A regulation designed to reduce health insurance companies’ administrative expenses may dampen their competitive edge.
The Health and Human Services, Labor and Treasury departments finalized a rule last week intended to clean up the pricing information insurance companies disclose.
Employer and provider trade groups such as the ERISA Industry Committee and the American Hospital Association applauded the regulation as an incremental step toward lowering health insurance costs. Tighter requirements will cost insurers nearly $400 million in one-time compliance expenses, but save carriers $174.5 million annually after the first year, HHS estimated.
The regulation will make it harder for insurers to hide their prices, said Caroline Pearson, executive director at the Peterson Health Technology Institute, a nonprofit that evaluates digital health tools.
“There’s a tension in making the files easier to use,” Pearson said.
Here’s what to know about the rule and what it means for insurers.
What does the rule require?
The biggest change will be that, in five months, insurers can no longer include “ghost rates,” or the prices paid for a service that a physician is unlikely to ever provide, in the files.
The regulation also reduces the frequency of disclosure from monthly to quarterly, standardizes the format and outlines how carriers must publicly post the information. It requires carriers to include more data on out-of-network pay and report prices at the provider network level.
Health insurance company executives will have to attest to the accuracy of the data.
Come 2027, insurers’ call center staff must be able to answer member questions about cost-sharing responsibilities.
The new regulation better aligns the insurer and hospital price transparency requirements and will help industry experts compare the datasets, said Carol Skenes, chief of staff at Turquoise Health, a healthcare price transparency company.
What do insurers think?
The federal changes are significant, and additional technical guidance is needed, David Merritt, senior vice president of external affairs at the Blue Cross Blue Shield Association, said in a statement.
“While these changes should improve usability, some requirements may make the data less consistent across health plans and will require significant operational changes in a compressed time frame,” Merritt said.
For instance, the final rule allows each insurer to decide what “ghost rates,” or implausible provider-service combinations, should be excluded from their files. Implementing a single, standardized methodology would make it easier to compare datasets across companies, Merritt said.
Requiring additional insight into consolidated hospital systems’ chargemasters and brand drugmakers’ prices would help lower consumer costs, AHIP spokesperson Chris Bond said in a statement.
How could insurers change their strategy?
Carriers will have to assess whether their existing teams have the resources needed to comply with the new requirements, Skenes said. Companies will also have to train customer service staff and implement new quality controls, she said.
“It’s making them keep an eye on the industry in a way that payers haven’t historically had to do in the same way hospitals have,” Skenes said.
Unlike hospitals, insurance companies have never been publicly penalized for not complying with the disclosure requirements, Pearson said. Part of that is because the files have been so complex that it is hard for federal regulators to determine whether insurers are meeting the standards, she said.
Streamlining how this information is disclosed opens the door to additional enforcement, she said.
New attestation requirements also invite additional scrutiny, said Jason Montrie, CEO at Alerion Advisors, a health plan consulting company. Regulators signaled they will perform market conduct exams and install corrective action plans for companies not complying with the requirements, he said.
“It turns it much more into a data integrity exercise,” Montrie said.
Attestation requirements could open companies up to legal risks, although identifying who may have standing in a case could prove challenging, said Robert Hartwig, director of the University of South Carolina’s Darla Moore School of Business’ Risk and Uncertainty Management Center.
Will this relieve political pressure on insurers?
Cleaning up the data will alleviate some of the political heat the industry faces over its alleged opaque business practices and steep premium increases, Hartwig said. Insurers will be able to say that better-informed consumers will be able to make better decisions that fit their budgets, he said.
What’s next for price transparency?
Regulators said they plan to propose a rule in May 2027 requiring insurers to disclose what they pay for prescription drugs. The requirement was included in a draft regulation in 2020, but was delayed amid pushback from drugmakers and the U.S. Chamber of Commerce.
The final rule also said the departments intend to require insurers to list what they pay under stop-loss and other unusually high-cost arrangements.