On July 1, 2021, the Departments of Health and Human Service (HHS), Labor, and Treasury (collectively, the Departments) released an interim final rule (IFR), which is the first of a series of regulations implementing the No Surprises Act (No Surprises Act, or the Act). The No Surprises Act, passed in late 2020 as a part of the larger Consolidated Appropriations Act, is aimed at curtailing the practice of surprise billing (also known as balance billing), which occurs when individuals are left with unexpected large out-of-pocket costs after receiving out-of-network care that is not covered by insurance. We previously reviewed the Act in our prior blog.
The IFR implements the following provisions of the No Surprises Act:
- Cost Sharing: Group health plans and carriers must limit cost-sharing for out-of-network emergency services, non-emergency services furnished by out-of-network providers at in-network facilities, and out-of-network air ambulance services to no more than the cost-sharing required for the same in-network care. Cost-sharing must be calculated based on the “recognized amount for services” (discussed below) and apply toward any in-network deductible or out-of-pocket maximum.
- Payments to Out-of-Network Providers/Facilities: Group health plans and carriers are required to provide payment (or notice of denial) within 30 days of receiving the bill. The IFR lays out a formula for determining the total amount plans must pay for covered out-of-network services.
- Balance Billing: Out-of-network providers and health care facilities are prohibited from balance billing plan participants in situations covered under the Act unless certain notice and consent requirements are met.
- Consumer Disclosures: Plans, carriers, facilities, and providers must disclose state and federal surprise billing protections to the public and to plan participants.
- Complaints Process: The IFR outlines the process for receiving and resolving consumer complaints of violations of the Act by group health plans, insurers, providers, and facilities.
The Departments are accepting comments for 60 days on the IFR before it is finalized. However, the provisions of the Act that apply to group health plans and carriers will go into effect with plan years that begin on or after January 1, 2022. The provisions of the Act that apply to providers and facilities will also go into effect beginning January 1, 2022.
The Departments are expected to release additional regulations related to the other provisions of the Act, including those related to transparency (e.g., price comparison tools and cost-sharing requirements for ID cards) and the payor-provider dispute resolution process, later in the year.
Though carriers and third-party administrators (TPAs) will be implementing most of the new requirements, employers, as plan sponsors, should contract with their carriers (if fully insured) or their third-party administrator or TPA (if self-insured) to ensure their plan is compliant with the Act.
Background: Surprise Medical Bills
The No Surprises Act implements new requirements for group health plans, carriers, and providers to protect consumers against surprise medical bills. Surprise medical bills refer to unexpected medical bills that arise when an individual inadvertently or unknowingly receives care from an out-of-network provider or facility (i.e., provider or facility that does not have a contractual relationship with the individual’s insurance plan). In these situations, the individual’s insurance declines to pay or pays an amount lower than the billed out-of-network charges. The out-of-network provider may then “balance bill” the individual for the difference between the billed charges and the amount collected from insurance (unless prohibited by state law), which usually results in the individual paying significantly more for services than they would have if they received care in-network.
The No Surprises Act
The Act addresses the below scenarios where surprise billing arises most frequently:
- Emergency Services
- Non-emergency care from out-of-network providers at in-network facilities (e.g., an individual may choose an in-network facility or in-network provider, but not know that one or more ancillary providers involved in their care, such as an anesthesiologist or radiologist, is out-of-network)
- Air ambulance services from out-of-network providers
In the above situations, the Act limits cost-sharing that a group health plan or carrier is allowed to impose on plan participants and, at the same time, prohibits providers and facilities from balance billing plan participants for out-of-network coverage. Further, the Act outlines when and how much a plan or carrier is required to pay the out-of-network provider or facility for the services or items furnished to plan participants.
It is important to note that the Act does not impose a universal ban on surprise billing, rather it protects consumers under federal law in the most common scenarios where surprise billing may occur. In addition to federal law, some states participate in an All Payer-Model Agreement with the Centers for Medicare and Medicaid (CMS), which establishes amounts that group health plans and carriers must pay for certain services, while other states have passed insurance laws restricting surprise and balance billing.
The Interim Final Rules: Part I
Below we highlight sections of the IFR that employers should be aware of. Generally, the IFR applies to grandfathered and non-grandfathered group health plans (fully insured, level funded, and self-insured plans), health care insurance carriers, and out-of-network providers and facilities of covered services. The IFR does not apply to health reimbursement arrangements (HRAs), short-term limited duration insurance, or retiree plans.
For out-of-network services covered under the Act, cost-sharing (i.e., the amount an individual is responsible for paying for a covered item or service under the terms of the plan) must be limited to the amount an individual would have paid if they received the services from an in-network provider or facility. In addition, any cost-sharing must be applied to an individual’s in-network deductible or out-of-pocket maximum.
Example: If a plan imposes a 20% coinsurance rate for emergency services from in-network providers, the Act prohibits a plan from imposing a coinsurance rate higher than 20% for emergency services from out-of-network providers.
Calculating Cost Sharing based on the “Recognized Amount”
The IFR outlines a method for determining how much a patient is required to pay where the Act applies. For emergency services and out-of-network providers at in-network facilities, plans and carriers must calculate cost-sharing using the “recognized amount” for services, which may be different from the amount a plan or carrier ultimately pays for the out-of-network services. The “recognized amount” represents the amount an individual would have been charged if they received the services in-network.
The “recognized amount” is determined by applicable All-Payer Model Agreements or state insurance law. If a state does not have an applicable All-Payer Model Agreement or any state law, which will be the case for most states and self-insured plans, the “recognized amount” will be the lesser of either the billed charge or the “qualifying payment amount” (QPA).
The IFR lays out detailed steps for calculating the QPA, which is the plan’s or carrier’s median contracted rate for the item or service in the geographic region as of January 31, 2019 (indexed for inflation). The IFR permits self-insured plans to use their third-party administrator (TPA) to calculate the QPA.
Similarly, for air ambulance services, plans and carriers must calculate cost-sharing based on the lesser of the billed charge or QPA.
Prohibition on Balance Billing and Waiver
Out-of-network facilities and providers are prohibited from billing individuals any amount above their cost-sharing requirements (as outlined above) for items/services covered under the Act, except in certain non-emergency situations where prior informed consent is obtained. A patient can only waive the protections under the Act and agree to out-of-network charges if they are provided with specific disclosures (including a “good faith estimate” of the costs) within a strict timeframe, which is outlined in the IFR. Nonetheless, providers and facilities may not provide such notice or seek consent from patients where a surprise bill typically arises (e.g., providers of ancillary services that a patient does not typically choose).
Payment and Out-of-Network Rate
The Act requires carriers and plans to pay out-of-network providers and facilities the difference between the “out-of-network rate” and the cost-sharing for items and services covered under the Act. The IFR establishes a formula for determining the “out-of-network” rate and a timeframe for making payments.
The out-of-network rate is determined by any applicable All-Payer Model Agreement or state law, or if no such law applies, an amount agreed upon by the plan or carrier and the out-of-network provider or facility. If the parties cannot agree upon an amount, the out-of-network rate will be determined by an independent dispute resolution (IDR) process. The Departments are expected to release additional regulations on the IDR process later this year.
Plans and carriers must send a payment or initial notice of denial to the out-of-network provider or facility within 30 calendar days after receiving the bill and all relevant information.
New Disclosure Requirements
Plans and carriers must make publicly available, post on a public website of the plan or issuer, and provide plan participants with information on federal and state surprise billing protections and contact information for state and federal agencies where complaints of surprise billing violations can be filed. This information must also be included on explanation of benefits (EOBs) for out-of-network claims covered under the Act.
Similarly, health care providers and facilities must make publicly available, post on the website of the provider or facility (if applicable), and provide patients with the above information.
The Departments have developed model notices that health care providers, facilities, group health plans, and carriers may (but are not required to) use to satisfy this disclosure requirement.
The No Surprises Act implements comprehensive consumer protections and dramatically changes the way plans and carriers must handle certain out-of-network coverage. Employers should contract with their carrier (if fully insured) or their TPA (if self-insured) to ensure the Act’s provisions will be implemented for plan years beginning on or after January 1, 2022. In addition, employers should ensure any relevant plan documents and plan participant communications include the required disclosures and accurately outline the new rules.
- Interim Final Rule: Requirements Related to Surprise Billing; Part I
- Press Release: HHS Announces Rule to Protect Consumers from Surprise Medical Bills
- Fact Sheet: What You Need to Know About the Biden-Harris Administration’s Actions to Prevent Surprise Billing
- Fact Sheet: Requirements Related to Surprise Billing, Part I Interim Final Rule with Comment Period
- Sequoia Foreword: Congress Passes Ban on Surprise Bills and Other Patient Protections