Imagine this: you are on vacation and have an accident that requires you to go to the emergency room (ER) at an out-of-network (OON) hospital. While at the ER, your doctor orders an x-ray, lab work and says you need immediate surgery. You go through with the doctor’s recommendation and have the surgery that day. You paid your deductible at the time you received care at the hospital, and your insurance plan supposedly covered the rest of the cost for the tests, surgery, etc. However, months later, you receive multiple bills in the mail from: the ER physician, the anesthesiologist, the radiologist, and a pathologist (providers the patient did not choose) for services in connection with this surgery all for amounts your insurance company didn't cover. This practice is widely known as “Balance Billing.”
Balance billing has been an unpopular practice with patients for quite some time. Patients are frustrated with payors and providers alike when they pay a deductible for services provided but then receive multiple invoices months later from a variety of providers claiming amounts owed. Balance billing puts the patients at the focal point for disputes that have traditionally occurred between provider and payor. For years, balance billing has been a tool that providers have used to help recoup amounts owed by patients that were not covered by their insurance. Balance billing or “surprise billing” is a practice that usually occurs for OON providers who do not have a contractual arrangement with a commercial payor. As such, these OON providers are not bound by any agreements to not bill their patients for amounts not covered by insurance.
Attempts to curb surprise billing both at the state and federal level have consistently hit deadlocks as payors, providers, and even patient advocate groups differ over how to resolve outstanding balances from OON providers. However, the COVID-19 pandemic put legislation on a fast track that led to the passage of the "No Surprise Act" (the Act) at the end of 2020. The Act provides patient protections while adding price transparency tools for providers. These provisions are set to begin in January 2022 and cover the following:
- Identifies providers that are affected;
- Gives examples regarding scenarios for when the Act applies;
- Confirms payor types that will be affected including (HMO, PPO, other);
- Sets out rate-setting payment standards;
- Implements dispute resolution provisions;
- Creates a blanket prohibition on balance billing; and
- Requires payors to make payment directly to providers and not insureds.
The Act will apply to health plans or health insurance that's offered to a group or individual coverage, including self-funded ERISA plans. Exceptions to this will be applied at the state level based on individual state regulations. The Act will also affect the services provided to patients, including services and emergency department of a hospital or freestanding emergency department as well as non-emergency services performed by OON providers at participating (in-network) facilities, and OON air ambulance providers. Interestingly, the Act provides that an OON provider at an in-network facility can balance bill the patient provided that the patient received a notice and consented to receive services from the OON provider. However, the Act expressly prohibits balance billing for the following services and gives U.S. Department of Health & Human Services (HHS) the ability to add or exempt other services:
- Emergency services
- Certain ancillary services:
- Diagnostic services (including radiology and lab services), and
- Where there is no in-network provider available
As to patients, the Act provides that patients' obligations will be considered similar to their obligations in an in-network situation, which means that patients will have the same cost-sharing obligations as if the services were rendered by an in-network provider. The payments made to the OON provider will count towards deductibles and the maximum out-of-pocket limits under their policies. However, providers or facilities will be prohibited from balance billing the patient beyond the in-network cost-sharing amounts.
So how would OON providers or facilities know, with certainty, the in-network cost-sharing amounts for similar services provided to the patient? Under the Act, determination of the payment and patient cost-sharing is problematic because there is no benchmark provider payment level that is established. As it stands, patient cost-sharing is calculated as a percentage of a "recognized amount," which includes the following:
- The amount “determined in accordance” with “a specified State law” setting the level of payment for an item or service provided by OON provider or emergency facility, or
- The amount established through an “all payor rate-setting model, or, if neither is present, or
- The “qualifying amount.”
But what is a "qualifying amount"? According to the Act, the qualifying amount is as follows:
"an item or service furnished during 2022, the median of the contracted rates recognized by the plan or issuer, respectively … Offered within the same insurance market … As the total maximum payment … 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 the geographic region … Consistent with the methodology established by the secretary … Increased by the percentage increase in the Consumer Price Index for all urban consumers …"
In addition, the Act provides that should there be insufficient data, the qualifying amount can be determined using independent databases regarding historical payment rates for the same items or services provided. Now, OON providers and facilities will have to determine how much they will be able to charge their patients and cannot simply rely on their charge master to balance bill for services rendered.
The Act also provides that payors make an initial payment or send notice of the denial within 30 days of an OON provider bill to the patient. This will open a 30-day window to negotiate the initial payment or denial. The Act provides for the dispute resolution process to begin four days after the end of the 30-day open negotiation. However, negotiations are allowed concurrently with the dispute resolution process. The dispute resolution process is not subject to judicial review, which would create a lengthy litigation process. The Act sets forth the dispute resolution process including:
- Using batch claims for the process;
- Creating specific criteria for arbitration and arbiters;
- The timing of arbitration;
- Requiring losing parties to pay for arbitration unless certain requirements are met; and;
- A quarterly public reporting of dispute resolutions.
In addition to the dispute resolution process, the Act also provided transparency to patients. For example, the Act states that providers must give patients a disclosure regarding the balance billing protections under the Act. In addition, providers are required to give patients a good faith estimate of the total expected charges as well as the dispute resolution process for uninsured individuals.
The Act also requires payors to include on member benefit ID cards, the patient's maximum out-of-pocket limit, the patient's plan deductible amounts for in-network services and consumer assistance contact information. Health plans are also required to provide advanced EOBs to patients that include the network status of the providers that are expected to provide the treatment for a given service (meaning in-network or OON), the expected cost and patient cost-sharing responsibilities, and how to obtain information on in-network providers that will reduce potential expense exposure for the patients.
Some key takeaways on compliance with the Act:
- It is not retroactive and begins on January 1, 2022. Meaning, the Act will apply to emergency or nonemergency services furnished during a plan year beginning on or after January 1, 2022.
- The Act prohibits providers from holding patients liable for outstanding bills, so the likelihood of sending outstanding bills to collections will be severely minimized.
- If the patient receives a prohibited bill, according to the Act, there will be parallel state and federal enforcement with civil monetary penalties of up to $10,000 per violation. However, HHS can waive the penalties if the facility/provider did not knowingly violate the surprise billing probation, withdraws the bill, and pays the difference back to the patient within 30 days.
- State law is preempted if it prevents the application of the Act. This is similar to a preemption standard that applies to HIPAA and ACA.
- The dispute resolution does not allow litigation in court and is binding upon all the parties except for fraudulent claims or evidence of misrepresentation of the facts to the dispute resolution entity.
- Patients are only responsible for in-network cost-sharing even if there is an inaccurate provider directory provided by the payor.
The Act overhauls many of the OON billing practices that providers and facilities have used for years. On July 1, the Office of Personnel Management along with HHS, U.S. Department of Labor and U.S. Department of Treasury released part one of the regulations implementing the Act. Additional regulations will focus on honing down on the qualifying amounts, health plan audits, the Independent Dispute Resolution process, and patient notice and consent. Providers would be well advised to keep on top of the additional regulations that are in the final rulemaking through the end of 2021. Consumers/patients will benefit from this regulation. The effects of the Act will be felt during the contracting process between provider and payors. At this time, the dispute resolution process may or may not have impacts on rate-setting depending on payouts and decisions in these dispute resolutions over time. The Act has imposed a federal overlay of what states have been unable to do concerning this process. Providers are advised to begin preparing, from a compliance standpoint, for the implementation of the Act well before January 1, 2022.