All-Payer Claims Databases: Should Self-Funded Employers Participate?

By now, several self-funded employers have received communications from their third-party administrator (TPA) asking whether they would like to opt-in to participate in a state data collection database, commonly referred to as “All-Payer Claims Databases” (APCD). In some states, laws mandate certain entities submit claims and health plan information to a central state-run database; because of the Employee Retirement Income Security Act (ERISA) preemption, participation is optional for self-funded employers. Below we will explain what an APCD is and if self-funded employers should consider participating.

What Is an All-Payer Claims Database?

APCDs are large-scale databases designed to collect public and private payer healthcare claims and diagnostic data and provide the public access to the aggregated information. Currently, 22 states have enacted APCDs with the intention to use the data to improve healthcare affordability, efficiency and cost transparency. APCDs generally include market plans, Medicaid and Medicare Advantage plans. Federal Employee Health Benefit (FEHB) Program Plans and Veterans Health Administration plans are typically excluded as well, as are most federally managed and self-funded plans.

Advantages of APCDs

These datasets study the link between clinical outcomes and spending based on plan design using the exchange of provider health information. Employers can use the data collected to promote improvements in healthcare outcomes, costs, quality, access, utilization, disparities, population health and the availability of healthcare services.

The healthcare services costs negotiated by insurers and providers have traditionally been veiled in secrecy. This lack of transparency has resulted in higher premiums and increased out-of-pocket costs for medical procedures and pharmaceutical drugs. Plan types like a preferred provider organization (PPO) or health maintenance organization (HMO) manage costs by defining a provider network for plan participants to use, with higher costs associated with services outside of that network. High-deductible health plans (HDHPs) manage costs by lowering premiums in exchange for larger out-of-pocket upfront expenses. The larger upfront out-of-pocket expenses incentivize plan participants to make better and more informed choices before seeking services, with the assurance that emergency care is still well covered.

APCD’s unique datasets make healthcare data easily accessible to policymakers, researchers, employers and plan participants. They often include patient care information across multiple care sites, rather than limiting data to hospitalizations and emergency department visits. The large sample sizes and greater geographic representation capture a wide range of information about the procedural and diagnostic habits, as well as associated costs, for individual patients. APCDs promote transparency, informed decision-making, and improved healthcare outcomes in states that enact them. They also empower employers to determine which insurer provides the most cost-effective health coverage based on verifiable data.

APCD Privacy and Security Concerns

Employers have good reason to be concerned about APCD’s security standards. The Health Insurance Portability and Accountability Act (HIPAA) defines “covered entities” as: health plans, health clearinghouses, and providers who transmit information electronically. APCDs are considered government-run entities and do not fall under the definition of a covered entity. APCDs that contract third-party vendors to collect or maintain the database are also not subject to HIPAA.

However, despite not being considered a covered entity, many APCDs become subject to HIPAA in their legislative construction with some states placing stricter security and privacy requirements on the databases. Additionally, these databases are not uniquely different from the variety of other government undertakings concerning highly sensitive data. Although some level of concern may be warranted, self-funded employers who opt to voluntarily submit data to an APCD can be assured that their employees’ data is adequately protected.

ERISA Preemption of an APCD

As mentioned above, certain entities are required under state law to submit data to APCDs. These include fully insured health plans, state-run health plans, and insurers licensed to provide health insurance in the state. Employers who sponsor self-funded health plans are exempt from mandatory submission through ERISA preemption as ruled by the Supreme Court in Gobeille v. Liberty Mutual Insurance Company.

In 2022, self-funded health plans covered 65% of the U.S.-insured workforce. The use of self-funding among employers, especially in larger firms, has increased over time and is considered to represent a large proportion of the total claims processed in any given state. The absence of this data, due to the lack of mandatory submission, challenges an APCD’s effectiveness in fully understanding a state’s healthcare landscape and opportunities for improved healthcare outcomes and cost management. Self-funded employers are generally granted access to the database after voluntary submission. The benchmarking reports available in the database can be used to compare performance with other payers and identify specific ways an employer can save money and improve the health of their employees in subsequent plan years.

Should Self-Funded Plans Voluntarily Submit to an APCD?

The decision to submit the required health and claim information to an APCD is ultimately up to the plan administrator of a self-funded plan sponsor. Many self-funded TPAs will submit the required data on behalf of the employer after receiving a signed opt-in form. No additional work is usually required from the employer.
Healthcare stakeholders often do not have a comprehensive and cohesive view of how the systems of health are performing and where the systems are failing. The data currently collected by APCD’s required submitters is vast enough to substitute for the lack of mandated self-funded health plans. However, to develop targeted and effective solutions for all, self-funded employers should consider voluntary submission. Opting in would expand the ability of all stakeholders involved to analyze statewide and national healthcare markets properly and more accurately.

Summary

Several states have mandated certain entities to submit health and claim data to their All-Payer Claims Database. Self-funded plan sponsors, under ERISA preemption, are not required to participate. The databases are generally structured to adhere to HIPAA’s security and privacy protocols with safety provisions similar to other government data collections. TPAs will generally submit the required information once a self-funded plan administrator decides to opt in.

APCDs serve as a way for employers, consumers, legislators, and various stakeholders to examine healthcare spending and utilization by analyzing claims data across payers, providers and plan designs. This can lead to greater transparency, improved preventive measures, and cost-saving decision-making for all stakeholders involved. So, while not required, self-funded plan sponsors should consider opting in to help foster market competition and lower healthcare pricing.

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EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.