HHS Finalizes Payer Transparency Rules

Ethan HeidornHealthcare Policy

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Quick Summary:

  • Beginning in 2022, insurers must post online machine-readable files that include their in-network negotiated provider rates, out-of-network coverage rates and in-network negotiated drug prices, including historical net prices.
  • Beginning in 2023, insurers must offer an online shopping tool or similar platform that includes an out-of-pocket cost estimate and negotiated prices for 500 of the “most shoppable” services, with the remaining services required in 2024.
  • The Final Rule does not apply to “grandfathered plans” under the ACA, nor does it directly apply to PBMs.

Deeper Dive:

In their continued efforts to shed light on the opacity of the healthcare market, HHS has finalized rulemaking on price transparency for payers. The “Transparency in Coverage” Final Rule from HHS, the Department of Labor (DOL), and the Department of the Treasury (DOT) are designed to empower consumers to make informed financial decisions regarding their healthcare utilization. Just last year, HHS imposed similar rules for hospitals in the “Hospital Price Transparency” Final Rule requiring hospitals to provide patients with easily accessible information about standard charges for items and services offered by the hospital, including privately negotiated payment rates with insurers. Naturally, this was met with legal rebuttals from the American Hospital Association (AHA) and other hospital groups which were eventually struck down in June by a federal district court. The present rule will be no different with expected rebuttals from across the industry, America’s Health Insurance Plans (AHIP) most notably. PhRMA has declined to say if they will support litigation against the rule, but the requirement to publish negotiated rates and historical net prices increases the likelihood of joining the legal challenge. The Final Rule was originated as an Executive Order in June 2019 resulting in the proposed rule in November of 2019, eventually finalized at the end of October 2020.

HHS Goals:

Ultimately, the Departments continue to hold the “view that the release of this information is appropriate and necessary to empower consumers to make informed decisions about their health care, spur competition in health care markets, and to slow or potentially reverse the rising cost of health care items and services.” An ambitious goal to say the least. HHS specifically comments on the disclosure of net price to be essential in price transparency efforts to “put consumers on notice when the net price is less than their cost-sharing amount.” The published information has the ability to show flaws in our prescription benefit design as patient cost-shares commonly outpace negotiated prices, although that fact is already well-substantiated without this rule.


Expectations for Payers

According to the Final Rule, these requirements will be implemented over the course of the next 3 years giving issuers time to develop the applications necessary. The Final Rule is highlighted by two measures:

  • First, beneficiaries will have access to patient-specific cost-liability estimates regarding drug prices and shoppable services.
  • Secondly, plans and issuers will be required to make publicly available files showing in-network and out-of-network rates for services along with their negotiated drug prices and historical net drug prices.

This blog focuses on the drug price transparency requirements.

Drug Price Transparency

The Final Rule imposes two requirements on payers relating to drug pricing. First, payers must make certain drug pricing information publicly available through machine-readable files. Second, upon the request of a participant, a payer must make available certain pricing disclosures. The drug price provisions, which would not begin until 2022, were a surprise because they were not included in the original proposed rule issued in 2019.

Public Disclosures

As the Final Rule states, “plans and issuers will also be required to disclose on a public website their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.” The health plans will be required to publicly post both a ‘negotiated rate’ and a ‘historical net price’ by NDC in “the Prescription Drug File.”

  • Negotiated rate: The negotiated rate is defined as the amount a group health plan or issuer has contractually agreed to pay an in-network provider, including an in-network pharmacy or other prescription drug dispenser, whether directly or indirectly, including through a third-party administrator or pharmacy benefit manager. The negotiated rate must be reported on an NDC basis rather than an aggregate amount across a drug class.
  • Historical net price: HHS is defining the historical net price as “the retrospective average amount a plan paid for a prescription drug, inclusive of any reasonably allocated rebates, discounts, chargebacks, fees, and any other additional price concessions received by the plan.”
  • For the purposes of the Final Rule, the Departments are concerned with the price ultimately paid by a plan or issuer to a drug manufacturer (or the price their PBM/TPA ultimately pays to the manufacturer).
  • Publishing the current net price would be impossible with the delay in rebate and price concession final payments.
  • In the unique case of longer value-based contracts, HHS expects plans to use a “good faith estimate” of the total concession.
  • The rule will not specifically require plans to disclose rebates and other discounts they negotiate with drug makers and pharmacy benefit managers. Yet, the inclusion of net prices on an NDC level reveals much of what is not required to be shared through rebates and other discount data.

Requirements of Plans to Members:

Under the Final Rule, starting in 2024 an insurance plan member can request and receive estimates of out-of-pocket costs for prescription drugs, taking into account the member’s deductible, coinsurance, and copays. Although the Final Rule would now make this information a requirement, most plans already offer such cost-estimator tools. The disclosure of prices for the shoppable medical services holds greater enlightening for consumers due to the relative rarity in price estimating medical claims as opposed to the pharmacy level drug claims.


The proposed rules have been finalized, however, they are not slated to take effect until at least 2022. Legal challenges surely pose a potential threat to the timing and content of the Final Rule. Additionally, a new administration could postpone many of the outgoing initiatives during the final months of the current administration. However, the Biden administration appears likely to keep the new price disclosure rule for health plans. In July, the Biden campaign issued a joint policy statement with Sen. Bernie Sanders favoring increased price transparency in health care.

Potential Implications:

The premise that price transparency will direct consumer behavior in healthcare remains highly questionable. The most impactful downstream effects for the ruling will be three-fold.

  1. The potential for increased price shopping among elective procedures. Although consumers often have the misguided belief that increased prices equate to increased quality, the opportunity to compare and prepare for expenses in elective procedures gives savvy consumers the option to direct themselves to more cost-effective care. The payers who most successfully correlate some level of quality information along with the price for patients will be better able to direct members to lower-cost providers.
  2. The level of data made publicly available could indirectly impact future legislation. Allowing researchers more direct access to quality negotiated pricing data could serve as fuel for Congress to tackle more broad and direct actions to impact drug pricing.
  3. Publishing negotiated rates among competitors could impact the rates achievable by smaller health plans. That is the bet HHS has made although there is much debate as to whether publishing negotiated rates allows smaller plans to share in large payer discounts or simply raise the average negotiated rate across payers of all sizes.


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