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Finalized Price Transparency Rules for Insurers

Happy post-election day! Time to take a breather, right?

We are living in uncertain and contentious times. Actually, this is a bit of an understatement.

With Tuesday’s election, in addition to another erupting episode of the COVID-19 pandemic and see-saw economic news, one pertinent healthcare story was relegated to the third page of last week’s Wall Street Journal.

The story? “Health Insurers Face Price Transparency Rule.”

As directed by President Trump’s executive order in June 2019, the Department of Health and Human Services (HHS), Department of Labor, and the Department of Treasury issued on October 29, 2020, the final rule for American consumers to have healthcare price transparency when shopping for hundreds of ‘shoppable services’ beginning on or after January 1, 2023. Insurance companies and self-funded employer health plans will be required to post in-network and out-of-network rates negotiated with providers, in addition to developing online price transparency tools to help assist patients with cost-sharing information.

Under the final rule, by January 1, 2023, insurers and employer payers will need to make available a list of 500 shoppable services through an online tool. And one year later, all other items and services must be added to those self-serve tools. Negotiated rates will also need to be machine-readable files showing rates for in-network providers and historical payments and charges to out-of-network providers.

This rule affects most non-grandfathered group health plans or health insurance issuers offering non-grandfathered health insurance coverage in the individual and group markets. A non-grandfathered health plan is one that was put in place after March 23, 2010, the date the Affordable Care Act (ACA) became law. A good primer on grandfathered vs. non-grandfathered health plans, can be found here.

The recent rule affects insurance companies, while this same executive order generated a final rule in November 2019 that requires hospitals to disclose the rates they negotiate with insurers and post the payer-specific negotiated rates online in a searchable and consumer-friendly manner for 300 of the most popular services. Hospitals are required to comply this coming January 1. The final rules on hospitals appeared to have survived challenges and lawsuits by hospitals.

Executive Orders

Developing healthcare policy via executive orders is akin to building a house on sand, it can prove to be short-lived. Once issued, executive orders remain in force until they are canceled, revoked, adjudicated unlawful or simply set to expire. It is typical, for example, that a new president reviews in-force executive orders while in the first few weeks in office. In the short term, executive orders may possibly be effective, however, when one-fifth of the economy evolves around healthcare, more substantive approaches are necessary to ensure long-term certainties.

Will Transparent Pricing Work in Healthcare?

Persuasive arguments have been made by hospitals, insurers and some economists that transparent medical prices will not change the fundamental problems baked into the existing healthcare system. After all, they argue that Americans seldom search for the cost of any given medical procedure, but rather, are most concerned that their desired doctor and hospital are in the health plan’s network of providers. They have even argued that price transparency “would confuse patients.” Advocates for price transparency claim otherwise.

Without question, seeking real medical prices is similar to searching for a needle in a haystack, and most people are disheartened with the process and eventually give up because the ‘system’ was not designed for ‘true’ payers to price and quality shop.

I will stand by what I wrote in a December 2019 blog on this topic:

“By itself, real prices made public will not solve the inherent problems that persist throughout the healthcare system, but price transparency is a good first-step to have. Clearly, it is not the sole remedy to a ‘system’ that requires massive incremental fixes. The push for healthcare ‘consumerism’ has been admittedly slow. However, it is likely that consumerism will find new legs due to third-party entrepreneurs and technology companies who will find disruptive ways to make pricing a relevant decision-making tool for many patients. All purchasers want the best value in the healthcare being purchased.”

The healthcare ‘system’ we have to date is doing what it was designed to do, but it’s time to reboot a system that desperately needs a new blueprint that accentuates intended consequences and minimizes costly (and sometimes deadly) adverse consequences.

For the record…

President Trump’s executive order for hospital price transparency does not at all suggest that he has an overall healthcare policy that would replace the Affordable Care Act. The fact is, he doesn’t appear to have a specific vision that addresses the holy trinity of healthcare: 1) coverage, 2) quality care, and 3) affordability. Platitude statements that his eventual healthcare plan will be “beautiful” does not cut it, and frankly is both disingenuous and empty. We need more, much more.

For price transparency to be meaningful in the future, providers will need to charge prices that will cover their costs. Additionally, providers will need to have a comprehensive understanding of how variable and fixed costs are allocated to the care they deliver, allowing them to make informed decisions on how to price their services to the more cost-conscious consumer.

With this ray of hope, try to enjoy your post-election life. And remember, stay safe!

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A Potential Game Changer – Making ‘Secretly-Negotiated’ Medical Prices Public

Have you ever had a clogged bathtub drain or toilet? Yep, me too. For the waste to exit efficiently, it takes deliberate effort to remove the obstruction that hinders the plumbing system.

The U.S. healthcare system is somewhat akin to an inefficient plumbing system. As is said, “Every system is perfectly designed for exactly the results it gets.” So, in healthcare, when it comes to having transparent prices (and outcomes), our system was DESIGNED to have clogged ‘plumbing.’ Allow me to explain…

The current healthcare pricing system is broken and indefensible. It is a known fact that the escalating prices we pay for our healthcare services is a black box. Whether it be for hospitals, doctors, pharmacy or other healthcare providers, we have no idea what the negotiated prices actually are between insurers and health providers, at least until sometime AFTER the services have been rendered. But this black box was carefully designed to work as intended. To paraphrase noted economist Uwe Reinhardt, where there’s mysteries (in pricing), there’s (larger than normal) margin to be had. In healthcare, obscene money is made when it is allowed to operate in a dark room of denial and obfuscation.

It’s one thing for hospitals to now publicly disclose their ‘list’ prices – (effective January 2019) – but it’s another to disclose the ‘real’ prices that have been negotiated and paid by the insurers we choose to use.

Negotiated prices are largely bound by confidentiality agreements between healthcare providers and insurance companies, and are so closely guarded that even mega employers are not allowed to penetrate this veil of secrecy. While in Indianapolis this past week, I had lunch with the manager of General Motors’ benefits plans who shared her frustrations about these backdoor deals around the country. If this secrecy happens to General Motors, it happens to all employers.

New Transparency Approach Provides Hope

But there is hope. A Wall Street Journal (WSJ) story broke this past Friday that may possibly open up the drain and allow the plumbing to finally function properly. The Trump Administration, through the U.S. Department of Health and Human Services (HHS), is seeking to require hospitals, doctors and other healthcare providers to publicly disclose these secretly negotiated prices – which are the relevant prices we all want to know.

HHS is requesting public comment on whether patients have the right to view the discounted prices in advance of obtaining care. The invitation for comment was actually outlined in a little-noticed passage of a broader patient-data proposal released in March, tucked away in a 700-page draft regulation. According to the WSJ article, the Administration could issue a final rule mandating the disclosure of negotiated rates after the comment period closes on May 3.

Watch for Opposition to Fight this Move

It is often interesting to observe both insurers and healthcare providers who have historically acknowledged the importance of having ‘transparency’ in healthcare. These same organizations, however, appear to believe that ‘transparency’ can only happen when it suits them.

One prime example is the American Hospital Association (AHA), which opposes the move to make negotiated prices public. As reported in the WSJ article, an AHA executive vice president commented, “Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market…While we support transparency, this approach misses the mark.”

Misses what mark? What type of transparency is the AHA looking for? This is a baffling comment made by a trade organization whose sole purpose is to serve hospitals, but at the public’s expense. We don’t need to have the AHA tell us what ‘transparency’ should be…they, along with insurance companies, have had their chance to fix this clogged drain for decades, but they have habitually – and deliberately – failed. Just watch the massive lobbying efforts that will coalesce to fight against this newly-found plunger from being used to fix an enormous problem.

The legal question will most likely center around whether this new transparency initiative violates contract law, or whether it can ‘bust’ antitrust activity that harms the public. The insurance card that we carry represents lost wages and financial bonuses that have, instead, been unnecessarily diverted to pay exorbitant healthcare fees to others.

A Possible New Beginning – More Changes Necessary

By itself, having real prices become publicly available will not solve the inherent problems that persist throughout the healthcare system, but it may serve as the liquid drain cleaner that will eventually loosen stubborn ‘hairy gunk’ that blocks a drain from functioning properly. Price transparency is a good first-step to have, but it is not the sole remedy to a ‘system’ that requires massive fixes.

Despite isolated progress, healthcare ‘consumerism’ has been relatively slow for various reasons. However, by exposing real (negotiated) prices to the public, the aggregation of price data will most likely find new legs due to third-party entrepreneurs and technology companies who will find clever ways to make pricing a relevant decision-making tool for many patients. This has always been the hope for consumerism to take hold. All purchasers want the BEST VALUE in the healthcare being purchased.

Unclogging the healthcare price drain will begin to allow for a natural flow of the real waste to exit the system.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.

Caregiving Crisis – Employers Beware

Iowa is fortunate to have many jobs available for applicants, but unfortunately, there are not enough bodies to fill those positions. According to a 2017 Wall Street Journal article, Iowa, and 11 other Midwestern states have experienced a net outflow of 1.3 million people between 2010 and July 2017. In fact, if every unemployed person in 12 Midwestern states was placed into an open job, there would still be 180,000+ unfilled positions. The Iowa Workforce Development recently announced the number of unemployed Iowans in December (2018) is 40,600, an historic low of 2.4 percent. Iowa has THE lowest unemployment rate in the U.S.  (The U.S. unemployment rate in December moved up to 3.9 percent.)

To combat low unemployment, Iowa along with other states have developed plenty of free programs to train low-skilled workers for higher-skilled positions. For the second consecutive year, Iowa was named by Site Selection magazine as the Midwest’s top state for workforce training and development.  Another 2018 Wall Street Journal article indicated that Iowa’s extremely low unemployment rate has drawn “thousands of workers off the sidelines…with the share of Iowa adults working or seeking work at 67.9 percent in February (2018), nearly five percentage points more than the national average.” Rural Iowa employers have it more challenging, as the pool of local talent is just not there to fill positions.

Caregiver Responsibilities at Home

Now comes yet another challenge, but not just for Iowa employers. A new national survey by a pair of Harvard Business School researchers found that employers are likely to underestimate the struggle their employees have when balancing their professional and caregiving responsibilities. Caregiver responsibilities include providing for children and elderly parents. In fact, about three-quarters of U.S. employees face caregiving responsibilities, of which, 32 percent have left their job because they were unable to balance work and family duties. If employers fail to provide support for caregiving responsibilities, they will pay the hidden costs of presenteeism, absenteeism, turnover and rehiring.

This study was based on surveys of both employers and employees. A key finding was that despite more than 80 percent of employees saying their responsibilities at home kept them from doing their best at work, only 24 percent of employers believed that caregiving was affecting their employees’ performance. This enormous divide is troubling, yet it can also help nudge employers to understand what they can do to retain employees, especially during a very tight labor market.

Other study highlights include:

  • Younger employees, ages 26 to 35, were more likely to leave a job because of caregiving responsibilities.
  • Hard-to-replace higher-paid employees and those in managerial or executive positions were also most likely to quit.
  • More men than women said they left a job because of family needs.
  • As the nation ages, caregiving responsibilities are expected to grow. The Census Bureau projects that for every 100 working-age Americans, aged 18 to 64, there will be 72 people outside that range by 2030, an increase from 59 in 2010.
  • With an increasing share of jobs expected to require a college degree or beyond, the loss of many women could exacerbate labor shortages in the future.

This study caught my interest because, for the first time since we began in our employer benefits study in 1999, we will ask a series of work-life and convenience questions in our 20th Iowa Employer Benefits Study©. Among asking many work-life benefit questions, we will learn about the prevalence of the following caregiver benefits offered by Iowa employers, such as:

  • Personal days
  • Sabbatical leave
  • Adoption leave
  • Foster child leave
  • Leave to attend a child’s activities
  • Maternity leave
  • Paternity leave
  • Child-care subsidies
  • Elder-care subsidies
  • On-site or near-site child and/or elder care
  • And more…

As we learned from surveying both Iowa employers and their employees in our 2007 Iowa Employment Values Study©, there can be a great disconnect between what employees’ desire at the workplace versus what their employers think is important to employees. The aging of the Iowa workforce, in addition to the challenges faced by young families can cause caregiver ‘tension’ that adversely impacts both employees and the unsuspecting employer. To address these challenges, Iowa employers must search for new ways to further accommodate the changing workforce environment pressures that are vital to employee well-being and, consequently, their productivity.

Sometime this summer, our 2019 survey will reveal new results about the prevalence of caregiver programs offered by Iowa employers. Such benefits, I suspect, will vary greatly by industry and by employer-size categories.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.