No Surprises Act prohibits balance billing, creates arbitration process for out-of-network providers

Three federal agencies — the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Internal Revenue Service (IRS) — are required by the Act to issue implementing regulations related to the establishment of qualifying payment amounts and certain other provisions of the law by July 1, 2021.

Enrollee cost sharing

The No Surprises Act amends the Public Health Service Act (PHSA) (and makes corresponding changes to the Employee Retirement Income Security act of 1974 (ERISA) and the Internal Revenue Code of 1986 (IRC)) by adding section 2799A-1, “Preventing Surprise Medical Bills,” which contains requirements for coverage of emergency services provided by non-participating providers at participating facilities, emergency services provided at non-participating health care facilities, and non-emergency services furnished by non-participating providers during a visit at a participating health care facility, as well as new Section 2799A-2 related to out-of-network air ambulance services. With respect to these types of services, the law generally provides that:

• the cost-sharing requirement for the applicable services must not be greater than the total amount that would have been charged to the patient if such services were provided by a participating provider or a participating emergency facility;

• any cost-sharing payments made by the enrollee for the services must be counted toward any in-network deductible or out-of-pocket maximums applied under the plan; and

• beneficiaries may not be balance-billed for the difference between what the plan reimburses and what the non-participating provider charged.

With respect to independent third-party laboratories, it appears that the No Surprises Act limits enrollee cost sharing and prohibits balance billing when the laboratory test is ordered and the specimen is collected during a visit at a participating facility, but the clinical laboratory is non-participating. Although the definition of “facility” does not include clinical laboratories, the term “visit” includes laboratory services, suggesting that laboratory services are intended to be included in the purview of the Act. How this will work in practice is not clear, however, and likely will need to be addressed through regulation. For example, laboratories will need to know whether the facility at which the specimen was collected is participating or non-participating with a given health plan in order to know whether it may balance bill or whether the plan is responsible for payment — information that is not readily available to most labs.

Provider reimbursement

In establishing provider reimbursement amounts for services furnished by a non-participating provider during a visit at a participating health care facility, the No Surprises Act requires that the plan pay such provider the amount by which “the out-of-network rate” exceeds the cost-sharing amount for such items and services. The Act defers to state laws with respect to state-established out-of-network rates, defining the payment amount as follows:

1. In states where there is a state law that provides for a method for determining the amount of payment that is required to be paid by health plans to non-participating providers, the “out-of-network rate” is the amount determined in accordance with such law; or

2. In states without such a law, the “out-of-network” rate is:

   1. the amount agreed to by the plan and provider/facility (which may be through open negotiations pursuant to the IDR process); or

   2. the amount determined by a certified IDR entity if the parties cannot agree; or

   3. an amount the state approves under an All-Payer Model Agreement under section 1115A of the Social Security Act.

For air ambulance providers, this is important because, while state law does generally regulate rates for ground ambulance services, it does not for air ambulance providers. This means that air ambulance services will often be subject to the negotiation or IDR process for establishing rates, which, as discussed below, takes into account the median in-network rate for such services.

Independent Dispute Resolution process

The Act establishes a negotiation process followed by IDR if negotiation is unsuccessful for plans and providers in establishing an out-of-network rate. The process begins when a plan remits payment to the non-participating provider within 30 days of receiving a claim from the non-participating provider. Within 30 days from when the provider or facility receives an initial payment or notice of denial from the plan, either the plan or the provider/facility may initiate open negotiation. The open negotiation period is 30 days.

If open negotiation fails (i.e., the plan and provider/facility cannot agree on an out-of-network rate for the service) and the 30-day period elapses, the provider/facility or plan may initiate the IDR process. The law permits batching of similar payment disputes. Under the IDR process, each party can propose a payment amount to the arbitrator. The arbitrator then considers several factors, but is prohibited from considering the provider’s usual and customary charge or reimbursement payable by a public payer (including Medicare). One of the factors that is considered by the arbitrator is the “qualifying payment amount” for the service, which is defined in the law as the median contract rate recognized by the plan for the prior year multiplied by a percentage increase based on the consumer price index for all urban consumers.

For certain providers, like air ambulance providers, there can be a wide range of in-network rates driven by differences in whether the air ambulance provider is independent or affiliated with a large institution and the geographic area in which the air ambulance provider operates. If these factors are not somehow taken into account when calculating the qualifying payment amount, that amount could be artificially deflated or inflated and result in a payment rate that is neither adequate nor appropriate.

The decision of the arbitrator is binding on the parties, and the losing party (i.e., the one whose payment offer was rejected by the arbitrator) must pay the IDR fees. The parties are permitted to continue negotiating throughout the IDR process, but, once the arbitrator issues a decision, it is binding and subject to limited judicial review.

Advance Beneficiary Notice (ABN)-like notice

Although the No Surprises Act generally prohibits balance billing for services furnished by non-participating providers during a visit at a participating facility, the law enables such providers to issue ABN-like notices to patients, and bill them in excess of the cost-sharing amounts imposed by the plan pursuant to the No Surprises Act, provided the non-participating provider has obtained consent from the patient to be treated by a non-participating provider or non-participating facility 72 hours in advance of the visit. Notice documents provided to patients must include a good faith estimate of the costs of the services, and must also provide a list of in-network providers at the facility and information regarding medical care management, such as prior authorization.

However, the following “ancillary services” may not be balanced billed by an applicable non-participating provider under any circumstances (even if notice is given and consent is obtained), thus largely limiting the utility of the notice and consent option for many providers:

• Items and services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology, whether or not provided by a physician or non-physician practitioner, and items and services provided by assistant surgeons, hospitalists, and intensivists;
• Diagnostic services (including radiology and laboratory services);
• Items and services provided by such other specialty practitioners, as specified through rulemaking; and
• Items and services provided by a non-participating provider if there is no participating provider who can furnish such item or service at such facility.

HHS may impose civil monetary penalties of up to $10,000 for violations of these notice and consent provisions for balance billing of non-emergency services by non-participating providers at participating facilities. However, HHS may provide a hardship exemption or waive the penalties if the provider did not knowingly violate law and corrects with interest. There is also an exception for advanced diagnostic laboratory tests (ADLTs), whereby the Secretary of HHS may create a list of ADLTs that are excluded from the definition of “ancillary services,” further supporting that the law is intended to apply to clinical laboratory tests.

Importantly, the law does not permit this ABN-like process for emergency services, meaning that when emergency services are provided by a non-participating provider at a participating facility, or at non-participating hospitals and freestanding emergency departments, those entities are not permitted to balance bill patients under any circumstances. While the negotiation and IDR process with plans should alleviate some of the financial burden associated with out-of-network care, the American Hospital Association recently published its findings that hospitals in 2019 provided $41.6 billion in uncompensated care, meaning care for which no payment was received from the patient or payer.[1] It remains to be seen whether this law helps or hurts providers in the long run.

Provider directory requirement

For plan years beginning on or after January 1, 2022, under the No Surprises Act, every group health plan and health insurance issuer offering group or individual health insurance coverage must have a database on the public website of such plan or issuer that contains (a) a list of each health care provider and health care facility with which such plan or issuer has a direct or indirect contractual relationship for furnishing items and services under such plan or coverage; and (b) provider directory information with respect to each such provider and facility. It must also establish a verification process under which, not less frequently than once every 90 days, such plan or issuer verifies and updates the provider directory information. Plans must also establish a procedure for removing providers they are unable to verify, and by which they update provider information within two business days of receiving an update from a provider. By 2022, plans must have a “response protocol” in place under which they respond to requests regarding network status of providers within one business day, and retain such communications for two years.

Providers and health care facilities also have obligations under the Act to post in a provider directory information on balance billing protections, including, if provided under state law, the amount providers/facilities may charge and appropriate federal and state agency contacts to which to report violations. By 2022, the providers must also have a “response protocol” in place to ensure timely provision of directory information to a plan. At minimum, the provider must submit an update to the plan: when the provider begins a network agreement with a plan with respect to certain coverage; when the provider terminates an agreement; when there are any material change to the content of provider directory information; and at any other time determined appropriate by HHS.

Notably, if a patient relies on erroneous directory information, the plan cannot impose a cost-sharing amount greater than in-network rates, and the amount must count toward the patient’s in-network out-of-pocket-maximum and in-network deductible.

Transparency

The No Surprises Act provides that patients can receive an Advance Explanation of Benefits before a health care service is delivered. This document must provide a good-faith estimate of costs and cost sharing; identify whether the provider furnishing the items or services is in network and, if not, how to find in-network providers; and disclaimers, if applicable, that coverage is subject to medical management requirements, and that the information is only an estimate and may be subject to change.

Under the law, insurers must also offer price comparison information by telephone, develop a web price comparison tool, and maintain up-to-date provider directories. Insurance cards must include the deductible, out-of-pocket maximum, and a telephone number and website for patient assistance.

To increase transparency regarding air ambulances, air ambulance providers and plans must submit two years of cost and claims data to federal officials for publication in a comprehensive report. In addition, the legislation establishes an advisory committee on air ambulance quality and patient safety.

Last, the Act provides that grants will be made available to states to establish an All Payer Claims Database (APCD) or improve an existing one. These grants will allow access to data by researchers and entities (including health care providers and plans) for purposes of quality improvement or cost-containment (pending application and approval). HHS will create an advisory committee to establish a standardized reporting format for reporting by self-insured plans to submit claims to APCDs.

HHS to issue rulemaking on qualifying payment amounts

The No Surprises Act further requires that, no later than July 1, 2021, HHS, in consultation with the DOL and IRS, shall establish through rulemaking:

1. the methodology group health plans or health insurance issuers offering group or individual health insurance coverage shall use to determine the qualifying payment amount, differentiating by individual market, large group market, and small group market;

2. the information such plans or issuers shall share with the non-participating provider or non-participating facility, as applicable, when making such a determination;

3. the geographic regions applied for these purposes, taking into account access to items and services in rural and underserved areas, including health professional shortage areas; and

4. a process to receive complaints that group health plans and health insurance issuers are violating the law’s requirements.

This rulemaking must take into account payments that are made by such plans or issuers that are not on a fee-for-service basis. Such methodology may provide for relevant payment adjustments that take into account quality or facility type (including higher acuity settings and the case mix of various facility types) for purposes of determining payment amounts with respect to participating facilities.

No later than January 1, 2022, HHS, DOL, and IRS must also issue a proposed rule implementing section 2706(a) of the Public Health Service Act regarding protections against provider discrimination, and a final rule by six months after the 60-day comment period on the proposed rule.

If you have any questions regarding implementation of the No Surprises Act or anticipated rulemaking, please contact any of the lawyers listed with this alert or the Hogan Lovells lawyer with whom you normally work.