Are there surprises with the implementation of the No Surprises Act?

September 13, 2021

Andréa Caballero, MPA, wrote this blog.

It’s been a little over 2 years since I last wrote about surprise medical billing and how it can affect consumers and employer- purchasers. There has been a lot of state and federal activity on this issue since, and some research estimates that surprise billing has added more than $40 billion a year in unnecessary health care spending…so it’s been an expensive 2 years.

As of January 2021, 18 states have enacted comprehensive surprise billing protections.  For reference, in June 2019, only 11 states had laws on the books. Congress and the Department of Health and Human Services (DHHS) have acted on this issue too, most recently with the interim final rule (IFR) called “Requirements Related to Surprise Billing;” Part 1, based on the passage of the No Surprises Act.  The provisions and regulations of the No Surprises Act apply to plan years beginning on and after January 1, 2022, and will provide a standard way of addressing balance billing across the country. Unlike the state regulations that have come before, the No Surprises Act will extend protections to employees of large, self-funded employers.

Much has been written about the No Surprises Act and Part 1 of the IFR, so this post briefly recaps the major consumer protections and identifies what to look for in Part 2 of the regulations, specifically with regards to the independent dispute resolution process (IDR).

How does the No Surprises Act and IFR Part 1 protect consumers from surprise or balance billing?

The Act and the IFR prohibit out-of-network (OON) providers from balance billing patients in emergency situations and certain non-emergency situations.  Protecting consumers against balance billing in emergency situations is critical, as patients rarely can determine in advance if the emergency room facility or its attending staff is in their insurance network.

In non-emergency circumstances, patients are protected from balance billing by OON providers who provide care at in-network facilities.  For example, a patient may schedule a procedure at an in-network facility only to discover after the procedure (or after being prepped) that certain “hospital-based providers” (e.g., radiologists, pathologists, and anesthesiologists) performing some of the services are out-of-network.  Patients may act prudently by seeking care at an in-network facility but find themselves in a “gotcha” situation because unbeknownst to them, some of the health professionals aren’t in the network. There is some fine print, however: facilities can balance bill patients if they provide notice that providers are OON, and they obtain consent to waive the balance billing protections.

The IFR further protects consumers by limiting consumer cost-sharing for OON services to in-network levels, stipulating that plans must apply this cost-sharing toward any in-network deductibles and out-of-pocket (OOP) maximums.  These are solid wins for consumers who might otherwise face significant financial hardships for circumstances that are beyond their control.

Is there a catch?  Possibly.

While patients will only pay the in-network costs for services provided by OON providers, and they cannot be balanced billed for any more than this amount, someone will have to pay something for the OON claims…and that someone is either the health insurance company or the self-funded purchaser.  The idea is that consumers should not be in the middle of a dispute between plans and providers; however, this does not eliminate the fact that the provider is billing for services at out-of-network rates, which are typically higher than an in-network negotiated rate.

One could argue that health insurance companies are in a more powerful position than individual patients to negotiate with providers on high OON claims, so in theory OON costs may come down.  The IFR outlines a specific methodology that requires payment to be based on contracted rates, which (hopefully) encourages providers to participate in the network and keeps patient cost-sharing in check.  Part 1 of the IFR outlines a fair method for paying OON claims that is not based on billed charges. However, the Act also outlines an independent dispute resolution process (IDR) that might have some unintended consequences, the details of which will be in Part 2 of the IFR.

What’s next for Part 2 of the IFR related to independent dispute resolutions?

Because no contract exists between an OON provider and a plan, the IFR outlines a methodology for plans to pay OON providers, called the qualifying payment amount (QPA).  The parties must first attempt private negotiations. But if negotiations fail, either party may dispute the amount and move to an arbitration or independent dispute resolution process.  This was likely a necessary provision to make the Act politically palatable.  Authors of a blog published by the Commonwealth Fund believe that the statutory language leans toward the interests of providers because arbitration “avoids a government-set rate standard and allows them to make their case for higher fees.”

There are still a lot of unknowns around what the final provisions will ultimately look like. As the next round of regulations are released, health insurance companies and self-funded employer-purchasers should watch for the following:

• Part 2 of the regulations should reinforce that IDR be used as a last resort and focus, instead, on in-network rates. This will ensure efficient, predictable, and consistent payment outcomes.
  • If IDR is used routinely, it can be a mechanism for providers to inflate costs once the patient is out of the middle. Only five of the 18 states with comprehensive balance billing protections use arbitration.  New Jersey, New York, and Texas allow arbitrators to consider billed charges.  Evidence from these three states show that when billed charges are considered, the payment standard is generally 80% of billed charges. The other two states (Connecticut and Ohio) rely partially on billed charges, which can lead to inflationary results.  Fortunately for those footing the bill, the federal system does not allow consideration of billed charges.
• Using IDR on a limited basis and focusing on geographic in-network rates may also create an incentive for providers who are currently not participating in insurance networks to participate, which should avoid the need to balance bill in the first place.

Getting these details right will determine if implementation of the No Surprises Act through the IFRs will not only protect patients from most high and unexpected medical costs but also help reduce the need for balance billing in the first place and keep prices in check. A new letter signed by over 59 organizations, including CPR and representing patients, consumers, unions, and employers highlights the opportunities to safeguard patients from surprise medical bills in a way that lowers costs. Stay tuned to see if Part 2 will ultimately fit the bill.

Andréa Caballero wrote this blog post. Feature image by @mdominguezfoto on Unsplash.