What’s in the Surprise Billing Rule, and What Happens Next?

It’s the beginning of the end for surprise medical bills.  On July 1, the Biden-Harris Administration through the Department of Health and Human Services (HHS), the Department of Labor, and the Department of the Treasury (collectively known as the Departments), along with the Office of Personnel Management (OPM), released an interim final rule as a first step in implementing the No Surprises Act that was signed into law as part of the omnibus appropriations package in late 2020.  However, the regulations won’t go into effect until January 1, 2022, and stakeholders can provide comments by September 7.   

What’s In the Rule?

Below are the provisions in the interim final rule that establishes new protections from surprise billing and excessive cost-sharing for consumers receiving health care items and services.  

  • Surprise billing will be banned.  The interim final rule bans out-of-network charges for emergency services, regardless of location.  Providers are required to bill emergency services on an in-network basis without prior authorization. The rule also prohibits surprise billing for ancillary services at in-network facilities in all cases, including anesthesiology services. 
  • Patients must consent to waive balance-billing protections. The rule directs federal agencies to establish a process to allow patients to waive their balance-billing protections and consent to out-of-network charges.  Notably, providers are not allowed to request patient consent in three scenarios: (1) The provider provides an ancillary service not selected by the patients, such as a radiologist or anesthesiologist; (2) there are no in-network providers available at the facility; or (3) the service is urgent or arises from unforeseen circumstances.
  • Insurers have 30 days to issue an interim payment or notice of denial from insurers. The interim final rule requires health plans to make an initial payment or issue a notice of denial to providers in 30 days after it receives a clean claim. 
  • CMS must determine the qualifying payment amount. The rule calls on the Centers for Medicare and Medicaid Services (CMS) to define the qualifying payment amount (QPA), which will calculate patient cost-sharing and be used by an arbitrator in the independent dispute resolution process. The rule addresses several factors that will determine how the rates are set, including the type of contract, insurance market, geographic region, and rates for same or similar services. 
  • Insurers must provide more transparency.  The interim final rule requires health plans to take several steps to promote price transparency and by requiring them to provide an advanced explanation of benefits, transitional continuity of coverage when a provider leaves the network, and access to accurate provider network directories. 

What’s Next?

The interim final rule issued on July 1 is only the first step in a multipart regulatory process, as the Departments will need to issue two additional rules to fully enact the No Surprises Act. 

By October 1, the Departments are required to put forth a rule on an audit process to ensure that plans and insurers are complying with the QPA calculation and requirement.  The audit may be performed by federal or state officials, depending on who is enforcing the surprise bill.  Enforcement follows the same rules as the Affordable Care Act, with the federal government tasked with enforcing self-insured group health plans, while states may enforce rules over non-group health plans and fully insured employer-sponsored plans.  The rule expected by October 1 will contain details on how the auditing process will work as well as how federal agencies will address enforcement. 

By December 27, the Departments must outline through rulemaking the details of an independent dispute resolution (IDR) process that providers and health plans can opt for if they fail to reach an agreement on an out-of-network rate.  The IDR process is characterized as binding, baseball-style arbitration, meaning the arbitrator must select one party’s offer.  Federal regulators face the challenge of setting up an IDR process that’s considered fair but doesn’t cause providers and insurers to overuse the process and incur higher administrative costs.  The details of the IDR process have been debated repeatedly among stakeholders and are considered to be the most consequential part of the No Surprises Act.

What Are the Reactions?

Initial reactions to the interim final rule suggest the rule favors employers and insurers over hospitals.  The American Benefits Council, an organization who advocates for employer-sponsored plans, applauded the publication of the  interim final rule as it included many of the organization’s recommendations. However, the council noted that many key issues won’t be addressed until the release of the rule on the IDR process.  One fundamental issue the council cited is confirmation that either party participating in IDR can defer the QPA except in extenuating circumstances.  Similarly, the ERISA Industry Committee applauded the rule for “taking a firm stand” to protect Americans from surprise billing and address high health care costs.  In contrast, the California Medical Association said it has “serious concerns” about the new regulations, specifically as they pertain to the QPA, although the organization declined to specify its concerns.   

What the Rulemaking Process Means for Surprise Billing

The battle among healthcare stakeholders over how to address the issue of surprise medical bills isn’t over.  The FY 2021 omnibus appropriations bill passed at the end of last year included the No Suprises Act, language designed to alleviate financial burdens on patients that can result largely when patients see out-of-network providers.  The next step will be the Department of Health and Human Services’s (HHS) release of a rule to implement the new federal law that sets up guardrails for providers and insurers alike.    Patient groups and health care stakeholders have been working with the agency  to try shape the law in their favor.  What can we expect?

Timeline

With the first part of the interim final rule due July 1, 2021, it looks like the government is likely to meet its statutory deadline. The Centers for Medicare and Medicaid Services (CMS) sent the draft to the Office of Management and Budget for review on June 8.  By law, the ban on surprise billing is scheduled to go into effect on January 1, 2022. 

Surprise Billing Part One

The law sets up a multi-part regulatory process — the July 1st rule is expected to contain details on how plans will calculate the qualifying amount to determine a patient’s cost-sharing obligation for out-of-network medical bills.  The rule is also anticipated to include guidance regarding notice and consent requirements that government how an out-of-network providers should obtain a patient’s consent before treating the patient.  Two additional deadlines for agency rulemaking this year are: 1) October 1, to establish a process to audit health plans for compliance; and 2) December 27, creating an independent dispute resolution (IDR) process.

Questions for the Rulemaking Process

Many provisions of the new law will depend on regulatory interpretation and guidance, leaving the agency to  fill in the details. Two key policy areas stakeholders are closely watching including how rates will be calculated and patient consent to treat by out-of-network providers will be obtained.   

Rates.  CMS will determine how insurers should calculate the initial payment to out-of-network providers before either party agrees on a final cost.  Determining this rate will be no easy feat, as provider payment rates for health care services are the result of negotiations between insurers and providers and can vary plan by plan and provider by provider.  Providers may favor leverage gained in these negotiations under the new law that could result in higher payments.

Dispute Resolution Process.  If a provider and a health plan fail to reach an agreement on an out-of-network rate, either party can opt for a binding, baseball-style IDR process whereby the arbitrator must select one party’s offer.  During the IDR process, the arbitrator may consider several kinds of information, including median in-network rates, case mix, and the complexity of the service. The HHS, Labor and Treasury departments face the challenge of setting up an IDR process that is considered fair but doesn’t drive providers and insurers to overuse the process.  Based on experiences with New York state’s IDR process, some experts fear an overreliance on arbitration could lead to higher health care costs.     

Consent.  Out-of-network providers must obtain consent from patients seeking treatment for non-emergency services before treatment can begin.  Exceptions apply to anesthesiologists, pathologists, radiologists and other specialists that are among the largest sources of surprise bills.  There is concern about the potential for loopholes that might still allow patients to receive surprise bills, especially in the case where an out-of-network provider must obtain consent from a patient before treatment.  While requiring patients to provide consent may be well-intended, the US Public Interest Research Group points out that requiring consent essentially puts the patient back in the middle, counter to the goals of thelaw.

Other areas of regulatory interpretation are expected to include how to monitor and punish providers who violate the ban, and how to address situations where patients cannot meaningfully consent to out-of-network care, such as emergency care.

What Stakeholders Are Saying

From the beginning of the year, health care stakeholders have shifted their lobbying efforts from the Hill to federal agencies.  Since March, HHS has been holding calls with stakeholder organizations to obtain feedback.  Additionally, several organizations have written to HHS with their recommendations for implementation.  Below are some key requests from organizations that have written to the Department. 

The American Association of Orthopaedic Surgeons (AAOS) voiced support for using an in-network median rate based on the rate for all local health plans and not simply the products of the insurer during the IDR process.  AAOS also suggested creating specific criteria for determining what constitutes “good faith” to show that physicians have adequately engaged in the IDR process.

The Association of American Medical Colleges (AAMC) asked that HHS provide language or a template that out-of-network providers may use when obtaining permission from patients to provide medical services, as well as allow providers and health plans a minimum 30 days to kick off the IDR process and 30 days to submit their offer.  Notably, AAMC also recommended that HHS delay implementation of the surprise billing ban by at least one year due to the complexity of the law. 

A group of 30 patient and disease organizations including the American Cancer Society and the American Heart Association recommend that states and HHS engage in enforcement action when cost estimates provided to a patient in advance of a medical procedures differ significantly from the billed charges.  The organizations also argue  that states should be required to report enforcement activities related to the law to the federal government.

Insurers are equally concerned about the implementation of the law.  A recent survey of 100 executives representing 85 different health payers found 64% are concerned about the timeline of implementation, echoing AAMC’s concerns.  Additionally, 95% expressed concern about the health care system’s ability to achieve compliance by the January 1, 2022 deadline.

All Eyes on the Administration

With critical rulemaking expected to begin to come out this year, , the fight over surprise billing is far from overHospitals and insurers are directing their attention at regulators and top agency officials to shape the new surprise billing law in their favor and will likely call upon Capitol Hill for help resolving any ongoing concerns.  This means the conversation in Washington on surprise billing is sure to continue even beyond the implementation of thenew law, as stakeholders continue to scrutinize it and the Administration releases guidance related to the law.  The outcome of the Administration’s rulemaking is also important because it will send a signal about how aggressively the Administration plans to regulate the health care industry.