On July 1, 2021, the federal agencies issued interim final regulations outlining certain requirements related to surprise billing. These rules implement certain provisions of the “No Surprises Act” (herein the NSA), which is a ban on surprise medical bills effective in 2022 that was enacted as part of the Consolidated Appropriations Act (CAA) passed at the end of 2020. See our update for background on the CAA provisions, and this fact sheet and news release for more information on the NSA. The newly released interim rule covers the requirements for certain billing, payment and ambulance services, but does not detail the independent dispute resolution (IDR) process, the transparency requirements, or the price comparison tools that are outlined in the NSA. The federal agencies intend to start issuing subsequent rules covering those aspects of the NSA later this year.
The “No Surprises Act”
The No Surprises Act or “NSA” was designed to end “surprise billing” for those patients who receive unexpected medical bills, sometimes for tens of thousands of dollars, from out-of-network medical providers, doctors and air ambulance services. Patients often cannot determine the network status of these providers during treatment in order to avoid the additional charges, and in many cases, the patient is not involved in the choice of provider at all. The issue of surprise medical bills has been especially relevant during the COVID-19 pandemic, which has increased the occurrence of surprise bills at a time when people are struggling with unexpected medical and other costs.
Overview of the Interim Rule
The interim final rule protects participants and beneficiaries in group health plans (GHPs) from surprise medical bills. The interim final rules generally apply to GHPs and health insurance issuers offering group or individual health insurance coverage. The rule clarifies that the NSA applies to both grandfathered and non-grandfathered GHPs, as well as grandmothered plans and traditional indemnity plans without a network (although some rules may not be relevant). The rule does not apply to health reimbursement arrangements (HRAs), excepted benefits, short-term, limited-duration insurance, and retiree-only plans. The agencies have requested comments on whether other plans should be exempt.
Here are highlights from the long and detailed rule, which is generally applicable to GHPs for plan years beginning on or after January 1, 2022:
Defining Payment Amount – Under the rule, providers will have to work with the GHP to determine the appropriate amount to be paid by the plan. The rule defines how the qualifying payment amount (QPA) will be determined, which is the basis on which a patient’s share of the bill is calculated. It’s based on a health plan’s historic median contract rate for similar services in a geographic area, and it must be considered by arbitrators if health plans and providers can’t agree how much a doctor or hospital should be paid. Employer groups are pleased with this first rule implementing the NSA as it appears to keep payment rates lower than what medical providers were calling for.
Initial Provider Payment – The rule establishes details for determining the amounts payable by a GHP for items and services within the NSA’s scope, referred to as the “out-of-network rate.” The GHP must pay an initial amount to the nonparticipating provider (or provide a notice of denial) within 30 days after receiving all information necessary to decide a claim for the services. The rule clarifies that this “initial payment” does not refer to a first installment, but rather the amount that the GHP reasonably intends as payment in full. Although the rule does not specify a minimum initial payment amount, comments are requested for consideration of future rulemaking on whether and how to set a minimum payment rate.
Notice to Provider – When a GHP determines that the QPA is the recognized amount, additional information about the QPA must be furnished to the nonparticipating provider. The notice must identify the plan’s contact person if the provider wishes to initiate a 30-day negotiation period with respect to the plan’s total payment, and explain the deadline to initiate independent dispute resolution (IDR) if agreement cannot be reached. While these rules mention the IDR process, the IDR requirements are to be addressed in future rulemaking. The agencies highlight the distinction and different timelines between the ERISA claims and appeals procedures (applicable to adverse benefit determinations when participants may be personally liable to a provider) and the IDR process (applicable to disputes between plans and providers, when the provider has no recourse against a participant).
Patient Protections – The rule attempts to ensure that patients who choose out-of-network providers, for which they can be billed for out-of-pocket charges such as coinsurance at higher than in-network rates, have ample time to consider their decision. The rule provides that if a patient schedules an appointment at least 72 hours beforehand, the provider or facility must provide notice of the implications for higher rates at least 72 hours before the appointment. If the appointment is scheduled in less time, the provider or facility must provide the information on the day of the appointment.
Emergency Services – The rule specifies that emergency room rates won’t be averaged with freestanding emergency rooms, which are more expensive, and rates for teaching hospitals, which typically charge higher rates, won’t be calculated separately from non-teaching hospitals, so calculating median rates using those methods will help reduce rates. But the rule favors hospitals in the way it requires GHPs to cover emergency services, as it provides that plans are not allowed to automatically deny claims based on the diagnosis code. So if the diagnosis ultimately proves to be for something that isn’t an emergency, GHPs may not deny the claim or pay at a lower rate if a prudent layperson analysis of the presenting symptoms is reasonable.
Notice and Consent Exception – Non-emergency services furnished by a nonparticipating provider at a participating health care facility are generally exempt from the NSA’s balance-billing and cost-sharing protections when the provider satisfies certain advance notice requirements and obtains the patient’s consent. To enable a GHP to apply cost-sharing correctly, a provider (or facility, as applicable) relying on the notice and consent exception must timely notify the GHP and provide the GHP a signed copy of any binding notice and consent documents.
Model Notice – A model notice is provided for GHPs to post and include in all explanations of benefits to which the NSA applies. The rule lays out the process for providing the notice, which is intended to serve as good faith compliance with the NSA requirement that, beginning in 2022, a GHP disclose the prohibition on surprise billing and the entities to contact in the event of a violation.
Dispute Rules Expected Later This Year – The agencies have indicated that their next set of rules to be issued later this year will determine how the independent dispute resolution (IDR) process will work in the event of disagreements in terms of payer-provider disputes. The IDR is one of the most important components of the entire NSA, and guidance will be needed to inform an eligible arbitrators’ decisions and to help ensure that arbitration will work fairly.
This interim rule represents the first guidance on the process of implementing the extensive surprise billing requirements in the NSA. While the NSA has been praised by patient advocacy groups, the full effects of the new rule on patients’ access to and quality of care, and health care costs more generally, will need to be evaluated over time. The payment resolution process and numerous reporting requirements included in the NSA offer many opportunities for implementation concerns which remain to be addressed. We expect more clarity shortly as the agencies have indicated that they intend to issue guidance later this year on the IDR process and some of the surprise billing disclosure requirements (including rules for price comparison tools). The agencies have also indicated that rules related to the many NSA transparency requirements might not be provided before the end of 2021, but rather there will likely be a prospective applicability date and an expectation of good faith compliance before then.
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