Agencies Issue Two Rounds of No Surprise Billing Guidance
By Roberta Casper Watson, Dannae Delano and Barry Salkin
The No Surprises Act (“Act”), part of the Consolidated Appropriations Act, 2021, enhances the ACA’s consumer protections by prohibiting balance billing in many situations and limiting out-of-network cost sharing in circumstances where surprise billing typically occurs (see Agencies Issue Regulations Restricting Surprise Billing), and the Treasury Department, the Department of Labor (the “DOL”), the Department of Health and Human Services the (“HHS”), and the Office of Personnel Management (the “Agencies”) have issued two rounds of guidance implementing the restrictions on surprise billing applicable to all group health plans, including employer sponsored group health plans, in the form of interim final rules.
The focus of the Act and the initial regulatory guidance, issued July 13, 2021, was on protecting group health plan participants from payments to service providers not covered by a plan’s network, often in circumstances in which the participant has no control over the service provider. Although the focus of the Act and the regulatory guidance was not generally on plan sponsors of group health plans, the guidance addresses several ways in which sponsors of group health plans may be affected.
While certain areas of the guidance were technical in nature, such as the calculation of rates, and some determinations must be made by health care providers, some of the guidance will influence the operations of group health plans. The four agencies also clarified that the Act, which will be effective January 1, 2022, extended the patient protections related to choice of health care professional and emergency services, protections that under the Affordable Care Act were initially limited to non-grandfathered plans, to grandfathered health plans for plan years beginning on or after January 1, 2022. These interim final rules do not apply to health reimbursement arrangements or other account-based plans such as flexible spending accounts; to excepted benefits; to short-term limited duration insurance; or to retiree-only plans. The interim final rules do apply to traditional indemnity plans, although the Agencies recognized that certain provisions of the interim final rules would not be relevant to traditional indemnity plans.
Coverage for Emergency Services
In the preamble to the interim final rules, the Agencies stated that some plans deny coverage for certain services performed in a hospital emergency room based solely on final diagnostic codes. In addition, some plans automatically deny coverage initially based on a list of final diagnostic codes, without regard to the individual’s presenting symptoms. In response to these types of practices, the interim final rule makes clear that if a group health plan provides or covers any services with respect to services in an emergency department of a hospital or with respect to emergency services in an independent freestanding emergency department, the plan must cover emergency services without limiting what constitutes an emergency medical condition solely on the basis of diagnostic codes. Under the interim final rules, whether an emergency medical condition exists is based on a prudent layperson standard, rather than what a medical professional would consider to be an emergency. The determination of whether the prudent layperson standard has been met must be based on all pertinent documentation and must be focused upon the presenting symptoms. The Agencies clarified that neither the Act nor the interim final rules preclude a plan from taking diagnostic codes into account when deciding payment for a claim for emergency services, so long as any denial of coverage is not based solely on diagnostic codes. In the same vein, the Agencies stated that a plan could not restrict the coverage of emergency services by imposing a time limit between the onset of symptoms and the participant’s presentation at an emergency room, nor restrict coverage because the participant did not experience a sudden onset of the condition.
The Agencies also addressed the permissibility of denying coverage for emergency services based on a general plan exclusion. As an example, it has been a common practice for a plan to deny coverage for dependent maternity care. The Agencies indicated that such an exclusion would be impermissible if the plan tried to use the exclusion to deny emergency coverage to dependent women who were pregnant. The Act provides that, if a plan provides or covers any benefits with respect to emergency services, emergency services must be provided “without regard to any other term or condition of the plan or coverage (other than the exclusion or coordination of benefits).” As the Agencies interpret this provision of the Act, a plan that covers emergency services cannot deny benefits to a participant or beneficiary based on a general plan exclusion that would apply to items and services other than emergency services.
Calculation of Deductibles and Out of Pocket Caps and Coordination with HDHP Rules
Under the Act and the interim final rules, any cost-sharing payments for emergency services, non-emergency services furnished by nonparticipating providers in a participating health care facility, as well as air ambulance services furnished by a non-participating provider must be counted towards any in-network deductible or out of pocket maximum, including the annual limitation announced by CMS, in the same manner as if such cost-sharing payments were made with respect to services furnished by a participating provider or facility.
The manner in which the cost-sharing and out-of-network rates apply under the Act will, in certain circumstances, result in an out-of-network provider receiving payment from a plan before an individual satisfies his or her deductible under the plan, a situation that would not have arisen prior to the Act. While such a payment to a provider would generally cause a high deductible health plan to lose its status as a high deductible health plan with respect to eligibility for contributions to a health savings account, the Act specifically provided that a plan would not fail to be a high deductible health plan because of any payments made under the Act.
ERISA Preemption and Compliance with Rules for State Programs
As a general matter, ERISA’s preemption provisions preclude a state law from applying to a self-insured medical plan. However, ERISA’s preemption provisions do not prevent states from expanding access to a state program and allowing self-insured ERISA group health plans to comply with it. Consistent with that understanding of ERISA preemption, the interim final rules allow self-insured plans to voluntarily opt in to a state law that provides for a method of determining the cost-sharing amount or total amount payable under a plan, where a state has chosen to expand access to such a method to employer plans. A group health plan that opts in to such a state law must do so for all items and services to which the state law applies. Additionally, a self-insured plan that has chosen to opt in to a state law must prominently display in its plan materials describing the coverage of out-of-network services a statement that the plan has opted in to a specified state law, identify the relevant state or states, and include a general description of the items and services provided by nonparticipating facilities and providers that are covered by the specified state law.
Calculation of Qualified Payment Amount
In determining the qualified payment amount under the Act, it is necessary to calculate the median contracted rate for a given item or service. The interim final rules provide that such calculation must consider the contracted rates under all group health plans of the sponsor that are offered in the same insurance market. With respect to self-insured group health plans, insurance market is defined to mean all self-insured group health plans of the plan sponsor or, at the option of the plan sponsor, all self-insured group health plans administered by the same entity, including a third party administrator, that determines the qualified payment amount for the plan. That is, the interim final rules, to ease the administrative burden on the sponsors of self-insured plans, permit third party administrators to determine the qualified payment amount for the sponsor by calculating the median contracted rate using the contracted rates recognized by all self-insured group health plans administered by the third party administrator, not only those rates of the particular plan sponsor.
Coordination with DOL’s Claim Procedures
The Agencies also recognized that there might be inconsistencies between the Act and the DOL claims review procedures. Addressing that inconsistency, the Agencies explained that while the DOL claims procedure regulation would require plans to make a benefit determination within 15 days of a claim being resubmitted with additional information, plans would have 30 calendar days to make an initial payment to a nonparticipating provider or facility, or send a separate notice of denial of payment.
The Agencies also stated that there is a significant distinction between an adverse benefit determination, which may be addressed through a plan’s claims procedures, and a denial of payment or a payment less than the billed amount to a service provider, which would under the Act be resolved through open negotiation or through the independent dispute resolution (“IDR”) process. IDR provisions are used by health plans and nonparticipating providers following the end of an unsuccessful open negotiation period to determine the out-of-network rate for certain emergency and non-emergency services, services furnished by nonparticipating providers at participating health care facilities, and a limited set of air ambulance services. If adjudication of a claim results in a participant being personally liable for payment to a provider or a facility, the determination may be an adverse benefit determination that could be disputed through the plan’s claims and appeals process. In contrast, if the adjudication of a claim does not result in a decision that affects the amount that a participant owes, the dispute only involves an amount due from the plan to the provider, and the provider has no recourse against the participant, then the payment dispute is not an adverse benefit determination and the payment dispute may be resolved under the procedures provided under the Act.
Independent Dispute Resolution Rules
On October 7, 2021, the Agencies also jointly issued another round of guidance on various aspects of the Act, including the interim final rules relating to the federal IDR provisions. As this guidance clarifies, upon receiving an initial payment or notice of denial of payment with respect to an item or service, the provider, facility, group health plan or issuer, may initiate an open negotiation period within the 30 business days beginning on the date that initial payment is received or payment is denied. Multiple items and services may be jointly considered as part of one payment determination, or batched, if:
- the items and services are billed by the same provider or group of providers or facility;
- the payments are made by the same group health plan or issuer;
- the items or services are the same or similar items or services (e., items billed under the same service code or a comparable code under a different procedural code system); and
- all the items and services are furnished within the same 30-day business period or associated 90-day calendar suspension period (the period during which the party that initiated the IDR is suspended from taking the same party to an IDR entity for the same item).
The open negotiation period may continue for up to 30 business days beginning on the date that either party first initiates the open negotiation period. The parties may discontinue the negotiations if they agree on an out-of-network rate before the last day of the open negotiation period. If the parties cannot agree on an out-of-network rate, they must exhaust the full open negotiation period before initiating the Federal IDR process.
Either party may initiate the Federal IDR process during the four-business day period beginning on the 31st business day after the start of the open negotiation period. The parties may select a certified IDR entity or, if the parties do not select a certified IDR entity within three days after initiating the IDR process, they must notify federal officials on the fourth business day of their failure to agree. The Agencies will then select a certified IDR entity at random within six business days. To avoid conflicts of interest, the certified IDR entity selected, whether by the parties or the Agencies, cannot be a party to the determination or an employee or agent of such a party, or have a material familial, financial, or professional relationship with such party (these relationships are defined in the interim final rule).
Each party to a federal IDR determination must pay an administrative fee for participating in the federal IDR process at the time the certified IDR entity is selected. The administrative fee is paid by each party to the certified IDR entity and then remitted to the Agencies (the CMS IDR approval process documentation indicates that the fees will be remitted by the IDRs to CMS, a division of HHS). The administrative fee is determined annually ($50 for 2022). In addition, each party must also pay a certified IDR entity fee to the certified IDR entity at the time that the party submits its offer. However, the non-prevailing party is ultimately responsible for the certified IDR entity fee, which for 2022 is within the range of $200 to $500 for single determinations and within the range of $268 to $670 for batched determinations. Amounts outside the ranges can be implemented if approved by the Agencies. The non-prevailing party’s fee is retained by the certified IDR entity, while the prevailing party’s fee is returned.
In the case of batched claims, the certified IDR entity may make different determinations for each qualified IDR item or service. In those cases, the party with the fewest determinations in its favor is the non-prevailing party that is responsible for the certified IDR entity fee. In the event, each party prevails on an equal number of determinations, the certified IDR entity fee will be split evenly between the parties. Further, if the parties reach a settlement before the certified IDR entity makes a payment determination, the certified IDR entity fee will be divided equally between the parties, unless they agree on an alternative allocation.
To resolve disputes, the guidance provides that the parties each submit an offer in the form of a payment amount (both the dollar amount and the percentage of the qualified payment amount – see discussion above of how to calculate the qualified payment amount) that would resolve the dispute and any other required information related to the offer within the 10 business days following the selection of the certified IDR entity. The parties may also choose to submit additional information for the certified IDR entity to consider. While the certified IDR entity has some discretion with respect to the required additional information, the interim final rule requires the following:
- the provider or facility must submit information about the size of the practice or and facility;
- the provider must submit information on the practice specialty or type;
- the plan or issuer must submit its coverage area; the relevant geographic region for purposes of the qualified payment amount; and whether the plan is fully insured, partially insured, or self-insured.
This dispute resolution process is what is sometimes referred to as a baseball type arbitration, meaning that the certified IDR entity must select one offer or the other – no middle ground may be taken by the certified IDR entity. The certified IDR entity must also select the offer closest to the qualified payment amount, unless the certified IDR entity determines that credible information submitted by either party is materially different from the out-of-network rate, based on additional factors specified in the Internal Revenue Code and ERISA. Those factors include:
- the level of training or experience of the provider or facility;
- the quality and outcomes measurement of the provider or facility;
- the 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 is provided;
- patient acuity and complexity of the services provided;
- the teaching status, case mix, and scope of services of the facility;
- any good faith effort, or lack thereof, to join the insured’s network; and
- any prior contracted rates over the previous four years.
However, in considering these other factors, the certified IDR entity must consider whether the other factor is already taken into account by the qualified payment amount and whether the other factor made an impact on the care that was provided. For example, for treatment of a superficial wound, even a practitioner with 30 years of experience would generally not be entitled to a higher rate than the qualified payment amount due to the practitioner’s experience. Similarly, the Agencies’ view is that only in rare instances will the qualified payment amount not already account for the acuity of the patient or complexity of the service.
If offers are equally distant from the qualified payment amount but in opposite directions, the certified IDR entity must select the offer that the certified IDR entity determines best represents the value of the items or services.
Other important parts of the dispute resolution process set forth by the guidance include:
- information is defined as credible if upon critical analysis the information is worthy of belief and is trustworthy.
- Material difference is defined as existing where there is substantial likelihood that a reasonable person with the training and qualifications of a certified IDR entity making a payment determination would consider the information important in determining the out-of-network rate and view the information as demonstrating that the qualified payment amount is not the appropriate out-of-network rate.
- If the certified IDR entity determines that credible information about additional circumstances clearly demonstrates that the qualified payment amount is materially different from the appropriate out-of-network rate, the certified IDR entity must select the offer that the certified IDR entity determines best represents the appropriate out-of-network rate for the qualified IDR items or services, which could be either party’s offer.
The certified IDR entity may not consider usual and customary charges, public payor payment or reimbursement rates, such as Medicare, Medicaid, the Children’s Health Insurance Program, or TRICARE, or an amount that would have been charged if there were no regulations prohibiting providers and facilities from balance billing or charging amounts that exceed the cost-sharing requirements for these items or services.
Not later than 30 days after the selection of the certified IDR entity, the certified IDR entity must also notify the plan or issuer and the provider or facility of the offer selected by issuing a written decision.
The guidance sets forth requirements for certification of IDR entities by the Agencies and establishes a process whereby members of the public, providers, facilities, plans, or issuers may petition for the denial or revocation of certification of an IDR entity. The guidance also establishes a Federal IDR portal to administer the Federal IDR process.
Coordination with External Review Provisions of Claim Rules
Finally, the external review provisions of ERISA and the Internal Revenue Code are modified in two ways. First, the scope of adverse benefit determinations eligible for external review is amended to ensure that issues relating to compliance with the cost-sharing and surprise billing provisions of the Act are within the scope of external review. Second, grandfathered health plans, which generally are exempt from the requirements related to external review, must nevertheless provide for external review of adverse benefit determinations for claims subject to the cost-sharing and surprise billing provisions of the Act.
Action Items for Health Plans
Health plans must work now to understand the IDR requirements for certain payors and out-of-network providers, as well as the other requirements to implement the prohibitions on surprise billing, as many of these rules are expected to be effective next year. With the rules discussed in this article subject to comment, there may be significant changes to the initial provisions in the final rules.
With external review procedures affected, even for grandfathered plans, amendments to health plan claims procedures will be necessary to comply.
If you have questions about how the new requirements could affect your health plan, you can contact one of the authors listed for more information.