When it comes to enforcing price transparency, the discussion centers around the federal hospital and insurance rules, which require them to make pricing information publicly available. However, there is another rule that would have a greater impact, ushering price transparency into our healthcare system. That is the Advanced Explanation of Benefits (AEOB).
An AEOB is a clear, itemized price of the total cost of care given to a patient before they receive treatment. When a patient makes an appointment or requests an AEOB, this rule requires the provider to send a good-faith estimate (GFE) of the expected charges to that patient’s health plan. If a person is uninsured, then the GFE is given directly to the patient. Once the health plan receives the GFE, it must use that information to create an AEOB for the patient.
The AEOB must include the network status of the provider and facility, or (if it is out-of-network) information on where to find in-network providers and facilities. It must also share the original GFE and contracted rate for the service, how much the insurance plan is expected to pay, what the individual may owe, and how much they’ve already paid toward their financial limits, such as a deductible. Finally, it must disclose whether coverage depends on medical management techniques such as prior authorization, and have a disclaimer that the information is based on estimates at the time of scheduling.
The AEOB rule comes from the No Surprises Act, signed by President Trump in 2020. This act aimed to protect consumers from surprise medical bills by only allowing patients to be charged their regular in-network cost-sharing amounts for out-of-network care that was provided during an emergency or at an in-network facility.
The law went into effect on January 1, 2022, and most of it has been implemented. However, the AEOB requirement has still not gone into effect. Uninsured or self-pay patients have been required to receive a GFE from their provider. This is not the case for insured patients whose GFE would be sent to their health plan to create an AEOB. This was delayed because the industry claimed not to have the infrastructure necessary to comply, despite the process being very similar to a regular explanation of benefits that patients receive after their care. Almost four years later, the rule is still not implemented.
The Centers for Medicare and Medicaid have provided updates on their progress towards rulemaking and implementation of this requirement, most recently in December 2024. These updates were expected to help speed up the rulemaking and implementation process, but this has yet to be done.
Finally implementing the AEOB requirement is crucial to ushering in the benefits of price transparency into our healthcare system. Requiring hospitals and health plans to make pricing data available is a necessary first step, but patients and their families must be able to understand and use that data to make informed choices about their health care. Once they are empowered to do so, the healthcare industry will have to compete for their business, incentivizing hospitals, insurance companies, and all providers to lower costs. The sooner this rule is finalized, the sooner we can truly address rising healthcare costs.