Managed care is sometimes described as a dance, or perhaps tug-of-war, among plans, providers, and beneficiaries. The No Surprises Act, passed in December 2020 and effective January 1, 2022, removes beneficiaries from this dance with respect to certain claims involving out-of-network (OON) providers. The resulting landscape terminates old remedies, creates new ones, and establishes new deadlines. These changes will create new claims payment challenges for plans along with billing challenges for providers. Both plans and providers may have new administrative challenges.
The existing status quo in most jurisdictions is that an OON provider may receive payment of covered services from (1) the plan, (2) the member’s cost sharing, and (3) balance billing of the member. When the OON provider receives an amount from the plan and member’s cost sharing that is less than the amount of billed charges, the member may then receive a “surprise” bill for the balance of the provider’s charges. The No Surprises Act removes balance billing from the source of payments and generally increases the amounts payable by plans.
On July 1, 2021, various agencies jointly issued “Requirements Related to Surprise Billing; Part I.” This interim final rule adds direction about what to expect and how to prepare for the implementation of the new regime. The effective date is September 13, 2021, and the rule applies to plan year 2022.
A few notable points stand out pertaining to (1) a plan’s baseline initial payment of OON providers, (2) the operation of parallel state OON disputed payment regimes, (3) the survival of state litigation rights, and (4) air ambulance payment disputes.
A plan must have three contracted rates for a particular service in a particular geographic region in order to rely on its median contracted rate as a qualifying amount.
The No Surprises Act creates an important concept of “qualifying payment amount,” or “QPA,” which becomes each plan’s baseline payment for a particular service in a particular region. The determination of this baseline payment may be audited, but the payment will not be otherwise disturbed outside of the dispute resolution process established by the Act. Accordingly, the determination of this QPA is significant.
The No Surprises Act process begins with a 30-day prompt pay requirement in which a plan is required to pay the qualifying amount. The qualifying amount may generally be the plan’s median in-network rate. For calendar year 2022, the median in-network rate is taken from calendar year 2019 and then increased with inflation per the Consumer Price Index. Yet, if the plan does not have “sufficient information” to determine the median contracted rate, an alternative method of determining a qualifying amount will be used instead. That is, “in-network allowed amounts for items and services are a reasonable proxy for contracted rates, and  where there is insufficient information to calculate the QPA based on the median of a plan’s or issuer’s own contracted rates, using the median of in-network allowed amounts for all private payers in an eligible database is a reasonable method for approximating the median contracted rate for items and services in the applicable geographic region.” 
The plan will only be permitted to rely on its median in-network rate if it has sufficient information, which the new interim final rule defines. Sufficient information is three contracted rates for a particular service in a particular geographic area. Notably, a single case agreement is not considered a “contracted rate” for purposes of this determination: “These interim final rules specify that solely for purposes of the definition of contracted rate, a single case agreement, letter of agreement, or other similar arrangement between a plan or issuer and a provider, facility, or provider of air ambulance services does not constitute a contract, and the rate paid under such an agreement should not be counted among the plan’s or issuer’s contracted rates.”The geographic area for all non-air ambulance claims will mirror the metropolitan statistical areas defined by the U.S. Office of Management and Budget, in addition to having a region encompassing all other portions of the state. For air ambulance claims, each state will only have two geographic areas, a metropolitan area and a non-metropolitan area.
A plan may now determine, using its 2019 contract rates, what its qualifying payment amounts will be, at least for those services for which it has sufficient information. Additionally, the interim final rule identifies special processes for determining the QPA for both anesthesia services (focusing on the conversion factor) and air ambulance services (focusing on air mileage service codes A0435 and A0436). Doing this homework prior to the January 1, 2022 effective date of the Act may be necessary in order to meet the Act’s 30-day payment requirement and to avoid adverse audit results when the Departments begin reviewing the payment of qualifying amounts.
Plans in states with parallel dispute resolution processes will see claims in which a portion of the services are disputed under the federal regime and a separate portion disputed under the state regime.
Where the scope of a state dispute resolution regime concerning managed care pricing disputes differs from the scope of the No Surprises Act, portions of the claim may be split such that one portion is subject to the state regime and a separate portion is subject to the federal regime. This issue may present itself in Georgia, Maine, Michigan, New Jersey, New York, Ohio, Texas, Virginia, Washington, and other states that have chosen or will choose to create their own state surprise billing regimes. A common area in which the claim may be split will be claims that include both emergency services and post-stabilization services. While state regimes typically include emergency services, the federal regime encompasses a wider scope of post-stabilization services than most state regimes.
For instance, the No Surprises Act applies to certain types of claims, particularly (1) emergency services performed at an OON facility, (2) OON air ambulance claims, (3) emergency services provided by an OON provider at an in-network facility, and (4) an OON provider performing non-emergency services at an in-network facility. Texas has a similar scope with respect to non-emergency services performed at an in-network facility, but the Texas provision is limited to “facility-based providers.” Thus, post-stabilization services performed by a provider who does not meet the “facility-based provider” definition in Texas will be subject to the No Surprises Act, but the emergency services portion of the claim will be subject to the Texas regime.
The implication of the same claim being subject to multiple regimes is significant. For example, a Texas provider challenging the payment of emergency services has 90 days from payment to request arbitration, whereas the same provider contesting the payment amount of certain post-stabilization services on the same bill only has 30 days to begin the dispute resolution process under the No Surprises Act. Additionally, the factors the arbitrators may consider differ between the federal regime and most state regimes.Notably, the federal regime requires the arbitrator to consider the market share held by (1) the OON provider or facility and (2) the market share of the plan or issuer in the geographic region,yet most state regimes do not include this consideration. Similarly, the federal regime prohibits the consideration of certain factors such as billed charges and the Medicare rate, whereas the state regimes typically do not prevent the consideration of these elements and sometimes mandate their consideration.
Providers located in states that recognize a private right of action to determine UCR retain their litigation rights if they forego the dispute resolution process.
The No Surprises Act preserves two distinct elements of state law regarding payment to OON providers. First, the Act avoids altering the operation of existing state dispute resolution regimes concerning OON payments. It does this by stating that the state law applies if (1) the state law has a method for determining the total amount payable, (2) the state law permits the particular type of plan to participate, and (3) the state law applies to the particular type of service and provider.
Secondly, and critically in high-litigation states like Florida and New Jersey, the No Surprises Act preserves the provider’s right to pursue a claim for payment of a usual and customary rate (UCR) via litigation. The commentary to the interim fine rule provides, “to the extent state laws do not prevent the application of a federal requirement or prohibition on balance billing, the Departments are of the view that such state laws are consistent with the statutory framework of the No Surprises Act and would not be preempted.” Moreover, nothing in the Act or in the rule purports to make the federal regime the exclusive remedy for providers seeking additional payment. To be sure, a provider is prohibited from utilizing the federal dispute resolution process and subsequently seeking additional compensation. Yet, a provider could choose to forego the No Surprises Act process and pursue additional compensation through a state private right of action.
A distinct state remedy, through a separate arbitration process or through litigation, is something both plans and providers should recognize. A provider, for example, might miss a deadline under the No Surprises Act yet still retain rights provided under state law. Similarly, a plan may find value in reducing litigation costs by encouraging the use of the No Surprises Act in lieu of litigation, to the extent possible.
The No Surprises Act is the exclusive remedy for air ambulance providers seeking additional payment.
The No Surprises Act included, and the interim final rule implements, a prohibition on balance billing by air ambulance providers and a corresponding right to seek additional compensation from plans and issuers. The Airline Deregulation Act preempts state efforts to limit balance billing by air ambulance providers, and therefore only federal legislation could effectively regulate air ambulance billing. Accordingly, “[t]he Departments are not aware of any state laws regulating or limiting surprise billing or other price control measures with regard to air ambulance providers or the air ambulance industry.”
The No Surprises Act will then be the exclusive regime to dispute air ambulance bills. The statute and regulations applicable to air ambulance bills create a regime with a similar structure and deadlines as the regime applicable to emergency services and OON providers performing services in in-network facilities
The No Surprises Act transforms the payment relationship involving OON providers by removing insureds from disputes over the amount owed. It does this by granting providers new rights to pursue additional payment from plans while forbidding balance billing of the insureds. The Departments’ first set of regulations on the No Surprises Act answers a lot of questions about the operation of the Act and empowers plans and providers to begin more reliable preparation for the January 1, 2022 effective date.
- Consolidated Appropriations Act of 2021, H.R. 133, Division BB – Private Health Insurance and Public Health Provisions.
- Requirements Related to Surprise Billing, Office of Personnel Management, Department of the Treasury, Department of Labor, and Department of Health and Human Services, 86 Fed. Reg. 36872-01 (filed July 13, 2021).
- An interim final rule is issued when an agency finds that it has good cause to issue a final rule without first publishing a proposed rule. The rule may be altered if warranted by public comments. See Office of the Fed. Register, A Guide to the Rulemaking Process, p. 9.
- 42 U.S.C. § 300gg-111(a)(3)(E).
- 42 U.S.C. § 300gg-111(a)(3)(E)(iii).
- 86 Fed. Reg. at 36896.
- 86 Fed. Reg. at 36895; 29 C.F.R. § 2590.716-6(a)(15). Parallel regulations can be found in 26 C.F.R. § 54.9816-1T et seq. and 45 C.F.R. § 149.110 et seq., but remaining citations will be limited to the ERISA codification.
- 86 Fed. Reg. at 36889.
- 29 C.F.R. § 2590.716-6(a)(7).
- 29 C.F.R. § 2590.716-6(a)(7).
- 29 C.F.R. § 2590.716-6(b)(3)(iii).
- 29 C.F.R. § 2590.716-6(b)(3)(v).
- 42 U.S.C. §§ 300gg-111, 300gg-112.
- Tex. Ins. § 1467.084.
- Tex. Ins. § 1467.084(a).
- 42 U.S.C. § 300gg-111(a)(1)(C)(iv).
- 42 U.S.C. § 300gg-111(c)(5)(C).
- 42 U.S.C. § 300gg-111(c)(5)(C)(ii)(II).
- 42 U.S.C. § 300gg-111(c)(5)(D).
- For example, in New York, NY Fin. Serv. § 604 mandates the consideration of the provider’s usual billed charge when it is OON. The Texas regime similarly gives weight to billed charges at Tex. Ins. § 1467.083(b)(3).
- 42 U.S.C. § 300gg-111(a)(3)(I).
- 86 Fed. Reg. at 36887.
- See 42 U.S.C. § 300gg-111(c)(5)(E) (making decision of arbitrator binding on parties).
- See, e.g., F.S.A. § 641.513.
- 42 U.S.C. § 300gg-112. The prohibition applies “[i]n the case of a participant, beneficiary, or enrollee who is in a group health plan or group or individual health insurance coverage offered by a health insurance issuer and who receives air ambulance services from a nonparticipating provider.”
- 49 U.S.C. § 41713(b).
- 86 Fed. Reg. at 36925.
- 42 U.S.C. § 300gg-112.
- 29 C.F.R. § 2590.717-1.