On 28 December 2020, the Federal No Surprises Act (Act) was enacted. It protects patients from surprise medical bills in certain emergency and nonemergency settings for out-of-network patients.
The Act and its arbitration provisions include both emergency and nonemergency care in certain out-of-network contexts. It requires payors to treat out-of-network patients as though they are in-network for prior authorizations, coverage limits, cost sharing obligations, and out-of-pocket maximums.
It has a detailed process for providers and payors to elect to arbitrate out-of-network payment disputes, laying out the arbitration style; may of the criteria arbitrators will consider; cost shifting to the losing party; how cases may be batched for arbitration; and public reporting of arbitration outcomes.
The Act’s protections are effective for plan or policy years January 1, 2022.
Patients will be protected from what the Act calls surprise medical bills for emergency services from the point of evaluation and treatment until they are stabilized and can consent to being transferred to an in-network facility. Protections apply to three emergency categories (1) emergency services received at an out-of-network (OON) facility, which includes facility fees; (2) emergency services rendered by an OON provider, whether the facility rendering services is in- or out-of-network; and (3) emergency services provided by OON air ambulances. Ground ambulances are not covered.
Patients are protected from surprise medical bills for nonemergency services provided by an OON individual provider at an in-network facility; and OON air ambulance services.
Patients might get a surprise bill from a nonemergency OON provider of ancillary services or a specialist. OON air ambulance services are covered regardless of whether or not emergency.
Waivers
Under non emergency conditions, patients can waive the Act’s protections by agreeing to use an OON practitioner. In these instances, patients can be balance billed.
In very narrow non emergency instances, the Act also allows certain providers to request a patient’s written consent to a waiver of the Act’s protections. Such waivers are prohibited if (1) there is no in-network provider available in the facility; (2) the care is for unforeseen or urgent services; or (3) The provider is an ancillary provider that a patient typically does not select.
Certain providers are precluded from asking for a waiver under the Act. The Act identifies an initial list and regulators may identify additional precluded providers.
Providers allowed to obtain patient consent waivers must generally notify the patient in writing 72 hours before services are scheduled to be delivered. The notification must include a good-faith cost estimate and identify available in-network options for obtaining the service.
The Act requires payors to treat OON patients as though they are in-network for purposes of: prior authorizations; coverage limits; cost sharing obligations; and out-of-pocket maximums.
The gist of this is to put a patient who seeks services in a surprise context on an equal-payment-obligation footing as an in-network patient.
Arbitration
The Act establishes an arbitration process for disputes between providers and payors.
After a provider receives a response from the payor, the provider and payor have 30 days to negotiate. If the payor negotiations fail within the 30-day period, either party may request arbitration within four days.
The arbitration process will be administered by independent dispute resolution entities subject to conflict-of-interest standards. The federal government, via regulation, will establish the independent dispute resolution process, including a list of qualifying arbitration service providers.
The Act uses baseball-style arbitration rules. This is a very specific type of arbitration that is not the typical process for most parties experiencing arbitration.
In a baseball-style arbitration, each party offers a single payment amount to resolve the dispute; and the arbitrator selects amount with no ability to split the difference or arrive at any other conclusion.
The arbitration decision is binding on the parties. The parties can continue to negotiate or settle after the arbitration decision.
Multiple cases can be batched together in a single arbitration proceeding to encourage efficiency, but those batched cases must involve the same provider or facility; the same insurer; treatment of the same or similar medical condition; and cases occurring within a single 30-day period.
Congress imposed the administrative costs of arbitration on the losing party. This is intended to encourage settlement.
The party that starts the arbitration process is locked out from taking the same party to arbitration for the same item or service for 90 days following a decision. This is to encourage settlement of similar claims. Any claims that occur during the lockout period qualify for arbitration after the lockout ends.
Arbitrators will have flexibility to consider a range of factors. Certain factors are specified in the Act. The arbitrator may also consider any relevant factors raised by the parties, subject to a set of specific exclusions.
Arbitrators are instructed to consider (1) the level of training or experience of the provider or facility;(2) quality and outcomes measurements of the provider or facility; (3) market share held by the OON provider or facility, or by the plan or issuer in the geographic region in which the item or service was provided; (4) Patient acuity and complexity of services provided; (5) Teaching status, case mix, and scope of services of the facility; (6) Any good faith effort—or lack thereof—to join the insurer’s network; (7) Any prior contracted rates over the previous four years; and (8) The “qualifying payments amount” defined
More guidance may come from implementing regulations.
The same general factors apply to air ambulance providers, with additional factors like: (1) the location where the patient was picked up and the population density of that location; and (2) the air ambulance vehicle type and medical capabilities.
The Act precludes arbitrators from considering (1) the arbitrating provider’s usual and customary charge or billed charge; and (2) public payor reimbursement rates (e.g., Medicare, Medicaid, CHIP, or TRICARE).
So, while providers are precluded from advocating their charges as a factor, payors are precluded from advocating the “Medicare-plus” reference-based pricing used by payors in some OON disputes.
The Act requires DHHS to publicly report the outcomes of all arbitration cases quarterly.
The public reporting of arbitration awards is required to be presented as a percentage of the qualifying payment amount. The Act says the qualifying payment amount is the median of contracted rates for a given service in the geographic region within the same insurance market across all of an issuer’s health plans as a of 31 January 2019, inflated by the Consumer Price Index for All Urban Consumers.
The Act requires DHHS to adopt regulations to determine the methodology health insurance issuers must use to calculate the qualifying payment amount. Regular audits are required to verify that insurers are properly calculating this median amount. The qualifying payment amount is also the metric used to determine patient cost sharing limits under the Act and a factor to be considered by the arbitrator.
Many features of the arbitration process must be fleshed out by rulemaking during 2021. Other aspects of the arbitration process may or may not be addressed by regulation.
Regulators must determine how to certify arbitrator entities, which would likely entail certification of existing arbitration service providers like the American Health Law Association (AHLA) and the American Arbitration Association (AAA), both of which already have their own specialized healthcare arbitrator panels.
Regulation must also specify how the government selects the arbitrator if the parties cannot agree on one. One approach would be to default to service provider rules for arbitration selection where those provisions already exist.