisions. As a result, careful review of the requirements and delegation among service providers will be necessary to promptly achieve the requisite level of compliance. 

The following steps should help guide plan sponsor efforts:

1. Gain a basic understanding of what the transparency in coverage provisions require and how they work. 
2. Inventory health plans and determine which are subject to the transparency in coverage provisions. At least for now, compliance is not required for excepted benefits (vision, dental, EAPs, health FSAs, fixed indemnity hospital, and specified disease coverage), grandfathered plans, stand-alone retiree medical plans, or certain account-based plans. 
3. Assess which aspects of the transparency in coverage provisions will be assign to insurers and TPAs and which (if any) will be address in-house. Almost no employer plan sponsor will have access to the cost information required to satisfy the obligations. Moreover, even with access, maintaining the required communication channels will undoubtedly prove to be a burdensome task. Early cooperation with insurers and TPAs (including PBMs) is a necessity. 
4. Carefully document which parties are responsible for compliance with the transparency in coverage provisions. An agreement with the insurer is required to absolve the plan sponsor from liability for insured coverage. For self-insured plans, contracts with TPAs and PBMs should be revised to address transparency in coverage compliance. Appropriate compliance representations and warranties and indemnification provisions should also be sought. 
5. Federal agencies will likely look to determine whether a health plan has assessed its compliance obligations and have prepared a compliance plan. Document all activities in a compliance plan that can demonstrate good faith efforts and reasonable diligence to comply with the disclosure obligations. 
6. Be aware that insurers and TPAs will may attempt to pass along their costs of compliance with transparency in coverage obligations to their client plans.

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.