Starting Sept. 23, 150 million private health plan customers will be able to shop for coverage with the use of advertising materials that use the same template, so buyers can get apples to apples comparisons, according to the Centers for Medicare & Medicaid Services final rule released Thursday.
"For too many Americans today choosing a health plan means reading through a human resources booklet usually the size of a small phonebook," said Acting CMS Administrator Marilyn Tavenner during a news conference.
"If an insurance plan offers subpar coverage in some areas, they won't be able to hide it in dozens of pages of text. They'll have to come right out and say it. And this will create a more competitive marketplace where insurers are motivated to improve their product."
Tavenner also said, "Important information about eligibility and benefits is often buried in the fine print. And it can be confusing to compare one plan to another.... With these new rules today, we're making it easier for consumers to find the plan that's right for them. Specifically, these rules will assure consumers have access to key documents that will help them understand and evaluate their health insurance choices."
The release of the final rule was mandated by Section 2715 of the Affordable Care Act, which required the Secretary of Health and Human Services to "consult with the National Association of Insurance Commissioners" to develop these standards.
The "Summary of Benefits and Coverage" or SBC, required by each plan includes a four-page template summary revealing such specifics as the plan's overall deductible, other deductibles for specific services, annual limits, out-of-pocket limits on expenses and what's not included in the out-of-pocket limit.
Other disclosures include "services this plan doesn't cover," and the specific costs for a typical service, such as a visit with a primary care or specialist provider to treat an injury or illness, in both an in-network or an out-of-network provider, and any limitations or exceptions they may include.
Each plan also will have to provide examples of how it will cover two categories of healthcare services, having a baby with a normal delivery, and routine maintenance of well-controlled Type 2 diabetes. Each scenario includes breakdowns for specific charges.
For example, the cost of having a normal delivery baby would include disclosure of separate charges for the mother and baby, anesthesia, routine obstetric care, prescriptions, radiology, lab tests and vaccines, and how much the plan pays to provider, and how much the patient pays.
A third category of a healthcare service that was listed in the proposed rule, treatment of breast cancer, was dropped in the final rule because of concerns that breast cancer treatments are widely variable, but Steve Larsen, CMS Director of the Center for Consumer Information and Insurance Oversight, said that six other healthcare categories of service that are considered expensive will be added in future rulemaking.
Also dropped from the proposed rule is the requirement that plans list their premiums because those rates vary by medical status, family size and other factors and CMS officials said they thought it would be unnecessarily confusing. Besides, all health plan shoppers would already know their premium rates. "The information is readily available in a number of other formats," Larsen said.
The new rule carries a penalty for any plan that “willfully fails to provide the information required under this section" that does not exceed $1,000 for each failure.
Other elements of the new rule include
- A specific glossary of terms used in health insurance marketplace such as "deductible" and "co-payment."
- Requirements that plans make these documents available when applicants are shopping for coverage, when changes are made prior to the first day of coverage, upon coverage renewal or upon request.
According to the final rule, these "improvements will result in a more efficient, competitive market...(and will reduce) the time (consumers) spend searching for and compiling health plan and coverage information.
The federal agencies that wrote the rule, including the Internal Revenue Service, HHS and the Department of Labor, estimated the cost of producing these templates will be $73 million, but in fact will be lower in part because they allow greater flexibility for electronic disclosure.
In a statement, Karen Ignagni, President and CEO of America's Health Insurance Plans, said the final regulation makes important improvements, but said the industry needs more time to implement the change "to avoid imposing costs that outweigh benefits to consumers."
"The final rule requires an almost complete overhaul and redesign of how information must be provided to consumers," Ignagni said. "The short time frame in which to implement this new requirement creates significant administrative challenges that will increase costs and result in duplication because many plans are already developing materials for employers whose policies take effect October 1, 2012."
She also took issue with the rule's requirement that separate documents be available for each potential family size and for every possible benefit design option, including different cost-sharing levels, prescription drug formularies, and network designs.
"Requiring a separate document for each coverage scenario will significantly increase administrative costs and potentially result in consumers having to sort through scores of pages of coverage information,” she said.