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Health Insurance Transparency under the Affordable Care Act

In February, a final rule was issued implementing the Affordable Care Act (ACA) requirement that all health plans provide a uniform summary of coverage for all enrollees and applicants. The idea of providing easy-to-understand summaries of coverage is, in fact, the most popular provision in the ACA, according to a recent Kaiser tracking poll.

That finding suggests powerful consumer frustration over the complexity of health insurance and the difficulty people face evaluating health insurance choices and understanding how coverage works. Indeed, when asked, people say they would prefer to go to the gym or work on their taxes than read through their health insurance policies. Other Kaiser surveys find that too often, consumers don’t fully understand how coverage actually works until they get sick and try to use it, and then are surprised to learn their plan doesn’t pay as much, or at all, for care they thought would be covered. Economists document significant search costs to small businesses – $35 billion annually – arising from the limited ability of employers “to compare the price and quality of the bewildering variety of complex health insurance policies.” Such information barriers hinder market competition and increase the cost of health insurance. Objective measures of a health plan’s cost and value are not routinely available today nor easy for consumers and business owners to find.

With so much attention devoted to the ACA’s controversial requirement that individuals be insured and debates at the state level of whether to set up health insurance exchanges, the variety of provisions that would promote health insurance transparency have perhaps been somewhat lost in the shuffle. Implementation of some of these provisions is underway, while others await action.

Uniform Summary of Coverage (Section 2715, Public Health Service Act) – Starting this fall as they are offered or renewed, health plans and health insurance policies will have to provide enrollees and applicants with a uniform summary of benefits and coverage (SBC). All individual health insurance policies and group health plans must provide this summary. It will give consumers consistent information about what health plans cover and what limits, exclusions, and cost-sharing apply. It must be written in plain language and contain no fine print. At the outset, the final rule requires two illustrations of typical patient out-of-pocket costs for common medical events (routine maternity care and management of diabetes). Other care scenarios illustrating how coverage works for a broader set of benefits (such as expensive outpatient medical therapies, surgery, and mental health care) will be required at some time in the future.

This summary begins to provide consumers with information they can use to understand the coverage they have today and to evaluate health plan choices in new insurance markets that will begin in 2014. The SBC helps consumers understand how their health plan works on paper. Additional transparency provisions in the ACA are intended to show how health plans work in practice, and to make such information easily accessible to the public.

Transparency in Coverage Disclosures (Section 2715A Public Health Service Act, Section 1311(e) of ACA) – Non-grandfathered health plans, whether offered through exchanges or outside, must also disclose other information that would help consumers understand how reliably the plan reimburses claims for covered services, whether the provider network is adequate to assure access to covered services, and other practical information. The law requires plans to disclose information, and for exchanges and the federal Department of Health and Human Services (HHS) to then make publicly-available accurate and timely disclosure of the following information:

  •  Claims payment policies and practices
  •  Periodic financial disclosures
  •  Data on enrollment
  •  Data on disenrollment
  •  Data on the number of claims that are denied
  •  Data on rating practices
  •  Information on cost-sharing and payments with respect to out-of-network coverage
  •  Information on enrollee and participant rights under this title
  •  Other information as determined appropriate by the Secretary

Information required shall be provided in plain language that the intended audience, including individuals with limited English proficiency, can readily understand and use.

This requirement was scheduled to take effect for non-grandfathered health plans outside of exchanges six months after the date of enactment of the ACA, and for exchange plans starting in 2014. No draft rules or guidance on these requirements have been published to date; HHS has suggested a phased-in approach to implementation may be adopted.

Depending on the details of what HHS ultimately proposes, information disclosed pursuant to Section 2715A could give consumers insight into plan features and practices that affect how easily a patient might actually access care covered under a plan. For example, claims payment and denial practices are a key concern for consumers, many of whom report problems claiming covered benefits today. Disclosures might also include information on the nature of external appeals programs that plans use. Under final appeals rules and guidance published last summer, many plans will have the option of contracting directly with review entities to consider cases when consumers appeal a claim denial, while other plans will submit external review cases to an entity that is chosen independently by a regulator. Consumers might consider such information as they evaluate their health plan choices.

Information disclosed under Section 2715A could also help consumers understand aspects of plan coverage that may not be fully described under the SBC. An emerging trend in health plan design involves the use of tiered provider networks. Patients who seek care from network providers could end up paying more or less out-of-pocket depending on how their health plan ranks a particular hospital or doctor. Patients who seek care out of network could owe even more if they are subject to balance billing (which results when providers are not limited to charging the amount the health plan determines reasonable). This can happen inadvertently when patients are hospitalized or undergo surgery in an in-network facility, and are cared for by providers (such as anesthesiologists) who work in that facility but do not participate in the health plan network. Instructions to insurers and health plans for filling out the SBC note that accurately capturing how a tiered network plan operates may be difficult to summarize in the SBC, so plans and insurers are required to use their “best efforts” to describe rules “as reasonably as possible.” If plans were to report to regulators how frequently consumers claim care from the most preferred provider tier, less preferred tiers, and out-of-network tiers (and what out-of-pocket cost liabilities result), consumers would have additional tools to evaluate the accessibility of health plan provider networks and tiers.

Quality reporting for private health insurance (Section 2717, Public Health Service Act) – The ACA also requires the Secretary of HHS to develop reporting requirements for group and individual health plans with respect to covered benefits and provider reimbursement structures that improve health outcomes, prevent hospital readmissions, improve patient safety and reduce medical errors, and implement wellness and health promotion activities. This provision takes effect two years after the date of enactment, though federal guidance indicates that a phased-in approach to implementation of these requirements may be adopted.

As the health reform law restricts competition based on risk selection, insurers may increasingly have an incentive to compete based on the quality of care enrollees receive. Patients will benefit from information that helps them understand and recognize quality of care, and to compare alternative approaches insurers may adopt.

Quality reporting requirements will apply to non-grandfathered individual and group health plans and policies, offered both inside and outside of exchanges.

Healthcare.gov (Section 1103, Affordable Care Act) – Under the ACA, the Secretary of HHS must establish a website to help individuals, families, and small businesses in every state identify affordable health insurance coverage options. This website, www.Healthcare.gov, was first launched in July 2010. It provides information about major medical health insurance policies offered by private insurers in the individual and small group markets. It also provides coverage, cost and eligibility information about the new Pre-Existing Condition Insurance Program (PCIP) and state high-risk pools, Medicaid, and the Children’s Health Insurance Program (CHIP).

Using the so-called Plan Finder, consumers can see a list of all individual health insurance policies sold in their community. (Some insurers do not yet submit data to healthcare.gov.) Consumers can narrow their search and sort plan information based on enrollment, name of carrier, premium, cost sharing levels, and other coverage features.

The site displays standard rate premium information (that is, prices insurers would offer people in perfect health) for each plan option based on an individual’s age, gender, smoking status, family size, and location. In addition, it provides information about how often applicants for medically underwritten policies are turned down or offered surcharged premiums based on health status. The Plan Finder also displays summary information about covered benefits and cost sharing for each policy. Later this year, benefits and cost sharing information is expected to follow the format of the SBC required for all private health plans.

In the future, the Plan Finder will offer consumers other types of performance information about plans and insurers, based on data collected under Section 2715A authority, including the percent of individual policies that are rescinded; the percent of claims that are denied under each policy, and the number and disposition of appeals of denied claims. Elsewhere on the site, consumers can search information about individual and small group market insurers relating to rate review actions and medical loss ratios.

For small employers, the Plan Finder provides similar information about small group policies offered in each community. Small employers can see generally descriptive standard rate information, reflecting an aggregate of all cost sharing options offered under a plan and the demographics of all small businesses that might purchase a plan. The site does not provide Information about how often insurers surcharge premiums based on a group’s health status.

For low-income individuals, the Plan Finder also provides information about Medicaid and CHIP.
Issues involving money and ideology have largely dominated the debate about the ACA during and following its passage, and that’s not necessarily surprising. But as a result, so far at least, less attention has been paid to other ACA changes that would promote greater transparency in health insurance. These provisions may well be less controversial (though surely their implementation has and will engender debate about regulatory burdens) and more popular overall to the extent that they help consumers and small businesses understand how coverage works, reduce their search costs in buying insurance, and foster competition among insurers.