Must-share Details with the Public for Improved Transparency

The healthcare industry is witnessing a cultural shift, and aligning business goals along member-centricity. This shift is propelled by both member expectations as well as the plethora of rules and regulations.

One such rule is Transparency in Coverage, requiring organizations to divulge cost-sharing details with those concerned, promoting better care decisions.

Back in November 2020, ‘The Departments’ released a set of new requirements under the Transparency of Coverage rules. The Final Rules released had a list of mandated cost-sharing specifications. The specifications were split into two – one for Participants, Beneficiaries, or Enrollees, and the other for the Public.

The mandated requirements for the first part, i.e. for the enrollees, have already been discussed in the previous blog. Here we take a look at the mandated cost-sharing requirements for the public.

The Final Rules require plans to make the pricing information public, periodically, in 3 different files. This is done to facilitate easy comparison between multiple plans and providers, allowing consumers to make informed decisions regarding their health and cost.

It is required that plans publish these files once every month on the website, where they are easily accessible.

The Departments are concerned that with multiple files on different plans’ websites, consumers may struggle to get the right information. To avoid this confusion, they have allowed third-party vendors to provide the required information in the most innovative and user-friendly interfaces. The departments are also specific with the three common content elements that must be available in all the files – the name and identifier for each coverage, billing code, and the rates for the service. Other than the three content elements, they have also finalized the inclusion of the provider’s TIN, NPI, and the Place of Service (POS) Code.

The three files are:

1. In-network File

Based on the reimbursement models, issuers have to disclose the negotiated rate between the issuer and providers in dollar amounts. In the absence of a negotiated rate, issuers must provide details of the underlying fee schedule rates.

2. Allowed Amount File

The file must have all out-of-network allowed amounts paid by the issuer for service under a unique combination of NPI, TIN, and POS. The allowed amounts listed must have all data from the first 90 of 180 days before the file’s publication date. To protect the privacy of the member, the file should contain details of only the unique combination, for which the issuer has paid more than 20 claims.

3. Prescription Drug File 

The issuer will disclose the in-network negotiated rate and the Historical Net Price for prescribed drugs. The Historical Net Price will be calculated from the first 90 of 180 days before the file publication date. The information must be coded using standards assigned to the NDC by the FDA for each prescription drug.

All three files should be in a machine-readable format that is Non-Proprietary like JSON and XML. These files must be updated every month to make sure that the latest information is available to the public. The Departments have provided a technical implementation guide for the above rules at GitHub.

Amendment to the Medical Loss Ratio (MLR) Calculation Formula

The Department of Health and Human Services (HHS) has updated the formula to calculate the Medical Loss Ratio (MLR). According to the Public Health Service (PHS) Act, an issuer offering group or individual health insurance coverage must provide rebates to enrollees if the issuer’s MLR falls below a specific threshold. For private issuers, the MLR range is between 80 to 85 percent. For a non-profit issuer, the ideal MLR would be 100, indicating that the organization is spending either by reimbursements or running quality improvement programs with the amount they collect through premiums.

Traditionally, MLR was calculated as a percentage of claims’ reimbursement by the premium received.

 MLR = Claim Reimbursement Amount / Premium Amount

This equation was designed to ensure that issuers were proportionally profitable and adhered to a member’s wellbeing. According to the ACA 2010 act, certain modifications were made to the formula to account for Quality Improvement expenses.

In the numerator, the reimbursement amount was taken into consideration, while for the denominator, they reduced certain amounts that didn’t contribute towards revenue, like taxes, regulatory fees, etc. These changes encouraged issuers to run quality improvement programs for members.

MLR = ( Claim Reimbursement Amount + Quality Improvement ) / ( Premium Amount − Taxes,  Regulatory Fees )

Now, to encourage better coordination between issuers and enrollees, HHS has updated the numerator of the MLR formula to account for “shared savings” as well.

 MLR = ( Claim Reimbursement Amount + Quality Improvement+”Shared savings” ) / ( Premium Amount − Taxes,  Regulatory Fees )

This will encourage issuers to connect frequently with enrollees to ensure if they are selecting low-cost, high-value providers. To achieve this, enrollees must consult the issuer before shopping for the services, as they would have more details on various in-network and out-of-network rates.

Under the new amendment, enrollees have to go through the services, so that issuers will get the credit under MLR. Queries or recommendations alone will not suffice.

In Conclusion

All the above information when disclosed to the public, would help consumers take well-informed, all-rounded healthcare decisions that are pocket-friendly for them.

In order to implement these compliances, issuers must bring about adjustments or modifications to their health plans, business processes, and even their IT infrastructure.

Connect with healthcare experts at Nalashaa and discuss the impact the new rules, under the Transparency in Coverage Final Rule, could have on your organization. Reach out to us at

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Pankaj Kundu

Pankaj Kundu

Pankaj has vast experience ranging from claims processing engine to application of machine learning algorithms in US Healthcare. As a Healthcare Business Analyst, he is passionate about addressing healthcare data/process related challenges and ideating solutions for clients.
Pankaj Kundu

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