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Surprise Billing in Healthcare: The No Surprises Act Takes a Stand for Patients

On January 1, 2022, Requirements Related to Surprise Billing; Parts I and II under Title I, the No Surprises Act, will take effect. These rules lay the groundwork to protect patients against surprise billing in healthcare and promote price transparency. The Departments of Health and Human Services (HHS), Labor, and Treasury, along with the Office of Personnel Management (OPM), will issue the No Surprises Act legislation, which impacts healthcare providers and facilities, ambulance services, group health plans, health insurance issuers, and Federal Employees Health Benefits program carriers.

Fighting Surprise Billing in Healthcare: The Background and Purpose of the No Surprises Act

Surprise billing occurs whenever a patient unknowingly receives medical care from out-of-network providers. This interaction results in higher prices for medical services that would otherwise be cheaper if rendered by providers inside the patient’s health plan network. In emergency situations, response teams usually bring the patient to the nearest emergency department, whether that facility is in or out of network.

Even when a patient chooses an in-network facility in a non-emergent situation, they usually don’t realize if a provider involved in their care is out of network (e.g., an anesthesiologist or radiologist). These situations tend to lead to a transaction known as “balance billing,” in which the out-of-network provider bills the patient for the difference between the charge and the amount the patient’s insurance paid. Because the patient doesn’t have the option to choose an in-network provider in these cases, the expense is typically unexpected and unmanageable.

Traditionally, providers have billed an out-of-network patient directly for services rendered. The provider and the patient’s insurance company don’t have any contractual agreement, leaving the patient and insurance company to settle payment disputes. According to the Centers for Medicare and Medicaid Services (CMS), in 2016, 42.8 percent of emergency room bills resulted in out-of-network charges, even when a visit was to an in-network hospital. While Medicare and Medicaid both prohibit the use of balance billing, commercial and employer-sponsored plans do not.

The No Surprises Act aims to establish new protections from surprise billing in healthcare and excessive cost-sharing for patients receiving healthcare services. Effective January 1, 2022, the out-of-network billing process will shift from patients to providers. This transition intends to remove the burden of surprise billing from patients.

What Does the No Surprises Act Mean for Providers?

Complying with the Act will require providers to make some major process changes. Working with payers rather than patients for payment will be a new practice for many providers. For emergency out-of-network cases and out-of-network providers seen at an in-network facility (such as anesthesiologists and radiologists), the Act will limit patient billing to an amount no greater than the patient’s in-network obligation according to their insurance plan.

Because out-of-network providers don’t typically have established contract rates with insurance companies, the Act will require to provider to bill the health insurance first to see if services are covered under the patient’s specific plan. The Act requires insurance companies to first check if there is an applicable All-Payer Model Agreement under section 1115 of the Social Security Act or if there is a state law that determines the total payment for that out-of-network service. In the case of a state law, the Act calculates cost sharing from that state law amount.

For example, if the patient’s obligation is 20 percent for an in-network provider, the plan could take the state law amount allowed for that medical service and require 20 percent of that amount from the patient. If there is not an All-Payer Model Agreement or law, insurance companies must calculate the median in-network payment for that medical service based on their contracts with other providers within the same geographic region. The No Surprises refers to this metric as the qualifying payment amount (QPA).

Once the out-of-network provider receives an initial payment or denial notice from the insurance plan, the provider has two choices:

  • Accept the initial payment plus the in-network patient cost-sharing amount as full payment.
  • Engage in direct negotiation with the insurance company.
Negotiating or Resolving Payment

The Act allows 30 days for providers and insurance companies to negotiate payment. If the negotiation is unsuccessful, either party can initiate the Independent Dispute Resolution (IDR) process. Under the IDR, the parties jointly select a certified independent dispute resolution entity who has no conflicts of interest with either party to resolve the dispute. If the parties can’t agree on a certified independent dispute resolution entity, the Departments (HHS, Labor, Treasury, and the OPM) will select one.

Both parties will then submit their offer representing the cost they think the plan should pay for the services provided, along with supporting documentation. The certified dispute resolution entity will issue a binding determination.

Notably, not all services are eligible for the IDR process. This process applies only to those services for which balance billing was prohibited in Part I of the Requirements Related to Surprise Billing rule. Each step of this process will require new internal processes—providers need to begin planning for these promptly.

The Exception to the Rule: Patient Notice and Consent

The Act allows, in limited cases, a provider or facility to notify the patient regarding potential out-of-network care and costs and obtain consent before treatment. This requirement would allow the provider to charge the patient for the out-of-network cost-sharing amount and balance bill the patient for the difference between the insurance plan’s allowed amount and the provider’s charge.

The Act does not specify for what types of cases it will allow out-of-network notice to the patient. However, it specifically states that providers or facilities should not use the exception for services that are common surprise billing situations, such as emergency services and certain ancillary services. As the Departments haven’t yet specified the type of services for which they will allow a notice and consent, providers must watch for further guidance.

The Act also requires certain providers and facilities to make publicly available, post on a public website, and provide patients with a one-page notice on patients’ rights with respect to balance billing. The notice must contain the requirements established under the Act, any state-level protection laws, and contact information for state and federal agencies to report any potential violations.

The Good Faith Estimate: Price Transparency

One thing all providers—even those who are likely to be in network—need to note is the Act’s new requirements regarding price transparency. The rule will require all providers to reach out to patients prior to a scheduled appointment to solicit the patient’s insurance information and then issue a Good Faith Estimate to the patient’s insurance plan.

This estimate should include a description of the services that will be provided and the provider’s estimated charges. The insurance plan must then send the patient an Advance Explanation of Benefits (EOB) at least three days prior to the appointment.

The advanced EOB should include the following information:

  • A description of services to be provided, whether the provider is in or out of network.
  • The contracted rate for services (if the provider is in network).
  • A description of how to access in network care (if the provider is out of network).
  • The provider’s estimate of charges and the patient’s responsibility total.
  • The patient’s status regarding deductible and out-of-pocket maximum.

Insurance plans must provide patients with an up-to-date directory of in-network providers, an insurance card that describes the deductibles and out-of-pocket maximum limitations for in- and out-of-network providers, and a price comparison tool.

If the patient is uninsured (or self-pay), the provider must provide the Good Faith Estimate directly to the patient within a specific timeline: The Act states that if the patient schedules the services at least three days prior to the appointment date, the provider must offer the estimate within one business day after scheduling. If the patient schedules the services at least 10 days before the appointment date, the provider must share the estimate within three days of scheduling.

Balancing Burden to Providers with Benefit to Patients

Most providers consider protecting patients from unexpected and unmanageable medical bills an important part of patient care. However, these process changes will take time and effort to implement. If providers do not prepare, they may experience delays in payment and financial penalties for noncompliance. The No Surprises Act’s ultimate goal is price transparency, which most providers agree improves the patient experience and increases the likelihood of payment for care.