In November 2019, the Centers for Medicare and Medicaid
Services (CMS) released a final rule establishing requirements for hospitals
operating in the United States to establish, update, and make public a list of
their standard charges for items and services they provide. The provisions of
the final rule go into effect on January 1, 2021.
The lack of price transparency in the U.S. healthcare market is well known. There are several reasons that can make estimating costs before care difficult for consumers. One of the main challenges is the variation in billed charges and negotiated rates between insurance companies and providers. The majority of Americans have health insurance coverage through insurance companies (or payers), which negotiate prices with hospitals and providers. The negotiated prices between payers and providers have historically been confidential and subject to nondisclosure agreements.
Health economists and other experts believe that
transparency in pricing is key to healthcare cost containment. Opponents of the
policies adopted in the CMS final rule say that these requirements will impose
a significant burden on hospitals and may lead to confusion without providing
any relevant information.
In this paper, Milliman actuaries and consultants provide a summary of key provisions of the final rule that apply to hospitals, briefly touching on topics that require additional consideration by parties affected by the rule.
Operating Medicare Part C and Part D plans has become increasingly complicated. The Patient Protection and Affordable Care Act (ACA) and a growing number of rules and regulations added each year have heightened the complexity and associated compliance burden for the health insurance companies that sell and administer these plans.
Actuaries are instrumental in developing the bids that plan sponsors submit annually to the Centers for Medicare and Medicaid Services (CMS). Those bids include a plan benefit package and Part C and Part D bid pricing tools. The bid submission also includes a set of supporting documentation describing how the financial projections were developed and demonstrating compliance with the many bidding rules.
During desk review, CMS independently confirms that the bids pass compliance tests. It is critical that plan sponsors understand the tests and confirm compliance before bids are submitted.
In this paper, Chris Girod and Shyam Kolli discuss a relatively narrow area of rules that is sometimes loosely referred to as actuarial compliance. This information can be useful for actuaries and other professionals who are tasked with understanding and following the many rules and regulations as they relate to Parts C and D.
Health savings accounts (HSAs) have been in the news recently and for good reason. First introduced in 2003, the HSA is a tax-advantaged medical savings account available to taxpayers in the United States who enroll in a qualified high-deductible health plan (HDHP). Since their introduction, these savings accounts have proven to be valuable for participants as they offer a number of tax advantages for qualified health benefit expenses. Recent changes proposed within the Senate and House bills during the effort in 2017 to repeal and replace the Patient Protection and Affordable Care Act (ACA) are supporting even further expansion of HSAs, creating even more of an advantage. With these changes, HSAs stand to compete with other standard retirement savings mechanisms, such as tax-deferred 401(k) savings plan contributions, potentially even pushing them into the forefront.
The tax code places certain annual limits on contributions to HSAs, as well as on the HDHP’s deductible and out-of-pocket maximum. For individual coverage for 2018, the maximum contribution to an HSA is $3,450, the minimum deductible is $1,350, and the maximum out-of-pocket limit is $6,650. These limits are doubled for family coverage. The standard advantages for HSA participants have not changed since they were first introduced in 2003:
• Contributions to HSAs are tax-exempt.
• Those same contributions can be invested and any investment income and appreciation are also tax-exempt.
• Withdrawals are tax-exempt as long as participants use them to pay for qualified medical expenses, such as doctor’s visits, prescription drugs, and dental care.
• HSA funds roll over and accumulate year to year if they are not spent. They are owned by the individual.
• HSA plan contributions are not subject to the Federal Insurance Contributions Act (FICA) tax whereas 401(k) plan contributions are.
The overall share of the U.S. economy devoted to healthcare spending reached almost 18% in 2015. As a result, methods for cost reduction are getting increased attention. The new administration under President Trump identified provider price transparency as one of its key healthcare reform goals. Until now, disclosure of provider rates has been very limited, which is due to the confidential nature of this information and concerns with provider collusion. However, rising trends, coupled with the demand for increased consumerism by employer plan sponsors, have started to move the transparency needle a bit. The following provides an overview of price transparency, including the primary drivers in the self-insured market and a short list of employer considerations.
What does price transparency means?
In terms of the self-insured market, price transparency means making information more readily available to consumers. This will allow them to make better-informed decisions based on current health status. Several carriers and independent companies have created tools to assist employees with “demystifying” medical rates in a consumer-centric manner. These tools allow employees to price-shop for a given service by provider, as well as factor in current benefits to estimate their out-of-pocket costs.
What factors are driving the need for transparency in the self-insured market?
The proliferation of high-deductible health plans (HDHPs), reference-based pricing, and narrow or custom networks all place a greater burden of cost sharing and decision-making on the employee and employer.
Increased price transparency from healthcare providers may help individuals become better consumers and reduce overall healthcare costs. However, some studies indicate that more price transparency may actually increases costs. In this article, Milliman’s Shyam Kolli explores the forces driving the need for price transparency. He also discusses potential ways to improve transparency.
In their article “CSR subsidies: Intra-year emergence,” Milliman’s Aaron Wright and Shyam Kolli assess the difference between prospective payments from the Centers for Medicare and Medicaid Services (CSM) and actual cost-sharing reduction (CSR) payments. They also discuss the effects that payments may have on quarterly financial statements for some carriers.