May 13, 2022

On April 19, 2022, the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury – collectively the Departments – issued Frequently Asked Questions (FAQs) Part 53 addressing stakeholder questions related to the machine-readable file requirements established by the Transparency in Coverage (TiC) Final Rules.

Under the final rules, plans and issuers must disclose specific dollar amounts for the items and services covered by a plan. The Departments recognize, however, that some plans and issuers utilize alternative reimbursement arrangements that limit their ability to identify a specific dollar amount in advance of an item or service being provided. For example, using a contractual relationship in which a plan or issuer pays an in-network provider a percentage of billed charges. Under the new safe harbor, plans and issuers that use these alternative arrangements will be permitted to reflect a percentage number in the In-network Rate File.

The TiC Final Rules for machine-readable files are effective for plan years beginning January 1, 2022; however, the Departments deferred enforcement of the in-network and out-of-network data requirements until July 1, 2022 (and indefinitely deferred the prescription drug data requirements, subject to additional guidance).

Background on Transparency in Coverage Machine-Readable Files

The original TiC Final Rules require individual and group health plans and health insurance issuers offering non-ACA grandfathered health coverage to disclose the following information on a public website: (i) in-network rates for covered items and services, (ii) out-of-network allowed amounts and billed charges for covered items and services, and (iii) (now further delayed), negotiated rates and historical net prices for covered prescription drugs. This information must be provided in three separate machine-readable files.

In-network Rate File must include all applicable rates, including negotiated rates, underlying fee schedule rates, or derived amounts for all covered items and services. The Departments specify in the preamble to the TiC Final Rules that the In-network Rate File requirement is applicable to all plans and issuers regardless of the type of payment model(s) used to provide coverage. If the plan or issuer does not use negotiated reimbursement rates, the plan or issuer must report on the In-network Rate file derived amounts for the items or services, to the extent those derived amounts can be calculated in the normal course of business. Crucially, the TiC Final Rules require that this informaiton – whether negotiated rates or derived amounts – be presented in the In-network Rate File as dollar amounts.

The Departments recognized plans and issuers may use alternative reimbursement arrangements that do not have associated dollar amounts for particular items or services. The preamble to the TiC Final Rules included a non-exhaustive list of alternative arrangements (e.g., bundled payment; capitation; reference-based pricing), with the Departments summarizing their general reporting expectations.

FAQs Part 53 Establishes Safe Harbor for In-Network Rate File Requirement

The Departments issued FAQs Part 53 to address feedback from plans and issuers that use alternative network reimbursement arrangements that may prevent them from reporting dollar amounts in the In-network Rate File. FAQs Part 53 specifically highlights stakeholder questions relating to “percentage-of-billed-charges” contract arrangements, acknowledging that these arrangements are not uncommon.

• FAQ Part 53 Q1: The Departments state that plans and issuers using “percentage-of-billed-charges” contracts may report a percentage number in the In-network Rate File, in lieu of a dollar amount. The FAQs give the example that if a negotiated arrangement for a particular item or service is reimbursed for 70 percent of billed charges, and the plan or issuer is unable to ascertain the specific dollar amount in advance, the plan or issue may report the in-network rate of 70 percent in the machine-readable file.
• FAQ Part 53 Q2: The Departments acknowledge that the technical format (schema) for the In-network Rate File may not align with alternative reimbursement arrangements, and/or certain plans or issuers may need to provide additional information to describe the nature of the in-network negotiated rate. As such, the Departments are adding an open text field to the file format that can be used to provide a description of the formula, variables, or other information necessary to help participants understand the reimbursement arrangement.

The FAQs state that this enforcement safe harbor will only apply to a particular alternative reimbursement arrangement if the Departments determine that arrangement cannot sufficiently disclose a dollar amount. Additionally, the Departments note that they will monitor implementation of the machine-readable file requirements and may revisit this safe harbor in the future

Next Steps for Employers

The TiC Final Rules took effect for plan years beginning on or after January 1, 2022; however, advocacy by Business Group on Health led the Departments to delay enforcement of the machine-readable files disclosing the in-network and out-of-network data until July 1, 2022, and defer enforcement of the prescription drug-related machine-readable files indefinitely pending future rulemaking if appropriate.

Employers should review the FAQs Part 53, consult with legal counsel, as necessary. Employers should also continue working with their vendor partners to implement in machine-readable file requirements inclusive of this guidance and be prepared to comply with the In-network Rate File and Out-of-network Rate File disclosures by July 1, 2022.

If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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