Healthcare Price Transparency

From ChamberChoice

On June 24, 2019, President Trump signed an executive order calling for hospitals and other healthcare providers to publicly disclose pricing. This is part of a longrunning effort to increase transparency in the cost of healthcare and assist consumers in making educated decisions in how to use tax-preferred accounts, such as HSAs, to pay for health services.

Hospitals, insurers, and drug manufacturers criticized several aspects of the June 24 Executive Order, including the requirement for providers to publicly disclose negotiated rates with insurance companies. However, many features of the Order will not take effect until the Department of Health and Human Services issues regulations consistent with the Order. It is possible, if not probable, that these eventual regulations could face legal challenges given the far-reaching effects of the rules and the characterization of much of this data as proprietary or protected by providers.

A similar, earlier rule advanced by the Trump Administration required prescription drug manufacturers to list the price of medication in television ads. This rule was intended to assist consumers in making an educated decision on the cost of certain medications versus other potential alternatives, and it naturally attracted significant criticism from the pharmaceutical industry. Drugs with a list price under $35.00 per month would not have been affected by the rule; practically speaking, this exception would not have reached most of the drugs frequently advertised on television.

Drug manufacturers scored a win against this rule on July 8, 2019, when a federal judge blocked the rule from taking effect. The basis for this decision was that the Department of Health and Human Services (which issued the rule) lacked the jurisdiction to compel manufacturers to include pricing in television commercials. Note that this ruling does not address the merit of the rule and its effectiveness – those are separate issues from whether HHS is able to impose this requirement on manufacturers. Potentially, this rule could still take effect in the future with congressional action or if the Administration successfully appeals the July 8, 2019 ruling.

The goal of these transparency initiatives is to drive down healthcare costs through a combination of educating consumers so that they may make cost-saving decisions, forcing providers to disclose favorable network rates (potentially leading to lower rates overall), and bringing public attention to unconscionably high drug and provider costs that could “shame” these entities into reducing costs. Whether these initiatives will succeed, or are even allowed to take effect, is an open question.

This article gives a basic overview of recent regulation as in effect on the date of the article. Please be aware that the determination of the requirements and the application of these rules to each employer may differ due to a number of variables. Nothing in this newsletter should be construed as legal advice.