The Departments of Labor, Health and Human Services (HHS) and the Treasury jointly issued ACA Frequently Asked Question (FAQ) 21 on October 10, 2014. FAQ 21 addresses the maximum out-of-pocket (MOOP) limits (under Public Health Service (PHS) Act section 2707(b)) and lists the factors the Departments will consider to determine whether a large non-grandfathered plan that uses reference-based pricing is using a reasonable method.
Prior FAQs (FAQ 19, Q4) provided that if a plan includes a network of providers, the plan may:
- treat providers that accept the reference-based price as the only in-network providers, and
- not count toward the MOOP limit any or some cost-sharing amounts participants pay for services rendered by other providers,
- as long as the plan (or issuer) uses a “reasonable method” to ensure that it offers adequate access to quality providers.
The ramification for participants is that they may have to pay more money before they reach the MOOP limits and the plan begins paying 100% of eligible expenses. If a participant receives services from a medical provider that charges more than the reference-based price the plan has set, the participant will have to pay this additional amount, and the plan can exclude the entire amount the participant paid (not just the additional amount) from the participant’s MOOP. This is because plans can provide that participants’ out-of-pocket spending for out-of-network items and services do not count toward the annual limit on cost sharing.
The FAQs applies only to reference-based pricing in non-grandfathered large group insurance market and self-insured group health plans. For non-grandfathered plans in the individual and small group markets that must cover the essential health benefits under ACA section 1302(a), additional requirements apply.
What is Reference-Based Pricing?
Reference-based pricing is a pricing structure under which the plan pays a fixed amount for a particular procedure (for example, a knee or hip replacement), which certain providers will accept as payment in full. In FAQ 19, the Departments explained that reference-based pricing is designed to encourage plans to negotiate treatments with high quality providers at reduced costs. Also in FAQ 19, the Departments also expressed concern that plans might use this as a subterfuge to impose unacceptable limits on coverage, without ensuring access to quality care and an adequate network of providers.
As noted above, the prior FAQ allows plans to treat providers that accept the reference amount as the only in-network providers, as long as the plan or issuer uses a reasonable method to ensure that it offers adequate access to quality providers. The FAQ also solicited comments on the application of the MOOP requirements to such benefit designs,
Factors to Determine Reasonableness of a Reference-Based Pricing Structure
The question in FAQ 21 is:
Q: Under PHS Act section 2707(b), what specific factors will the Departments consider when evaluating whether a non-grandfathered plan that utilizes reference-based pricing (or similar network design) is using a reasonable method to ensure that it provides adequate access to quality providers at the reference-based price?
The answer is that the Departments will consider all the facts and circumstances, including the following. The Departments will continue to monitor the use of reference-based pricing and may provide additional guidance in the future.
1) Type of service. Plan standards should ensure that the network is designed to offer benefits for services from high-quality providers at reduced costs, and does not function as a subterfuge for otherwise prohibited limitations on coverage. Specifically, reference-based pricing that treats providers that accept the reference amount as the only in-network providers:
- Should apply only to those services for which the period between identification of the need for care and provision of the care is long enough for consumers to make an informed choice of provider. (Not to services that are needed immediately.)
- Would not be considered reasonable with respect to emergency services. That is, a plan cannot limit or exclude cost-sharing from counting toward the MOOP with respect to providers who provide emergency services and do not accept the reference-based price. Furthermore, PHS Act section 2719A prohibits a non-grandfathered plan from applying a more restrictive network for emergency services than for other services.
2) Reasonable access. Plans should have procedures to ensure that an adequate number of providers that accept the reference price are available to participants and beneficiaries. Plans should consider reasonable geographic distance measures, whether patient wait times are reasonable, and network adequacy approaches developed by States.
3) Quality standards. Plans should have procedures to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.
4) Exceptions process. Plans should have an easily accessible exceptions process, allowing services rendered by providers that do not accept the reference price to be treated as if the services were provided by a provider that accepts the reference price if:
- Access to a provider that accepts the reference price is unavailable or service cannot be obtained within a reasonable wait time or travel distance.
- The quality of services with respect to a particular individual could be compromised with the reference price provider (e.g., if co-morbidities present complications or patient safety issues).
5) Disclosure. Plans should provide the following disclosures regarding reference-based pricing (or similar network design) to plan participants free of charge.
- Automatically. Information regarding the pricing structure, including a list of services to which the pricing structure applies and the exceptions process. (This could be in the plan’s Summary Plan Description or similar document.)
- Upon Request. Plans should provide:
o A list of providers that will accept the reference price for each service;
o A list of providers that will accept a negotiated price above the reference price;
o Information on the process and underlying data used to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.