Spring heralds the start of rate review season: that time of year when state departments of insurance assess health insurers’ proposed rates for the next year and determine whether their plans comply with federal and state laws. Many state insurance departments now have a new responsibility as part of that process: determining whether state-regulated health insurers are complying with federal Transparency in Coverage (TiC) requirements.
Although these are federal rules, state departments of insurance have the primary enforcement role with respect to state-regulated insurers. Insurance regulators can do more than just confirm that insurers are posting these data—they can also help ensure that the data files, currently difficult to access and use, fulfill their potential to help constrain health care cost growth and improve affordability for state residents.
Why Price Transparency? A Tool To Help Identify System Costs And Target Solutions
Health insurance has become increasingly unaffordable for employers and workers alike. Employees’ contributions to premiums have increased by 300 percent since 1999, and the average deductible has grown from $303 in 2006 to $1,562 in 2022. The enhanced federal subsidies that protect most individual Marketplace consumers from high premiums are slated to expire by 2026, and many consumers face significant deductibles. The growth in health insurance premiums and cost sharing is largely driven by growth in the underlying cost of health care services—particularly the prices that hospitals, physicians, and drug companies charge to commercial insurers.
A range of policies could reduce the prices that insurers pay for health care goods and services, from direct government regulation, to market-based approaches that require greater transparency of the prices negotiated between providers and commercial payers. While price transparency, by itself, is unlikely to move the needle much on health care costs, better price data can help policy makers, employers, insurance regulators, and researchers identify the drivers of higher costs and target solutions. For example, on average private insurers pay hospital prices that are 224 percent to 240 percent of Medicare prices for the same services, but prices vary widely across the country, with insurers in some states paying more than 300 percent of Medicare prices for hospital services.
The promise of price transparency prompted the federal government to require insurance companies to publicly post the prices they pay for all health care services. These new requirements, along with other data sources, have the potential to be powerful resources that support state-level efforts to improve insurance affordability. But this potential may be largely unrealized without a state-federal partnership to improve data access and quality.
Greater Price Transparency Can Inform State-Level Strategies To Improve Affordability
Multiple states have embarked on efforts to constrain health care cost growth and improve the affordability of coverage for local employers and residents. Many of these efforts could benefit from access to more robust, real-time, and provider-specific information about the prices that insurers are paying. For example, price data could be used to support:
- Market scanning. Provider-specific price data can help inform insurance and anti-trust regulators about outliers in the market and potential indicators of anti-trust issues.
- Initiatives to constrain cost growth. Price data can inform the implementation and oversight of state-level initiatives such as total cost of care cost-growth benchmarks, public option plans, and reference pricing.
- Anti-trust enforcement. Price data can provide an independent source of information for state attorneys general and others monitoring compliance with anti-trust settlements and prohibitions on anti-competitive contracting practices.
- Purchasing alliances. Price data can help employer coalitions, such as the Peak Health Alliance in Colorado, directly negotiate price discounts with local providers.
- Independent dispute resolution for out-of-network billing. Price data can provide an independent source of information for state departments of insurance and health on median in-network rates, which some state dispute resolution processes use as a factor for determining appropriate out-of-network reimbursement under state-level surprise billing protection laws.
- Rate review. Price data can help consumers and other stakeholders understand the drivers of premium rate increases.
New Transparency In Coverage Requirements: State Insurance Regulators Have A Critical Enforcement Role
On July 1, 2022, health insurance plans and issuers began to publicly post their in-network provider reimbursement rates for all covered items as well as allowed amounts and billed charges for out-of-network items and services. However, multiple problems, such as massive file sizes and a lack of standardization, have rendered the published data largely inaccessible and unusable for anyone without a supercomputer. There is much that the federal Centers for Medicare and Medicaid Services can do to improve access to the TiC data, such as requiring greater uniformity in how the data are organized and displayed. However, state insurance regulators can also play a critical role.
State departments of insurance share responsibility with the federal government for the enforcement of the TiC rules, which apply to self-funded employer plans and insurers selling group and individual insurance. Self-funded employer plans typically contract with third-party administrators (TPAs) to negotiate with providers and develop plan networks, and these employer plans have an obligation to ensure that their TPA vendors publicly post the TiC data, to comply with federal law. The federal government (through the Department of Labor) is responsible for ensuring that the self-funded employer plans comply. For fully insured individual and group-market insurers, state departments of insurance are the front line of enforcement. As such, these state regulators must ensure that insurers are meeting minimum federal standards. If they choose, states can also hold insurers to higher standards, so long as they don’t conflict with or prevent the application of federal law. Given the value of insurer price data to multiple state-level policies designed to advance insurance affordability, state insurance departments could exercise their enforcement powers to improve the accessibility and usability of the TiC data. Specifically, insurance departments could require state-regulated insurers to:
- Provide a data directory or library index, so that users can identify what is in the TiC files.
- Submit to regulators file extracts to enable an assessment of data quality.
- Take corrective actions in the event of missing or low-quality data.
Departments of insurance can also support broader state-level affordability initiatives by using insurers’ data submissions to inform public-facing reports about health system cost-drivers and other issues.
Looking Ahead
The cost of insurance coverage is increasing the financial stress on consumers and businesses. In adopting the TiC requirements, federal policy makers recognized that the prices commercial insurers pay for health care goods and services are one of the main drivers of premium growth. In theory, opening the black box of what has been, to date, largely secret pricing agreements among hospitals, doctors, and insurers could help us identify and target regulatory policies or market-based solutions to keep costs in check. For states that have or will adopt cost-containment initiatives, the TiC data can be an important tool to hold plans and providers accountable and meet affordability goals.
But these goals cannot be achieved if the TiC data are not accessible. As the front line of oversight and enforcement for a large segment of the market, state departments of insurance can play a critical role by raising the bar for data access and usability, and holding insurers accountable if they aren’t complying.