Unpacking The No Surprises Act: An Opportunity To Protect Millions

By Jack Hoadley, Katie Keith, Kevin Lucia

Update:

Congress included the No Surprises Act in the omnibus spending bill that was passed and signed into law by President Trump on December 27, 2020. There were some slight changes between the version of the No Surprises Act described below and the final text of the legislation. However, these changes were relatively minor, and this post has been updated to reflect the final enacted legislation. The protections included in the No Surprises Act will go into effect for plan or policy years beginning on or after January 1, 2022.

All eyes are on Congress as we near the end of another year and congressional session. As we wait to see if Congress will pass a COVID-19 relief package and/or a government spending bill, one key question is whether one of those vehicles will include new compromise legislation—the No Surprises Act—to comprehensively protect consumers from surprise medical bills.

This new bipartisan, bicameral legislation is the culmination of two years of hearings, mark-ups, campaign ads, and negotiation. Congress has gotten close before, but never this close.

The No Surprises Act includes several changes from prior compromise bills. These changes largely center on the mechanism to determine how much out-of-network providers will be paid by insurers. Unlike many prior bills, the No Surprise Act does not establish a benchmark payment standard for insurers to pay out-of-network providers. Instead, insurers and providers will try to resolve payment disputes on their own. If that fails, these stakeholders can turn to arbitration. This change (arbitration with no benchmark payment standard) is more favorable to health care providers like hospitals and physicians than prior bills. But the No Surprises Act also includes several important guardrails to help ensure that the arbitration process—which critics have argued can be inflationary—is not abused.

This compromise helped secure the support of bipartisan leadership from four key congressional committees: the Senate HELP Committee and the House Committees on Energy and Commerce, Education and Labor, and Ways and Means. House Speaker Nancy Pelosi (D-CA) has voiced her support, as has Senate Minority Leader Chuck Schumer (D-NY). The White House has confirmed that President Trump would sign the bill. The only outstanding question then seems to be where Senate Majority Leader Mitch McConnell (R-KY) stands—and thus whether the legislation will be included in must-pass legislation.

Time is of the essence. Even before the pandemic, two-thirds of Americans were worried about being able to afford an unexpected medical bill. And 78 percent of people (across ideological lines) support legislation to protect patients from surprise medical bills. The pandemic has increased the potential for surprise medical bills while the economic fallout has made it less likely that families can absorb an unexpected health care cost.

States have recognized this need: in 2020 alone, GeorgiaMaineMichigan, and Virginia passed comprehensive protections on an overwhelmingly bipartisan basis, making a total of 17 states with comprehensive protections to bar surprise medical bills in emergency and nonemergency situations. But state laws can only go so far. Federal legislation is needed to protect the estimated 135 million people with self-funded coverage and to extend these protections to federally regulated providers, such as air ambulances.

Beyond the need to protect patients, there are practical considerations as well. Key Republican champions of surprise medical bill protections—Sen. Lamar Alexander (R-TN) and Rep. Greg Walden (R-OR)—are retiring at the end of 2020. And the proposal would result in savings: the $18 billion in savings from the No Surprises Act would be used to fully fund community health centers and other primary care programs for four years.

What’s In the Legislation?

The No Surprises Act adopts a comprehensive approach to protecting consumers from surprise medical bills. This post summarizes some of the law’s key features.

Patient Cost-Sharing Protections And Transparency

Patients who see an out-of-network provider will not be responsible for cost sharing other than what they would have paid to an in-network provider. Equally important, providers will be barred from holding patients liable for higher amounts.

The No Surprises Act also tries to increase transparency for all patients to better understand their cost-sharing liability ahead of time. For instance, consumers can receive an Advanced Explanation of Benefits before a health care service is delivered. This document must provide a good-faith estimate of costs and cost sharing; it must identify whether the provider(s) furnishing the items or services is in network and, if not, how to find in-network providers. Insurers also will have to offer price comparison information by phone, develop a web price comparison tool, and maintain up-to-date provider directories.

Scope Of The Protections

Consumers will be protected from surprise medical bills when they receive care in both emergency and nonemergency settings; the protections extend to out-of-network air ambulances. As a result, patients will be protected from surprise bills in situations where they have little or no control over who provides their care.

Emergency Services (Including Air Ambulances)

Patients will be protected from surprise medical bills for emergency services from the point of evaluation and treatment until they were stabilized and can consent to being transferred to an in-network facility. Protections will apply whether the emergency services are received at an out-of-network facility (including any facility fees) or provided by an out-of-network emergency physician or other provider.

As mentioned, the No Surprises Act will also extend to air ambulances, which have a history of sending sky-high surprise medical bills to patients with critical medical situations. To increase transparency regarding air ambulances, air ambulance providers and insurers must submit two years of cost and claims data to federal officials for publication in a comprehensive report. In addition, the legislation establishes an advisory committee on air ambulance quality and patient safety.

The legislation does not extend to ground ambulances. This is likely because few states, to date, have regulated in this area, which is complicated by the fact that many ground ambulance services are provided by local government entities. The legislation, however, does call for a special advisory committee to recommend ways to best protect consumers from these surprise medical bills and improve transparency for ground ambulance services (including through the disclosure of charges and fees and improved consumer education and disclosures).

Nonemergency Services

Patients willl be protected from surprise medical bills for nonemergency services provided at an in-network facility but by an out-of-network provider. Today, a patient might receive a surprise bill from a nonemergency out-of-network provider that provides, say, ancillary services (such as those delivered by a radiologist, anesthesiologist, or pathologist) or specialty services needed to respond to unexpected complications (such as those delivered by a neonatologist or cardiologist).

Here, the No Surprises Act allows for some voluntary exceptions to surprise medical bill protections but only if a patient knowingly and voluntarily agrees to use an out-of-network provider. For instance, if a patient wants to select an out-of-network orthopedist for a knee replacement or an out-of-network obstetrician for a scheduled delivery, the patient could waive the federal protections (and thus could be charged a balance bill). Because the patient is knowingly choosing to see an out-of-network provider, the reasoning goes, the additional cost is no longer a “surprise” to the patient.  

The legislation also allows certain providers to request that a patient sign a consent waiver. But this exception is relatively narrow and generally more protective of consumers than state laws that allow for consent waivers. This exception is only allowed in nonemergency situations. And providers may not request a consent waiver 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 (e.g., a radiologist, anesthesiologist, pathologist, neonatologist, etc.). The legislation identifies a list of providers that may not ask for a consent waiver, and federal officials will be able to identify additional providers in future rulemaking.

For providers who are eligible to ask a patient for a consent waiver, the provider must generally notify the consumer in writing 72 hours before services are scheduled to be delivered. This notification must include a good-faith cost estimate and identify available in-network options for obtaining the service.

Settling Payment Disputes

While all stakeholders agree that patients should be taken out of the middle of disputes between insurers and providers, much focus has been on how to then settle payment disputes between insurers and out-of-network providers. In general, insurers and employers have favored adoption of a benchmark payment standard (meaning an insurer would pay, say, its median in-network rate to an out-of-network provider), while providers have favored arbitration. As noted above, the No Surprises Act does not include a benchmark payment standard but rather relies on voluntary negotiations between insurers and providers, backed up by arbitration if negotiations fail.

Arbitration Process

The legislation establishes timeframes for the arbitration process and impose other guardrails. For instance, insurers and providers will have 30 days to engage in private, voluntary negotiations to try to resolve the payment dispute. If negotiations fail, either party may, within four days, request independent dispute resolution. Presumably if there is no settlement and no request for arbitration, the provider will accept the amount paid by the insurer.

The arbitration process will be administered by independent dispute resolution entities subject to conflict-of-interest standards. The federal government will establish the independent dispute resolution process, including a list of entities available to take cases.

The No Surprises Act adopts “baseball-style” arbitration rules: each party offers a payment amount, and the arbitrator selects one amount or the other with no ability to split the difference. The decision is then binding on the parties, although the parties can continue to negotiate or settle. 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 have to occur within a single 30-day period.

There are two rules that can help deter overuse of the dispute resolution process. First, the losing party will be responsible for paying the administrative costs of arbitration. If a case is settled after arbitration has begun, the costs are split equally unless the parties agree otherwise. This rule increases the financial stakes for pursuing long-shot cases. Second, the party that initiates 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. The goal of this provision is to encourage settlement of similar claims. Any claims that occur during the lock-out period, however, can go to arbitration after the period ends.

Arbitration Factors

Arbitrators will have flexibility to consider a range of factors. This includes any relevant factors raised by the parties, but not the provider’s usual and customary charge or the billed charge. By explicitly prohibiting arbitrators from considering provider charges, the No Surprises Act attempts to help limit any potential inflationary effects if arbitration leads to settlements well above the amounts insurers typically pay to in-network providers. Arbitrators also cannot consider the reimbursement rates paid by public payers, such as Medicare, Medicaid, CHIP, or TRICARE.

Optional factors that an arbitrator can consider include, among others, the level of training or experience of the provider or facility; quality and outcomes measurements of the provider or facility; market share held by the out-of-network health care provider or facility, or by the plan or issuer in the geographic region in which the item or service was provided; patient acuity and complexity of services provided; teaching status, case mix, and scope of services of the facility; any good faith effort—or lack thereof—to join the insurer’s network; and any prior contracted rates over the previous four years. Arbitrators would also be able to consider the median in-network rate paid by the insurer. Federal officials, in implementing the dispute resolution process, might opt to provide more guidance on the use of these factors in the future.

The same general factors apply to air ambulance providers, with some adjustments such as the location where the patient was picked up and the population density of that location, and the air ambulance vehicle type and medical capabilities.

Interaction With State Laws

To date, 17 states have enacted comprehensive surprise billing laws, and another 15 states have more limited protections. The No Surprises Act defers to existing state laws with respect to state-established payment amounts. Thus, if a state law already sets a payment amount for a surprise medical bill dispute (as many of the states with comprehensive protections have done), this payment mechanism continues to govern disputes between insurers and out-of-network providers in that state for the fully insured plans they are able to regulate. Said another way, state payment standards are not preempted or otherwise displaced by the No Surprises Act.

States are free to pass surprise billing laws in future years as well, whether with a payment standard or arbitration that uses different criteria. Federal officials may be able to offer future guidance on the extent to which state standards can be used in place of the federal arbitration process.

Enforcement

With respect to insurers and employers, the No Surprises Act adopts the same enforcement framework as the ACA and HIPAA: states will continue to be the primary regulators of fully insured health insurance products (with back-up enforcement by the federal government if a state fails to substantially enforce the law). The Department of Labor will continue to regulate self-funded plans.

With respect to providers, the legislation allows states to require a provider (including air ambulances) to comply with the new standards. If a state fails to substantially enforce those requirements, the federal government will step in to do so. This federal backup enforcement will allow the federal government to impose civil monetary penalties against providers of up to $10,000 per violation. Federal officials must also establish a process to receive consumer complaints on surprise medical bills.

Other Provisions

The No Surprises Act includes many more provisions that are critical to protecting patients from surprise medical bills. For instance, providers will be required to provide uninsured consumers with a good faith estimate of costs before a health care service is delivered. If the eventual charges for the service are “substantially” higher than the good faith estimate, the patient can invoke the independent dispute resolution process to challenge that higher amount (although the patient may have to pay a fee to do so).

Federal officials must regularly report to Congress on the impact of the No Surprises Act, including detailed information on arbitration outcomes. The Department of Health and Human Services, for instance, must report on the legislation’s impact on factors such as provider consolidation, health costs, and access in rural areas. The Government Accountability Office will have to issue three reports on issues such as the legislation’s impact on network adequacy and provider payment rates, as well as the independent dispute resolution process (including whether providers that use this the process have relationships with private equity firms).

Finally, the No Surprises Act provides funding to states to set up all-payer claims databases, makes changes to current external review and continuity of care provisions, and requires the Department of Health and Human Services to finalize rules related to provider discrimination (with the goal of preventing discrimination against providers acting within the scope or their license or certification).

The No Surprises Act would extend comprehensive protections to millions of consumers across the country. While not all industry stakeholders will be pleased by the compromise, negotiators have reached a sensible agreement that would protect patients at a time when many need it most. It is long past time for Congress to ban surprise medical bills once and for all. Here’s hoping they do not miss this opportunity.

Jack Hoadley, Katie Keith, Kevin Lucia. “Unpacking the No Surprises Act: An Opportunity to Protect Millions,” Health Affairs Blog, December 18, 2020, https://www.healthaffairs.org/do/10.1377/hblog20201217.247010/full/. Copyright © 2020 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

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