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The new healthcare price transparency rule went into effect on July 1, but it still may not help much.

While most Americans are setting up email messages outside of their offices and preparing to fire up the grill over the Fourth of July holiday weekend, the rules governing their health insurance are unlikely to be on their minds.

But on Friday, July 1, 2022, after months of implementation delays, a new rule went into effect that will change how Americans shop for health care services and how much they pay.

Transparency in Coverage Offered by the Centers for Medicare and Medicaid Services (CMS) Final Rule requires health insurers to disclose prices for covered services and items. Insurers must include negotiated rates with participating providers for all covered services and items, as well as amounts allowed and billed to out-of-network providers. Allowed amounts are the maximum rates the insurer will pay for the service rendered and the billed amounts are actually charged by the provider.

Taken together, this information should provide consumers with a clearer sense than they get today of what their health insurance plan will pay for, even if they see doctors who do not participate in their health insurer’s provider network. With that information, people can theoretically make informed trade-offs about which healthcare providers to see.

The information should allow Americans to more accurately plan their out-of-pocket costs because the amount insurers will reimburse should no longer be a mystery. Knowing out-of-pocket expenses before you experience them is a level of visibility Americans sorely lack.

The new insurance transparency rules follow implementation of the No Surprises Act on January 1, 2022, which protects consumers from unexpected charges for certain services. Not surprisingly, the Act requires private health insurers to cover some out-of-network bills at the same rate as if the services were provided in the health plan’s network.

In theory, this level of transparency could force health care prices down (though some economists warn that some providers may be encouraged to raise their rates if they feel they’ve been underpaid). When the rates that health insurers negotiate with health care providers are on full display, companies that pay for employer-sponsored health benefits may find reason to question the effectiveness of insurer negotiations.

A recent RAND study showed that the rates private insurers and employers pay hospitals vary widely and are, on average, twice what Medicare pays for the same services. Other research has shown that paying cash instead of using insurance can save consumers about a quarter of the money on prescriptions. This kind of data at a more granular level can give companies leverage to demand lower rates.

But all these benefits will materialize only if the health plans first comply with the new rules.

The results of the previously enacted Hospital Price Transparency Final Rule may offer a cautionary tale on this front. The Hospital Transparency Regulations require hospitals to publish standard charges for all their services and items and make prices of 300 common services accessible in a consumer-friendly format. The rule went into effect on January 1, 2021 but a year later, only 14% of hospitals were in compliance.

CMS has set fines higher this time around, so insurers who don’t provide the required data will have to pay $100 per day per violation for each affected member, which can quickly add up for larger plans.

Many insurers have already posted the required files, although they can be difficult to find. In at least one case, the page was up but there were no files.

But complete health plan compliance doesn’t automatically give consumers the information they need. The required format for this data—machine-readable files—is virtually impossible for ordinary consumers to interpret. These files can power a consumer-friendly presentation of data but are consumer-friendly in their own right.

Nate Maslak, CEO and cofounder of Ribbon Health, a healthcare data company, thinks the data provided is too complex for patients to understand and says the data is full of mismatched and outdated numbers.

“Price transparency regulation will not give patients access to more affordable care decisions unless these insights are delivered to patients in a consumer-friendly fashion,” Maslak said.

Instead, the new rule creates conditions for technology companies and others to enable consumer-grade price transparency.

Maslock’s company is working with Turquoise Health to help healthcare organizations easily access and interpret customer data. Together they are combining price data with physician location, specialty, expertise and quality data.

“That way when a patient searches for care, they can ‘shop it around’ the same way they shop for another big purchase,” Maslak said. “I’m excited for a future where patients can have the same confidence in booking a hotel room as they do in reserving care — with clear and accurate information about how to get there, what it costs and what to expect. We’re building a world where anyone can find affordable, high-quality care, and this regulation is essential to that vision.

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