husband and wife shockingly looking at surprise billing costs for medical expenses

On December 27, 2020, the No Surprises Act was signed into law as part of the Consolidated Appropriations Act of 2021. In July 2021, “Requirements Related to Surprise Billing; Part I” was released, with “Requirements Related to Surprise Billing: Part II” following in October 2021. The federal law went into effect January 2022. It limits surprise billing either in emergency settings or from out-of-network providers at in-network facilities. While many details of the Act are still being worked out, self-insured employers should be sure they’re ready to comply with the Act’s requirements.

What is surprise billing?

In the context of the No Surprises Act, a surprise medical bill is defined as, “an unexpected bill from a health care provider or facility that occurs when a covered person receives medical services from a provider or facility that, usually unknown to the participant, beneficiary, or enrollee, is a nonparticipating provider or facility with respect to the individual’s coverage.”

When could this occur?

Surprise billing could occur in either emergency or non-emergency settings. In an emergency setting, a person is supposed to go to the nearest emergency room. In some instances, even if they go to an in-network facility, they could unknowingly be treated by out-of-network providers and therefore out-of-network costs. For non-emergency care, a person may use an in-network facility or provider, but other providers involved in care could be out-of-network. In either case, the person may not be able to ensure each provider is in-network. So when the bills from out-of-network providers or facilities come, they are charged out-of-network rates as well as possibly being balance billed.

Let’s look at an example of how this could occur.

Susan needs surgery so she selects an in-network facility to have the procedure. Little did she know that the anesthesiologist and radiologist involved in her care were both out-of-network. Therefore, both providers billed Susan at the out-of-network rate, which was significantly higher than the in-network rate. In addition, she was billed the additional amount not covered by her employee health plan.

How common is surprise billing?

The interim final rule points out several studies that demonstrate its prevalence. It shares a study that found that nearly 40% of emergency department visits to in-network hospitals result in an out-of-network bill.

In addition, 37% of inpatient admissions to in-network facilities resulted in at least one out-of-network bill, with the average bill being $2,040.

The rate of out-of-network billing in emergency situations varies greatly by state too. For example, 25% or more of ER visits in Texas, New Mexico, New York, California, Kansas, and New Jersey resulted in at least one surprise bill. While states like Minnesota, South Dakota, and Alabama saw fewer than 5% of visits with the same results.

Why is this a problem?

This is a problem because people end up with large bills that they weren’t expecting and they may not be able to pay. It can also affect provider contracts, premiums, and more. Additionally, payments for surprise bills and out-of-network charges often don’t count towards the deductible or out-of-pocket maximum.

The interim final rule points out these statistics:

  • The ability to balance bill is often used as leverage by some providers to obtain higher in-network payments, which results in higher premiums, higher cost-sharing for individuals, and increased health care expenses overall.
  • A recent study found that physicians collected, on average, 65% of the total amount charged for emergency room visits that likely included surprise bills. This is compared to 52% of the total amount charged for emergency room visits that likely did not include surprise bills.
  • That same study also found that 9% of people who likely received surprise bills paid physicians more than $400, which could cause financial hardship to many individuals.

What does the No Surprises Act cover?

The surprise billing regulations protect people from unexpected medical bills for emergency services, air ambulance services furnished by out-of-network providers, and non-emergency services provided by out-of-network providers at participating facilities. Let’s break each of those down.

Emergency Services

Under the regulations, health plans must cover emergency services without any prior authorization, regardless of whether the facility is in or out-of-network, and regardless of plan terms, except for exclusions or coordination of benefits.

Balance billing for out-of-network emergency care is prohibited. Emergency service facilities and providers must bill the same as in-network emergency care. Any payments made by the patient must apply to their deductible and out-of-pocket maximum.

Additionally, health plans cannot impose administrative requirements or limitations on coverage for emergency services received from out-of-network providers or emergency facilities that are more restrictive than the requirements or limitations that apply to emergency services received from in-network providers or emergency facilities. This means that co-payments, co-insurance, and deductibles cannot be higher than if services were provided in-network.

Health plans can’t deny emergency services coverage based on post-care review if there was a delay between when symptoms began or when the person sought care or based on how long the person had symptoms.

Non-Emergency Services Performed by Out-Of-Network Providers at In-Network Facilities

Out-of-network providers cannot balance bill for services provided at in-network facilities. This commonly occurs with ancillary care providers like an anesthesiologist or an assistant surgeon.

Air Ambulance Services

Balance billing is banned for out-of-network air ambulance services. However, this does NOT pertain to services provided by a ground ambulance. This is because air ambulance services are typically provided on an out-of-network basis.

What do patients pay out-of-network facilities and providers under the No Surprises Act?

Patient payments are limited to whatever their cost-sharing requirement is for in-network services. For example, if Susan’s in-network co-insurance for emergency care is 35%, then her out-of-network co-insurance is also 35%.

How is cost-sharing calculated?

Patient cost-sharing is the lesser of the billed amount or the Qualified Payment Amount (QPA). The QPA is based on the health plan’s median contracted rate. Self-funded groups can calculate the contracted rate based on their own group health plan or based on all of the group health plans administered by a TPA.

How are payment disputes settled?

The No Surprises Act requires health plans to make an initial payment to the provider or notify them of denial within 30 days from when the bill was submitted.

If the provider disagrees with the payment or the notice of denial, a 30-day negotiation period may begin. The process begins with a 30-day open negotiation process.

If the parties are unable to resolve the matter at the end of the 30-day period, the dispute may be submitted by either party to the Independent Dispute Resolution (IDR) entity to determine the payment amount for the service. The IDR entity must choose between the two offers made by the parties and may not award another amount. This process is designed to require each party to propose its best offer.

How will referenced based pricing plans be impacted by the surprise billing regulation?

At this time, it’s believed that the No Surprises Act does not apply to reference based pricing (RBP) plans. This is because RBP plans don’t use a network of providers.

What has happened since the law went into effect?

As expected, not everyone is happy with the regulations. Several lawsuits have been filed regarding implementation of the IDR process. These groups “fear that regulators have over-emphasized the qualifying payment amount — the median rate paid to in-network providers — to determine a fair price. According to their lawsuit, this puts far too much power in the hands of insurers, who largely dictate the qualifying payment amount.”

A lawsuit against the federal government led by the Texas Medical Association (TMA) argued that parts of the IDR rule are inconsistent with the NSA and should be invalidated. On February 23, 2022, Judge Jeremy Kernoodle agreed, and vacated these provisions on a nationwide basis. While the overall IDR process remains the same, the ruling sets aside parts of the IDR rule, including the parts that gave guidance to IDR entities and that were meant to help keep health care costs down.

On February 28, 2022, the Departments of Health and Human Services, Labor, and the Treasury issued a one-page memorandum recognizing the court’s decision. They note that consumers still have protection under this federal law and other provisions are not affected by this judgment. While they consider next steps, they say they’ll comply with the court’s order by:

  • Withdrawing and updating guidance documents that relied on the removed provisions of the rule
  • Providing training on new guidance
  • Allowing arbitration to be initiated within 15 business days after the independent dispute resolution portal is opened

What does this mean for self-insured employers and their employee health plans? Not much. Covered members will still enjoy the intended benefits of the No Surprises Act.

What should self-insured plans be doing to ensure compliance?

There are several things self-insured plans, employers, their insurance carriers, TPAs, and benefits advisors should be doing to maintain compliance with the No Surprises Act.

  1. It’s important to review the requirements under the No Surprises Act with your benefits advisor, service providers, plan administrators, and legal counsel to prepare for implementation. Work together to ensure compliance and ask questions any time you don’t understand something. Ultimately, compliances falls on you.
  2. The Act is likely to increase medical costs paid by employer-sponsored plans, which will likely trickle down to increased employee costs. Self-insured employers should look at benefit strategies to help reduce health care costs for themselves and their employees. One strategy to consider is implementing an integrated health solution.
  3. Make sure provider directories are up to date. There should be procedures in place to remove providers who have left the network.
  4. Know how the QPA is calculated. This gives you a good idea as to how out-of-network claims covered under the No Surprises Act will be paid. Be sure your plan discloses information about its QPA calculation with each initial payment or notice of denial of payment.
  5. Be sure that information about individual rights under the No Surprises Act is published on the plans’ website and is on each explanation of benefits (EOB) when applicable.
  6. Continue to look for guidance from government entities like the Department of Labor to learn how you’ll need to comply with claims procedures for these types of claims. Be ready for additional rules, decisions, and guidance to come out.

Please note: The information provided in this blog post is a high-level summary of the No Surprises Act and is accurate as of the date of publishing. We will continue to update as new information is made available. Please speak with your benefits advisor, TPA, and/or legal counsel to learn how the No Surprises Act will affect your organization.

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