January 4, 2021
Through passage of the recent COVID-19 relief legislation, the “Consolidated Appropriations Act,” Congress used bipartisan support to enact rules to curb surprise billing practices that commonly confuse and burden patients across the U.S. The “No Surprises Act” comes on the heels of recent efforts by a number of states to regulate surprise and balance billing practices implemented by various health care entities.
The No Surprises Act restricts surprise medical billing for emergency and certain non-emergency services. Surprise billing is traditionally applied to bills for out-of-network services (usually for emergency-related care) which results in the policyholder receiving a “surprise” medical bill to pay the balance of what a patient’s insurer does not cover under the policyholder’s plan. This practice has been subject to criticism and has resulted in more than twenty states limiting this practice in one form or another. However, states differ dramatically on the relative strength of these limitations. The No Surprises Act represents the first major federal legislative action geared toward limiting this practice, impacting policyholders, health insurance plans, and employers that offer group health plans. The No Surprises Act takes effect on January 1, 2022, and will apply to a broad set of health plans, including individual and group health plans (and self-funded employer plans traditionally governed by ERISA).
What Plans, Providers, and Services are Covered by the No Surprises Act?
- Covered Services and Providers: The No Surprises Act prohibits balance billing in two general areas: (1) for “emergency services” for plans that offer benefits for emergency services that take place either in an emergency department at a hospital or in an independent “freestanding” emergency department; and (2) for “non-emergency services” provided by non-participating providers at in-network facilities. Policyholders will no longer be required to submit prior authorizations for emergency services in these locations. These restrictions will also apply to certain ancillary services including radiology, laboratory services, and others. The No Surprises Act also specifically applies to services provided by air ambulances.
- Patient Consent and Disclosure Requirements: The No Surprises Act includes new notice requirements for balance billing for non-emergency services rendered by non-participating providers at an in-network facility. These providers may balance bill a patient so long as they satisfy the notice and consent requirements, which include providing (in most cases) disclosures to a patient 72 hours before services are to be rendered. These providers must receive a patient’s consent and must alert the patient to their right to seek care from an in-network provider and that they agree that these out-of-network charges do not accrue toward any plan limitation. Absent the consent, the non-participating provider is limited to the cost-sharing requirements in the patient’s plan.
- Cost-Sharing Requirements: Policyholders’ out-of-pocket expenses are reduced to the traditional cost-sharing requirements such as co-pays and standard co-insurance amounts that apply for in-network providers. Importantly, insurers and plan administrators must count these “out-of-network” cost-sharing amounts for the overall in-network accumulators such as deductibles and out-of-pocket limits. Plans are required to either make an initial payment 30 days after receiving the bill from the provider or include a denial or enter into a negotiation process in accordance with the No Surprises Act without involving the patient or policyholder. Cost-sharing amounts will be calculated as if the total amount charged is equal to the median of contracted rates.
- Independent Dispute Resolution Process: Another critical component of the No Surprises Act is the new independent dispute resolution (“IDR”) process designed to encourage health care providers and insurers to negotiate on the specific billings at issue. For items and services by an out-of-network provider, the No Surprises Act includes a 30-day negotiation period to agree on a rate to be paid for such items and services. Without a resolution, the parties will then initiate the new IDR process, which will be run by independent entities not affiliated with the disputing parties. The IDR entity must take into consideration several factors, including the geographic area, provider’s experience, outcomes, complexity and quality of care, among others. However, the IDR entity may not consider the usually and customary rates or amounts that would have otherwise been charged. Federal regulators are required to submit final IDR regulations on July 1, 2021 (but have an extra year if needed).
Considerations and Next Steps
- Review your existing health plans with legal counsel. The broad applicability of these protections will impact nearly every health insurance plan, particularly those group plans that are self-funded through ERISA.
- Keep an eye on your state’s regulations. As noted above, many states already have surprise and balance billing consumer protections and disclosure requirements. We recommend that you consult your state’s potential restrictions as in some cases, the state’s requirements may be more comprehensive than the new federal regulations.
- Flexibility is critical. As with almost every new development over the past year, the COVID-19 pandemic has resulted in a lot of “hurry up and wait” regulations for employers. The No Surprises Act is no different. Federal agencies are tasked with implementing formal rules under the No Surprises Act by July of 2021 (though the IDR rulemaking is extended into 2022). McGrath North is available to assist with any planning, strategy, or compliance needs in the year ahead.
If you have questions about the impact of the No Surprises Act on your organization, please contact Caroline Nelsen at (402) 633-9575 or firstname.lastname@example.org.
Contact information for the complete McGrath North’s COVID-19 Response Team can be found here.
For information regarding additional business-related concerns centered around COVID-19, please visit our COVID-19 Resource Guide here.