What is it?
CMS finalized a suite of policies at the end of 2020 in the latest iteration of its push toward greater transparency in health care. On October 29, 2020, CMS finalized its Transparency in Coverage Rule for payers. This complements the Hospital Price Transparency Rule requiring providers to disclose payer-identified negotiated rates. Payers will have to create out-of-pocket cost estimator tools for their members and publish negotiated rates with providers and pharmacies.
By equipping patients with pricing and quality information, CMS hopes to create a marketplace for services where patients can "shop" for high-value, low-cost care. With access to personalized out-of-pocket estimates for covered procedures, health plan members can make more informed choices and better plan their medical spending. Additionally, CMS amended medical loss ratio calculations, allowing payers to classify "shared savings payments," or incentive payments to members who select lower-cost providers, as medical expenses.
CMS intends for other stakeholders, including payers, providers, and third parties, to use and analyze pricing data as well. By requiring this information be publicly available in machine-readable files, CMS hopes to even the playing field during payer-provider negotiations and shift leverage away from large plans and health systems. However, It’s unclear whether the rule’s intended effects of increasing competition during rate negotiation and boosting consumerism in the market will drive down health care costs as proponents of price transparency predict. Stakeholders across the industry have argued that rate transparency, rather than lowering prices, will increase costs across the health care system by creating a pricing floor for services. By driving up the rates that providers want from payers, the transparency rule may limit payers’ ability to negotiate for lower rates in their provider networks.