Issued on July 12, 2021 I Download as a PDF
The first set of interim final regulations governing the No Surprises Act has been issued. As a reminder, the No Surprises Act was passed as part of the Consolidated Appropriations Act (CAA) of 2021 as an effort to protect consumers from surprise billing. It applies to insured and self-funded health plans, individual and group health plans, public and private sector health plans, and grandfathered health plans, for plan/policy years beginning on or after January 1, 2022. It does not apply to excepted benefit plans such as standalone vision or dental plans, health reimbursement arrangements, retiree-only plans, and short-term limited duration policies.
These coverage rules will supersede the relevant provisions of the Affordable Care Act.
Surprise (Balance) Billing
Balance billing occurs when a patient receives services or treatment from an out-of-network provider or facility, meaning a provider or facility that does not have a negotiated rate with the patient’s health plan/issuer. In such cases, the provider/facility typically bills the plan/issuer a higher rate than the rate the plan/issuer has negotiated with its in-network providers/facilities. The patient/enrollee then receives a bill for the balance – the difference between what the out-of-network provider/facility billed, and what the plan/issuer paid.
These bills generally come as a surprise to the patient, especially in emergency situations in which a patient may not be in a position to choose an in-network provider/facility. Even if the patient goes to an in-network facility, the patient might, nonetheless, unknowingly receive services from an out-of-network provider, such as ancillary services from an anesthesiologist or radiologist.
Elimination of Surprise (Balance) Billing
The No Surprises Act eliminates surprise billing in three scenarios:
- Emergency services provided at an out-of-network facility or by an out-of-network provider,
- Non-emergency services provided by an out-of-network provider at an in-network facility, and
- Air ambulance services.
Patients/enrollees will only be responsible for cost-sharing as if the services were provided in-network, and those cost-sharing payments will count towards the patient’s/enrollee’s in-network deductibles and out-of-pocket maximums. The cost-sharing that can be imposed on an individual is based on the “recognized amount,” as explained below. The remainder of the bill is resolved between the provider/facility and the plan/issuer.
Emergency services include examinations and services necessary to 1) evaluate the patient’s emergency medical condition, 2) stabilize the patient, and 3) outpatient observation services. Emergency services include:
- Stabilization services regardless of whether the services are provided in the emergency department or another department.
- Pre-stabilization services provided after the patient is moved out of the emergency department and is admitted to the hospital.
Determination of what is an “emergency condition” is based on a case-by-case “prudent person standard,” meaning a condition that manifests itself by acute, severe symptoms such that a prudent layperson would expect would a) place their health in serious jeopardy, b) impair their bodily functions, or c) cause serious dysfunction of any body part/organ, if the individual goes without medical attention. Determination of emergency conditions is:
- Regardless of whether the symptoms onset suddenly.
- Without imposing a time limit between symptom onset and the individual presenting at an emergency department.
- Based on all pertinent documentation and focused on the presenting symptoms.
- Regardless of the final diagnosis code.
Plans/issuers that cover emergency services cannot deny benefits emergency services, based on a general plan exclusion that would apply to items and services other than emergency services.
Non-emergency services provided by an out-of-network provider at an in-network facility
The No Surprises Act restrictions on balance billing apply only to items and services for which the patient has not been given notice of or consented to the service.
Where a provider has given a patient written notice at least 72 hours prior to the patient receiving an item/service 1) that the provider is out-of-network, 2) that it is optional to receive the items/services from the out-of-network provider instead of in-network, 3) a list of in-network providers available at the same facility, if any, 4) a good-faith estimated amount to be charged, and 5) information whether preauthorization is required; and where the patient acknowledges they received notice and were informed that payment might not count towards cost-sharing limits or in-network deductible, and the patient signed and dated the provided consent form, then the patient will be liable for out-of-network charges.
Patients cannot receive “notice and consent” for:
- Ancillary services where the patient does not generally have an opportunity to select the provider; and
- Items or services performed as a result of unforeseen, urgent medical needs, where advance notice and consent are not possible.
Ancillary services include, but are not limited to anesthesiology, pathology, radiology, neonatology, laboratory diagnostics, and item/services performed by an out-of-network provider because there is no available in-network provider in the facility to perform that item or service. For these circumstances, the surprise billing, in-network limitations apply.
Determination of Recognized Amount (Cost-sharing Amount Billable to Patient)
For the three No Surprises Act scenarios, 1) emergency services provided at an out-of-network facility or by an out-of-network provider, 2) non-emergency services provided by an out-of-network provider at an in-network facility, and 3) air ambulance services, the cost-sharing amount that a patient can be billed is calculated based on the “recognized amount.”
The “recognized amount” is:
- The amount determined by an applicable All-Payer Model Agreement
- If there is no applicable All-Payer Model Agreement, the amount determined by a specified state law; or
- If there is no applicable All-Payer Model Agreement or specified state law, the lesser of:
- The amount billed by the provider or facility or
- The qualified payment amount (QPA), which is generally the median of the contracted rates of the plan or issuer for the item or service in the geographic region
All-Payer Model Agreements
Under an All-Payer Model Agreement, a provider/facility is reimbursed the same amount for a given service regardless of the paying entity. The state approves the amount that is the recognized amount for an item or service. All-Payer Model Agreements can vary significantly by state, including in using different approaches for approving payment amounts. These interim final rules defer to the state to determine the circumstances under which, and how, it will approve an amount for an item or service.
- Maryland and Vermont are two examples of states with All-Payer models.
Qualifying Payment Amount (QPA)
The qualifying payment amount (QPA) is the median of the contracted rates recognized by the plan or issuer on January 31, 2019, for the same or similar item or service that is provided by a provider in the same or similar specialty, and provided in a geographic region in which the item or service is furnished, increased for inflation.
Where a plan or issuer has insufficient information to calculate a median contracted rate for an item or service, the regulations envision use of alternative methodologies, such as use of a third-party database, but only in limited circumstances where the plan or issuer cannot rely on its contracted rates as a reflection of the market dynamics in a geographic region.
Median Contracted Rate
To determine the median contracted rate, the contracted rates of all plans of the plan sponsor (or of the administering entity, if applicable) or all coverage offered by the issuer in, a) the same insurance market for b) the same or similar item or service that is provided by c) a provider in the same or similar specialty or facility of the same or similar facility type, and d) provided in the geographic region in which the item or service is furnished are arranged in order from least to greatest and the middle number is selected. The amount negotiated under each contract is treated as a separate amount.
Determination of Amount Payable to Provider/Facility by Plan/Issuer
The plan or issuer must make a total payment equal to one of the following amounts, less any cost-sharing from the participant, beneficiary, or enrollee:
- An amount determined by an All-Payer Model Agreement;
- If there is no such applicable All-Payer Model Agreement, an amount determined by a specified state law;
- If there is no such applicable All-Payer Model Agreement or specified state law, the payment amount agreed to by the plan or issuer and the provider or facility in open negotiation; or
- If none of the three above conditions apply, and the parties enter into the independent dispute resolution (IDR) process and do not agree on a payment amount before the date when the IDR entity makes a determination of the amount, the amount determined by the IDR entity.
Independent Dispute Resolution Process (IDR)
The IDR process is a different payment negotiation process than the claim, appeal, and external review process between a patient and their plan.
Under the IDR process, the parties, i.e. the plan and the provider/facility, jointly select an IDR entity – an arbitrator. From there, the parties have 10 days to submit to the IDR entity their proposed payment amount, and the IDR entity selects from one of the offers within 30 days of the commencement of the IDR process. The parties can also “bundle” charges for dispute resolution in the same process, so long as the items/services are related to the treatment of a similar condition and were furnished by the same provider or facility and within the same 30-day period, and payment for the items/services is required by the same plan. After the IDR entity’s offer selection, the plan has 30 days to pay the facility or provider.
- Generally, plan sponsors can rely on the insurer or third-party administrator (TPA) to accomplish these functions.
Additional regulations regarding the IDR process are expected at a later date.
Before the No Surprises Act was signed, several states had already passed legislation regarding balanced billing. These laws are still in place, and may be more generous to insured plans than the federal No Surprises Act.
- Self-funded plans subject to ERISA can, but are not required to, opt in to certain state balanced billing laws, such as in New Jersey.
Next Steps for Plan Issuers: Posting/Distribution of Model Notice
The Department of Labor (DOL) has provided a model notice that can be used by plans and issuers to satisfy the notice obligation imposed by the CAA’s amendments to ERISA, the Public Health Service Act (PHS Act), and the Internal Revenue Code (IRC). The notice must explain, in plain language, the new restrictions on balance billing and provide the following information:
- Description of balance billing.
- Description of the balance billing protections in the No Surprises Act.
- Description of any state protections against balance billing, including descriptions of any state protections may be more expansive than the protections in the No Surprises Act.
- Contact information regarding where patients who believe they have been wrongly billed can report violations and seek redress.
Use of this model notice is not mandatory, but any plan/issuer notice should include this required information and comply with the Affordable Care Act’s language requirements. The notice must be publicly available, posted on the plan or issuer’s public website, and included with each Explanation of Benefits, effective for plan years beginning on or after January 1, 2022.
- This is an ERISA obligation. Plan sponsors should work closely with the insurer or third-party administrator (TPA) to ensure compliance with this obligation.
The regulations will be published in the Federal Register on July 13, 2021, and they will become effective 60 days after publication, on September 11, 2021. Because these regulations are issued as interim final regulations, the regulations may change before their applicability date.
About the Author
McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law.
Ms. McLeese is based in the CBIZ Kansas City office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.