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The Prudent Perspective

COMPANY INSIGHTS

Perception Vs. Reality

Restricting Gag Clauses for Greater Transparency in Healthcare


Did you know that the United States spends significantly more on healthcare than comparable countries, and yet has worse health outcomes? Since 2008, average family premiums have increased by 55%, which is twice as fast as workers’ earnings (26%) and three times as fast as inflation (17%). When will the continuous rise of healthcare costs cease? This runaway freight train can be stopped if we have the fortitude to advocate and take action to correct the course. Thankfully, there are a number of ways to bring transparency to health care plans, mitigate rising costs, and benefit self-insured employers and the employees they support.

 

One area of opportunity is for health plans and health plan fiduciaries to pay closer attention to Billing and Insurance-Related (BIR) costs.  These costs, as well as hospital or physician practice administration expenses, are crucial elements in inflated costs driving the healthcare trend.[1] BIR costs include, but are not limited to, managing care administration, retrieving prior authorizations, filing claims, and communicating between parties. The most comprehensive study on excessive fees was done by The New England Journal of Medicine in which they found that US health care administrative costs account for 30% of total health care expenditures.[2]

Evidence has indicated that these fees are not determined by or related to the costs of efficiently producing health care services. Rather, these fees are largely driven by providers’ success, or lack thereof, in negotiating with carriers. Employers are left in the dark in regard to these provider negotiations in the typical self-insured carrier model. They have no leverage when it comes to extracting pricing that is most beneficial to the plan and delivering value. Due to this black box, self-insured providers have been unable to influence this substantial driver of increasing health care prices.[3]

Although there is a choice between plans with different characteristics, pricing is usually not visible to self-insured employers. Even when contracting with the same carrier, prices can vary drastically between plans and there is no way to foresee a reasonable rate for employees. Due to gag clauses, price variations could be purposefully opaque with no repercussions.

However, there is good news for self-funded health plans and it comes as a result of the new Consolidated Appropriations Act (CAA) of 2021. For the first time, the CAA makes clear that health plan administrators and self-funded employers, pursuant to ERISA, must demonstrate care in what services their employees are receiving, and observe it for quality control as well as cost efficiency. The CAA enables self-insured employers to be compliant with those requirements and feel confident that they are fulfilling their fiduciary role to the best of their ability.

 

Moreover, Section 201 of the CAA removes gag clauses on price and quality information. By prohibiting group health plans, health plan insurers, and issuers of health insurance coverage from entering into contracts that keep data intentionally opaque, self-insured employers are able to compare prices to make more informed decisions. As a result, they are able to improve the health of employees and use network steerage for cost savings. This will drive patients to resources such as “Centers of Excellences” that offer upgraded care.

 

The CAA of 2021 prohibits health plans from entering into contracts that would restrict the following:

  • Providing provider-specific cost or quality of care information or data through a consumer engagement tool or other means, to referring providers, the plan sponsor, enrollees or individuals eligible to be enrollees
  • Electronically accessing de-identified claims information for each enrollee in the plan (in accordance with HIPAA, GINA and the ADEA) including, on a per claim basis
  • Financial information, such as the allowed amount, or any other claim-related financial obligations
  • Provider information, including name and clinical designation
  • Service codes or any other data element included in a claim
  • Sharing information or data described above with a business associate (as defined under HIPAA)

Self-insured employers should immediately review their contracts in order to determine if such clauses exist, level set with their contracted vendors regarding their expectations on the delivery of any such information, and utilize this newly available data to extract value from the health plan. Doing so will not only save members and the plan substantial sums, it will allow the self-funded plan administrator to truly fulfill their fiduciary obligation pursuant to ERISA.  


 

[1]Elsa Pearson, “How much is too much? What does the US actually spend on health care administration?”, The Incidental Economist Blog, April 4, 2018, available at https://theincidentaleconomist.com/wordpress/how-much-is-too-much-what-does-the-us-actually-spend-on-health-care-administration  

[2]New England Journal of Medicine. 2021. Costs of Health Care Administration in the United States and Canada | NEJM. [online] Available at: <https://www.nejm.org/doi/full/10.1056/nejmsa022033> [Accessed 28 October 2021].    

[3]Self-Insured Employers Are Using Price Transparency To Improve Contracting With Health Care Providers: The Indiana Experience | Health Affairs Blog     https://www.healthaffairs.org/do/10.1377/hblog20191003.778513/full    

 

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December 3, 2021

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