The No Surprises Act, signed into law December 27, 2020, represents a significant change in the way out-of-network providers can bill and be reimbursed.
Starting January 1, 2022, the legislation prohibits providers from balance billing members during:
1. Out-of-network emergency items and services
2. Out-of-network nonemergency items and services provided in in-network facility
3. Out-of-network air ambulance healthcare items and services
But there are some exceptions based on provider notice and member consent.
For reimbursement, providers and health plans are provided a number of opportunities under the Act to settle on a payment amount. If reimbursement cannot be settled upon, either party can access a binding Independent Dispute Resolution (IDR) process. This final-offer arbitration process will use a government-approved entity to choose either offered rate as a final determination.
The goal? To eliminate medical bills received from out-of-network medical providers that the patient did not willingly choose, like in the case of a medical emergency.
How broad is the protection?
Protections apply to all commercially insured patients and to almost all out-of-network services.
The No Surprises Act will eliminate surprise bills for patients receiving:
- Emergency medical services from out-of-network providers
- Air ambulance services
- Non-emergency services at an in-network facility
How is payment determined?
Patients can expect to pay what they would pay for the same service if it were provided by a network provider.
For the health plan’s reimbursement to the provider, if there is an applicable state-required reimbursement process, the state law takes precedence. If there is no applicable state law, the Act outlines a reimbursement process to follow.
Under the Act’s process, a health plan reimburses the provider an initial payment. If the provider does not like the payment amount, the provider has 30 days to negotiate a different amount. If the negotiation fails, then either party may invoke arbitration. After both parties submit a proposed payment, the arbitrator must select one, with no ability to split the difference between the two proposals. The losing party must pay for the arbitration.
How will this affect health care costs?
The new bill could affect health care costs via three main channels, but CBO estimates that the No Surprises Act will result in less than a 1% reduction in premiums.
1. New administrative costs
Arbitration processes incurs administrative costs, via the typical fees associated with each arbitration case, as well as the staff time and resources needed to manage the process.
2. Settled payments
By making arbitration outcomes more predictable, providers and insurers will have shared expectations about how the arbitrator will ultimately rule and may recognize that reaching a negotiated agreement close to what the arbitrator will ultimately decide can allow them to avoid associated arbitration fees.
Agencies can also reduce the per-service administrative costs of arbitration when it does occur, although this could lead to prices higher than those that would have been paid prior to the No Surprises Act.
What does implementation look like?
Implementation questions generally fall into three buckets:
How widespread are the protections against surprise billing? Will they expand the list of specialities barred from balance billing out-of-network patients at in-network facilities? Will exceptions be made for certain advanced diagnostic lab tests that are typically billed out-of-network?
2. In-network rate calculation
To delineate the specifics of the median in-network rate calculation for insurers, a second set of decisions is needed. On what geographic level are insurers required to make these calculations? How do organizations implement the rules for dealing with new carriers, newly-covered services, or services where an insurer has an insufficient number of provider group contracts?
3. Arbitration process mechanics
Regulators will need to specify how certification of arbitrators will work, as well as how the federal government will select an arbitrator if the parties fail to agree. How does one deal with other factors that might impact pricing, like the parties’ market shares? Can arbitrators make decisions separately for each service in dispute, or are they required to choose between the insurer and provider final offers for the entire batch of services?
The wrap up
The No Surprises Act addresses the root market failure that created the surprise billing problem (aka a patient’s lack of choice of provider for certain services). But it also presents new challenges, as providers are now required to treat any patient regardless of ability to pay. Hopefully, the law’s new arbitration process will fill that role.
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