Transparency in Coverage Rules

As has become the norm, health plans are subject to many changes in this year and beyond. This bulletin will focus primarily on transparency rules certain of which come from the Affordable Care Act and others from the Consolidated Appropriations Act of 2021.A quick reference chart of other changes occurring in the near and longer term can be found on page 4.As guidance is issued on any of these standards, additional information will be provided.

Much of the information discussed below is information that a plan sponsor will not have. Therefore, it is essential to work closely with plan service providers and vendors to accomplish these obligations.

Machine Readable File Disclosure Obligations

In November 2020, the tri-governing ACA agencies (HHS, DOL, Treasury) issued final Transparency in Coverage regulations. These regulations were to take effect January 1, 2022 but were subsequently delayed to July 1, 2022.Plan years beginning between January 1, 2022, and June 30, 2022, must begin reporting July 1, 2022.Plan years beginning thereafter must begin reporting on the plan anniversary date.

As originally written the regulations required three sets of machine-readable files to be made publicly available. They are negotiated rates with in-network providers and historical out-of-network allowed amounts for all covered items or services. The third set of information relates to prescription drugs. This reporting tier has been delayed indefinitely and will likely be integrated with the Consolidated Appropriations Act prescription drug reporting discussed below. This disclosure obligation is not applicable to grandfathered plans.

The information needs to be updated monthly and must be publicly available and accessible to any person free of charge and without conditions, such as establishment of a user account, password, or other credentials, or submission of personally identifiable information to access the file.

Generally, plan sponsors will not have the kind of information necessary to accomplish this disclosure.

If a sponsor of an insured plan enters into a written agreement with the insurer to perform the reporting and disclosure obligation, the plan sponsor has no further liability.

A self-funded employer can enter into a services agreement with a TPA to collect and house the required information. The plan sponsor would then post a link to the third party’s website on the employer’s public facing website. Ultimately, the plan sponsor remains liable for compliance and will want to ensure that it has contractually obligated the TPA to perform these tasks.

Keep in mind the information is available to the public not just plan participants and is largely expected to be used by researchers. Information useful to plan participants will be required in 2023 in the form price comparison tools mentioned on the attached chart. We do not have guidance at this point on how this price comparison will be accomplished.

Prescription Drug and Health Care Costs Reporting

The Consolidated Appropriations Act of 2021 enacted on December 27, 2020, establishes a reporting obligation specific to prescription drug and certain health care costs paid by a plan. The reporting obligation was to begin December 27, 2021 but has been delayed. The reporting will be based on the reference year. The reference year is defined as the calendar year without regard to the underlying plan year.

It is anticipated that the first report, likely due December 27, 2022, unless it is delayed, will reflect the 2020 and 2021 reference years (calendar years).Subsequent reporting will be due by June 1. For example, the 2022 reference year/calendar year reporting will be due by June 1, 2023.The report must be submitted to the Secretaries of the Treasury, Labor, and HHS.

Certain information must be reported unique to each plan, while other information can be aggregated by state or market segment, defined below.

Information that must be reported per plan includes:

• Identifying information for the plan, the plan sponsor, the issuer or any other reporting entity.
• The beginning and ending of the plan year that ends during the reference year. The reference year is defined as the calendar year immediately preceding the calendar year in which the data submissions are due.
• The number of participants and beneficiaries covered on the last day of the reference year.
• Each state in which the coverage is offered.

The following information can be reported on an aggregate basis per market segment. The seven market segments are: 1) large insured plan; 2) small insured plan; 3) large self-funded plan; 4) small self-funded plan; 5) individual plan; 6) student plan; and 7) federal employee plan.

• The 50 brand Rx drugs most frequently dispensed by pharmacies for claims paid by the plan; number of claims paid for each such drug
• The 50 most costly Rx drugs with respect to the plan; total annual amount spent for each such drug
• The 50 Rx drugs with the greatest increase in plan expenditures over the prior plan year; percent change in amount expended each plan year
• Total amount spent on health care services by plan broken down by hospital costs; health care provider and clinical service costs, for primary care and specialty care separately; costs for prescription drugs; and other medical costs, including wellness services
• Prescription drug spending by the plan or coverage as well as by participants, beneficiaries, and enrollees
• Impact on premiums by rebates, fees, and any other remuneration paid by drug manufacturers, including top 25 drugs that yielded the highest amounts of rebates
• Average monthly premium paid by employers on behalf of enrollees, and by enrollees
• Reduction in premiums/out-of-pocket costs associated with rebates, fees and other forms of renumeration.

We are awaiting guidance on how this reporting obligation must be accomplished. While guidance is expected it is not known when it will be issued. In the meantime, plan sponsors should begin working with their vendors and service providers to prepare for compliance.

Like the transparency in coverage data described above, a plan sponsor will not likely have the kind of information necessary to achieve the reporting. Further, it is certainly possible that multiple vendors will need to work together to aggregate the data necessary. 

Quick Reference Chart of Health Plan Changes in 2022 and Beyond

(For additional information see December 2020 At Issue and FAQ 49 from the governing agencies)

About the Author

Karen McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Kansas City office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.