In an effort to improve competition and reduce healthcare costs, the Federal Government signed the Consolidated Appropriations Act into law in December of 2020.
The law requires employers who sponsor health plans to increase transparency in 4 key areas:
1. Broker Compensation (Section 408(b)(2) of ERISA): Effective January 1st, 2022, employers are required to know how much direct and indirect compensation their broker makes as a result of their business relationship.
- “Direct Compensation” is usually defined as fees or commissions charged to the employer.
- “Indirect Compensation” typically results when an insurance carrier pays a broker a bonus for reaching pre-determined volumes of revenue with the carrier.
This transparency clause is needed because for decades insurance brokers have marketed themselves as buyer’s agents, but gotten paid like seller’s agents. As a result of this financial misalignment, employers rarely received the objective advice and recommendations they thought they were getting from their broker.
2. Mental Health Parity and Addiction Equity Act: Given the increasing need for mental health care in the United States, the CAA now requires health plans to create parity between medical and mental health benefits.
- Plan sponsors should work closely with their administrator to ensure plan design meets this new standard.
3. Reporting of Pharmacy Benefits and Drug Costs: The CAA now requires group health plans to report the following:
- The plan year, number of enrollees, and each state in which the plan is offered.
- The top 50 brand prescription drugs paid for by the plan, and the total number of paid claims for each such drug.
- The top 50 most expensive prescription drugs paid for by the plan by total annual spending, and the annual amount spent by the plan for each such drug.
- The 50 prescription drugs with the greatest increase in plan expenditures since the prior plan year, and the change in amounts spent for each drug.
- The total spending on health care services by plan, broken down into specific categories, including hospital costs, primary care costs, specialty care costs, and prescription drug costs.
- Average monthly premiums paid by employers and by participants.
- The impact on premiums by rebates and fees paid by drug manufacturers to the plan or its administrators or service providers, including any reduction in premiums and out-of-pocket costs associated with the rebates and fees.
- The first report would be due one year after enactment of the CAA. Each subsequent report would be due by June 1 each year.
4. Price and Quality Gag Clause Removal (Section 201): Since most network arrangements work on a discount off of billed charges pricing methodology, businesses have struggled to identify how much they are actually paying for specific health goods and services, and this has made it difficult for employers to manage healthcare supply chains effectively. The amendment requires group health plans to have access to specific claims data that shows the costs related to claims.
Although group health plans would be required to have access to this specific cost data, providers and provider networks would be allowed to prohibit plans and health insurers from publicly disclosing the information received.
Plans would have to certify their compliance annually.
For your convenience, here is a implementation timeline for each part of the CAA:
Mandate | Effective Date | Mandate Description |
|---|---|---|
Advance Cost Estimate and Explanation of Benefits (AEOB) | Jan. 1, 2022 | Requires individual and group health plans to provide a cost estimate for scheduled services at least three days in advance to give patients transparency into which providers are expected to provide treatment, the network status of providers, good faith estimates of cost, cost-sharing and progress toward meeting deductibles and out-of-pocket maximums, as well as whether a service is subject to medical management and relevant disclaimers of estimates. |
Air Ambulance Reporting | Jan. 1, 2022 | Requires reporting air ambulance metrics within 90 days of the end of the plan year. |
Broker and Consultant Compensation Disclosure | Dec. 27, 2021 | Requires brokers and consultants to disclose to group health plan sponsors any direct or indirect compensation they receive for brokerage services or consulting—terms that are defined very broadly. For individual health insurance coverage and short-term, limited duration insurance coverage, a health insurance issuer must disclose to enrollees, and report to the Department of Health and Human Services (HHS), any direct or indirect compensation that the issuer pays to an agent or broker associated with plan selection and enrolling individuals in the coverage. |
Continuity of Care | Jan. 1, 2022 | For individuals who are undergoing treatment for a serious and complex condition, pregnant, receiving inpatient care, scheduled for non-elective surgery or terminally ill, requires a group health plan or health insurance issuer to provide 90 days of continued, in-network care if a provider or facility leaves the network. Also requires the group health plan or health insurance issuer to notify individuals receiving care from one of these providers or facilities of the network change and provide the option to continue care for the transitional period. In addition, providers subject to this provision are required to accept the continued in-network payment as payment in full and otherwise comply with all policies, procedures and quality standards imposed by the plan or issuer. |
Insurance Cards | Jan. 1, 2022 | Requires group and individual health plans to identify on insurance cards the amount of the in-network and out-of-network deductibles, the in-network and out-of-network out-of-pocket maximum limitations, and a telephone number and website address through which individuals may seek consumer assistance information. |
Mental Health Parity | Feb. 1, 2021 | Requires group/individual health plans to perform, document and to provide upon request (which may occur 45 days after enactment of CAA) comparative analyses of the design and application of non-quantitative treatment limitations (NQTL). |
Part D and Other Medicare Drug Pricing | Jan. 1, 2024 | Beneficiary Real-Time Benefit Tool: Requires Part D sponsors to implement one or more electronic real-time benefit tools that meet certain requirements and standards, such as integrating with electronic prescribing and electronic health records, and transmitting information on clinically appropriate alternatives, cost-sharing, negotiated prices and formulary status. The legislation does not specify an implementation date but refers to a “time determined appropriate by the Secretary” after HHS has developed a standard. The legislation also includes a rule of construction that nothing in this subsection shall be construed to allow a prescription drug plan sponsor to use a real-time benefit tool to steer individuals without their consent to a particular pharmacy or pharmacy type over their preferred pharmacy. Permanently authorizes the Limited Income Newly Eligible Transition (LI NET) demonstration effective Jan. 1, 2024. This program provides immediate, temporary Part D coverage for certain low-income beneficiaries while their eligibility is processed. Provides the Executive Directors of MedPAC and MACPAC access to certain Medicare Part D payment and pharmaceutical manufacturer rebate data for purposes of monitoring, analysis and making program recommendations. Prohibits disclosure, including to individual MedPAC and MACPAC commissioners, on specific rebate amounts, direct or indirect remuneration or information from submitted bids. Lastly, it requires all manufacturers of drugs covered under Part B to report average sales price (ASP) data to HHS beginning Jan. 1, 2022. This specifically adds a new requirement for manufacturers that do not have a rebate agreement under Medicaid. |
Pharmacy Benefits/Drug Costs Reports | Dec. 27, 2021 | Requires group and individual health plans to report annual data to HHS, the Department of Labor, and the Department of Treasury (Tri-agencies) on drug utilization, spending and rebates. Reporting includes total spending on health care services by type. No confidential or trade secret information submitted by health plans will be made public. |
Price Comparison Tool | Jan. 1, 2023 | Requires group health plans and health insurance issuers to maintain a price comparison tool available via phone and website that allows enrolled individuals and participating providers to compare cost-sharing for items and services by any participating provider |
Prior Authorization for OB-GYN Services | Jan. 1, 2022 | Prohibits plans/issuers from requiring prior authorization for OB-GYN services for in-network providers. |
Prohibition on Gag Clauses on Price and Quality Information | Dec. 27, 2021 | Prevents the inclusion of gag clauses on cost or quality information in payer-provider contracting. Precludes payers from entering into contracts with providers that prohibit payers from disclosing provider-specific costs or quality information to referring providers, the plan sponsor, enrollees and/or individuals eligible to become enrollees. |
Provider Directory | Jan. 1, 2022 | Requires commercial plans to establish a verification process to confirm provider directory information at least every 90 days, including removing providers or facilities who are non-responsive. Plans must also develop a response protocol to respond to member network questions. Members who receive inaccurate information that a provider is in-network can only be liable for in-network cost sharing. |
Public - Private Partnership for Health Care Fraud, Waste and Abuse Detection | Jan. 1, 2023 | Establishes a public-private partnership of health plans, federal and state agencies, law enforcement agencies, health care anti-fraud organizations and any other entity determined appropriate by HHS for purposes of detecting and preventing health care fraud. The partnership will provide technical and operational support to facilitate data sharing between partners in the partnership in order to, among other things: analyze data on aberrant billing patterns; identify potential vulnerabilities; and conduct aggregate analyses of health care data for purposes of detecting fraud, waste and abuse schemes. Not later than Jan. 1, 2023, and every two years thereafter, HHS must submit to Congress, and make available to the public, a report containing a review of activities of the partnership and its objectives, as well as any savings to the federal government or to health plans or any other outcomes attributable to the partnership. |
Surprise Billing – Independent Dispute Resolution (IDR) | Jan. 1, 2022 | Gives plans and providers (including air ambulance providers) 30 days to negotiate a payment after an initial payment or a denial is issued by the plan. If a decision is not reached, gives plans and providers four days to access an independent dispute resolution (IDR) process. Permits plans and providers to continue negotiations up until the IDR entity (arbiter) makes a final decision. |
Surprise Billing – Qualifying Payment Amounts | Jan. 1, 2022 | Provides for patients to be responsible for only in-network cost-sharing amounts, including deductibles, in emergency situations and certain non-emergency situations where patients do not have the ability to choose an in-network provider (including air ambulance providers). Prohibits providers from balance billing except in limited circumstances with patient notice and consent. |
Transparency in Coverage – Cost Estimating Tool (First 500 Services) | Jan. 1, 2023 | Requires the establishment of a web-based, self-service tool to allow members to get real-time, accurate estimates of cost-sharing liability for specific services, furnished by specific providers, at specific locations. |
Transparency in Coverage – Cost Estimating Tool (Remaining services) | Jan. 1, 2024 | Requires the establishment of a web-based, self-service tool to allow members to get real-time, accurate estimates of cost-sharing liability for specific services, furnished by specific providers, at specific locations. |
Transparency in Coverage - In-Network/Out-of-Network Machine Readable Files | July 1, 2022 | Requires certain cost and claims data available through posted machine-readable files (In Network, Out of Network and Pharmacy File) posted monthly to a public website. The nature of the machine-readable files is such that a group or third party (vendor) working on the group’s behalf can access the files and use their program/system to sort and filter the data to their specific benefit plan. |
Transparency in Coverage - Pharmacy Machine-Readable Files | TBD | Requires certain cost and claims data available through posted machine-readable files (In Network, Out of Network and Pharmacy File) posted monthly to a public website. The nature of the machine-readable files is such that a group or third party (vendor) working on the group’s behalf can access the files and use their program/system to sort and filter the data to their specific benefit plan. |
Surprise Billing – Independent Dispute Resolution (IDR) | Jan. 1, 2022 | Gives plans and providers (including air ambulance providers) 30 days to negotiate a payment after an initial payment or a denial is issued by the plan. If a decision is not reached, gives plans and providers four days to access an independent dispute resolution (IDR) process. Permits plans and providers to continue negotiations up until the IDR entity (arbiter) makes a final decision. |