New FAQ Provides Updated Guidance on Reference-Based Pricing Under PPACA

NBCH thanks the American Benefits Council for the information provided in this post.


A new “frequently asked question” (FAQ) document was released jointly by the U.S. Departments of Labor (DOL), Health and Human Services (HHS) and Treasury on October 10, updating prior guidance on the application of Patient Protection and Affordable Care Act (PPACA) cost-sharing limitations for plans using “reference-based pricing.”

The new FAQ sets out specific factors that the departments will consider when evaluating whether a plan that uses reference-based pricing (or a similar network design) is using a “reasonable method” to ensure that it provides adequate access to quality providers at the reference base price.

Generally, reference-based pricing is a system under which the plan pays a fixed amount for a particular drug, procedure or other service (for example, a knee replacement), which certain providers will accept as payment in full. If an individual uses a provider that does not accept the reference price, the individual pays the difference between the reference price and the actual price of the service.


Under Section 2707(b) of the Public Health Service Act (PHSA), as added by PPACA, any annual cost-sharing imposed under a non-grandfathered group health plan must not exceed certain limitations on out-of-pocket costs. For plan or policy years beginning in 2015, these limits are $6,600 for self-only coverage and $13,200 for other coverage, with future limits increased by a statutorily-defined percentage.

On May 2, FAQ Part XIX explained, among other things, that the Departments would not consider a large group market plan or self-insured group health plan that utilizes a reference-based pricing design plan as failing to comply with the out-of-pocket limitations of Section 2707(b) because the plan or issuer treats providers that accept the reference amount as the only in-network providers. This would be the case as long as the plan or issuer uses “any reasonable method” to ensure that it offers adequate access to quality providers.

In the May 2 FAQ, the Departments explained that while reference-based pricing is designed to encourage plans to negotiate treatments with high-quality providers at reduced costs, there was also concern that such a pricing structure could be a “subterfuge” for imposing otherwise prohibited limits on coverage without ensuring access to quality or an adequate network. As a result, the May 2 FAQ solicited comments on the application of maximum out-of-pocket requirements to such benefit designs, indicating a particular interest in standards that plans or issuers using reference-based pricing should be required to meet to ensure that individuals have meaningful access to medically appropriate, quality care.

The October 10 FAQs about Affordable Care Act Implementation (Part XXI), consists of a single question and answer. It states that pending issuance of future guidance, for purposes of enforcing the requirements of Section 2707(b), the Departments will consider “all the facts and circumstances” when evaluating whether a plan’s reference-based pricing design (or similar network design) that treats providers that accept the reference-based price as the only in-network providers and excludes or limits cost-sharing for services rendered by other providers as using a “reasonable method” to ensure adequate access to quality providers at the reference price. The guidance specifies the following factors to be considered:

• Type of services provided: The guidance clarifies that limiting or excluding cost sharing from counting toward the out-of-pocket limitation with respect to providers who do not accept the reference-based price would not be considered reasonable with respect to emergency services.
  
• Reasonable access to an adequate number of providers: Plans should have procedures to ensure that an adequate number of providers that accept the reference price are in the network and are encouraged to look to state standards for adequacy, as well as reasonable geographic distance measures and wait times.
  
• Reasonable quality standards: Plans should have procedures to ensure that an adequate number of providers that accept the reference price meet “reasonable quality standards.
  
• An “easily accessible” exceptions process: The guidance indicates that such a process should be offered if access to a provider that accepts the reference price is unavailable (for example, the service cannot be obtained within a reasonable wait time) or the quality of the service with respect to a particular individual could be compromised with the reference price provider (for example, if co-morbidities present complications or safety issues).
  
• Disclosure to plan participants: Plans should automatically provide information regarding the pricing structure, including a list of services it applies to and the exceptions process, for example through the plan’s Summary Plan Document or similar document. Disclosures to be made upon request by plan participants include: a list of providers that accept the reference price for each service, a list of providers that will accept a negotiated price above the reference price and information on the underlying data used to ensure adequacy of providers who will accept the reference price and quality standards. 

The FAQ indicates that the Departments will “continue to monitor” the use of reference-based pricing and may provide additional guidance in the future.