Health Insurance

Payor Transparency Has Arrived: Will Anything Actually Change?

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Published On: August 24, 2022

When it comes to curing the ills of our healthcare system, federal regulators have focused on hospital and insurance carrier pricing “transparency” in recent years. 

The premise is simple: When patients and consumers have access to better information, especially regarding cost, they will be empowered to make more informed, confident decisions regarding their healthcare. This, in turn, will lead to superior and more cost-effective outcomes, as well as a more robust health system overall. 

Toward those ends, on July 1, 2022–after more than six months of delays–the most recent regulatory effort from the Centers for Medicare & Medicaid Services (CMS) in pursuit of increased healthcare transparency took effect. Now, insurance carriers must ensure their negotiated rates and allowed amounts are publicly accessible. 

At face value, a new rule that demands unprecedented insight and a massive overhaul of existing reporting requirements and procedures might seem nothing short of momentous. In fact, the sheer complexity involved in complying with these new specifications was cited as grounds for temporarily postponing its implementation.  

In practice, however, a deeper look at the impacts likely to be felt across relevant industry stakeholders reveals that increased payor transparency–like the complementary rule on provider pricing transparency that went into effect in early 2021won’t have much of an impact at all.  

Let’s Look at Reality 

Take this statement by CMS Administrator Seema Verma in October 2020 regarding the aims of these transparency regulations: 

“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.”  

Under this final rule, according to the statement, about 200 million Americans would gain access to real-time price information, enabling them to know how much their healthcare will cost them before going in for treatment.  

Now, contrast the lofty ambition outlined above with the ground-level realities of how one large insurance carrier communicated the impact on a fact sheet to members.  

Q: How does this compare to the Hospital Transparency tool? Will it be more useful? 

A: Like the Hospital Transparency tool, this tool is a database of per-service charges, which does not reflect what members pay based on their plan benefits and our care provider contracts. 

Q: How will <carrier name> compare with its competitors for pricing on similar services with the new information disclosed? 

A: The individual prices per service/CPT codes does not reflect what people actually pay for these services, as this is a database and does not take into account the contracted rates for entire episodes of care and other factors. 

Q: Why is there such variation in carrier rates for individual health care services? 

A: Per-service charges do not reflect what members pay, as this database does not show contracted rates for entire episodes of care or progressive agreements that pay providers based on the value of services they provide (i.e., value-based contracts, accountable care organizations, and capitation). 

Similar to provider transparency information, the payor transparency rule will likely have a limited impact. Without additional plan design details, patient information, and timing variables, these new mandates do not provide enough context to impact patients at an individual level. 

Below are the key parties affected and how this will impact stakeholders further up the chain. 

Carriers and Health Systems: Low Impact 

The suite of recently implemented transparency rules means all cards are on the table for both health systems and now carriers. Given that the release of hospital pricing did not upend the healthcare system, a similar if not less disruptive result is expected with the release of carrier data. 

Hospitals will undoubtedly take the opportunity to compare their own negotiated rates with the rates negotiated by their competitor hospitals with that same carrier; brokers will then try to use it to negotiate on behalf of employers.  

Still, the major factors that impact carrier pricing from one health system to the next will remain same: the carrier’s market share; the demographics or risk profile of their members; the funding status of their members; the physicians and facilities in the carrier’s network; and the specific carrier plan design and strategy being considered. This will drive the same competitive per member/per month, or PM/PM, pricing that a carrier provides to an employer.  

Although nothing earth-shattering will occur, there will be a ripple effect as carriers and providers utilize this information during negotiations.  

Employers: Low Impact 

  • Small Employers: As a small employer, you probably review plans every year. As you know, pricing is relatively consistent across each insurance carrier, usually with a near two-digit increase. As stated above, the biggest driver of price is the plan design. Neither providers nor carriers will be able to negotiate substantially different rates because of this new information, so there will be no meaningful impact on your costs.  

  • Large Employers: Major plans quote you a PM/PM based on your employee population and risk pool each year. Your broker will help you navigate the complexities of the market, but competition keeps costs down and PM/PM rates are typically comparable across major medical plans and primarily driven by the specific plan design and strategy. As previously noted, neither providers nor carriers will be able to negotiate substantially different rates based on this newly available information, which means it won’t substantially impact their costs or yours.

Employees: No Impact 

The good news is you can now conclusively determine that getting an X-ray at the hospital is more expensive than getting the same X-ray done at the imaging center, which in turn is more expensive than getting an X-ray at your doctor’s office. But wait: In reality, most carriers have supplied that information for years through navigators, online tools, and other widely distributed materials. 

In fact, according to America’s Health Insurance Plans (AHIP), 94% of commercial health insurance providers supply enrollees with meaningful price transparency via cost estimator tools to help members shop for healthcare. Beyond pricing information most carriers already volunteer, the other data carriers must now disclose is irrelevant to individual end-users; again, without additional patient, care, and network-specific information cost is impossible to determine.  

Our Take 

Greater transparency is undoubtedly a positive step, even if it does create short-term friction and confusion. 

Does moving toward standard market rates for procedures limit pricing as a point of differentiation from the competition? Probably. 

Could an unintended consequence of flatter rates potentially be a contracting process with increased focus placed on outcomes vs. negotiated rates? Hopefully. 

Do these rules really change anything for employers or employees over the next couple of years? Sadly, probably not.  

Health Insurance


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Brian Freeman

Founder and CEO, Mployer Advisor


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