While there was widespread enthusiasm and expectations of relief from surprise balance billing, the No Surprises Act that went into effect Jan. 1, 2022 has made very little progress since its implementation.
While there was widespread enthusiasm and expectations of relief from surprise balance billing, the No Surprises Act (NSA) that went into effect Jan. 1, 2022 has made very little progress since its implementation. In employer-sponsored health plans, the NSA applies to medical bills for certain emergency services and services received from out-of-network providers at in-network facilities. Legal challenges to the NSA continue – mostly focused on federal agency regulations.
The initial bottleneck can be attributed to the flawed and ineffective Independent Dispute Resolution (IDR) arbitration process. After claims from out-of-network providers are processed, the provider may initiate a claim for additional reimbursement. The NSA process anticipates a period of negotiation for payment disputes and upon failure to resolve the dispute, a provider who contends the reimbursement was inadequate can initiate the IDR arbitration process.
The initial period of IDR appeals resulted in a number of problems including:
Significantly more IDR appeals were initiated, 90,000+ in less than six months, than anticipated. The Centers for Medicare and Medicaid Services (CMS) estimated 22,000 IDR appeals per year. Only 3,500 determinations have been made.
There are only thirteen IDR Entities (arbitrators) and only eleven accepting new disputes, which is simply not enough.
The IDR process occurs piecemeal. Appeals are initiated in the federal portal - every other step is managed by the IDR Entity. Each IDR Entity manages the process differently, some by e-mail, some by their own portal. Progress is difficult to track and monitor. IDR Entities are not following deadlines, but rather pausing the acceptance of offers upon receipt of new disputes. It has been very difficult to communicate with the IDR Entities, as most do not respond to phone calls or e-mails.
The maximum fees to the IDR Entities have been increased to $700 for single determinations and $938 for batched determinations. However, with the requirement of a written decision for each IDR determination, even that increase is not likely to be enough incentive to eliminate the ever-increasing backlog of unresolved cases. CMS has not provided results regarding the 3,500 cases that have been resolved. We do not know which offer was accepted in arbitration - the provider or the payor.
NSA Lack of “Progress” is Based on Perspective
NSA progress, and lack thereof, varies based on perspective (participant, plan sponsor, service provider or medical provider), as well as by the time frame (2022, 2023 vs 2024+).
Most expenses are not subject to the NSA limitations (surprise ≠ unexpected), so the reductions in participant out-of-pocket expenses are less than anticipated or hoped for. However, participants are most likely receiving all of NSA’s promised value when expenses are subject to the NSA as expenses qualify for in-network, not out of network benefits, with no balance billing.
Most plan sponsors have health plans with PPO structures, and most PPOs vary the point of purchase cost sharing so that the non-network reimbursements are subject to higher deductibles or out-of-pocket expense maximum. This is often used as a means to justify steerage to in-network providers so more expenses qualify for negotiated, lower fee
However, the NSA likely adds to recently increased levels of inflation because more expenses are being processed as in-network, not out-of-network claims, especially in plan designs where the participant paid expenses used to satisfy deductibles and out-of-pocket maximums do not cross apply to both in-network and out-of-network cost sharing.
Plan sponsors are ultimately shouldering the costs of the IDR filing fees and processing. While there is no data on who has prevailed, the fact that most IDR appeals are outstanding adds to plan sponsor uncertainty, risk and other variables. For most plan sponsors, however, the data is so preliminary that their NSA experience probably isn’t separable, identifiable or quantifiable and the costs of NSA compliance are lumped in with all other experience.
Claims service providers are likely in the process of reconsidering their fees given the additional processing requirements for NSA, the emphasis on transparency and renewed, higher levels of inflation. Different strategies may be applied where service fees are a percentage of claims vs. per capita or per claim amounts. On the horizon are new mandated disclosures, such as Rx.
Similar to plan sponsors, the same uncertainty and risk issues impact medical providers. Many are likely reconsidering which networks they belong to, where they fall in terms of the “median” or Qualifying Payment Amount (QPA). Many are likely assessing their negotiating strategies with the networks.
Given the inadequate indexation for inflation regarding QPA determinations, we expect many non-network providers to selectively and aggressively negotiate network participation.
In the short term, 2022, we don’t expect plan sponsors will see any “savings” from the NSA, and any "savings" participants achieve will likely be ‘swallowed whole’ by provider demands for increased rates to continue as an in-network provider after 2022.
This is especially relevant to those network providers who charged below median amounts in 2022. Most now know what other network providers received. For non-network providers, the QPA and IDR processes and determinations likely resulted in reductions in revenue. Over time, providers may intensify their efforts to reconfigure their patient population. Expect providers who charged below-median amounts to increase their fees to remain in the network. Non-network providers will also review the impact on their revenues and make strategic decisions regarding future network participation.
Past litigation has prompted the agencies to change the IDR regulations. Current litigation may prompt the agencies to made additional changes to the IDR guidance – especially to the extent that plaintiffs succeed in limiting the regulations so that they specifically match the actual statute.
Expected litigation may also bring greater clarification around the application of the IDR process where the plan design doesn’t include network providers (or limits the network to primary care providers). A concern is how a plan using "pure" reference-based pricing (no network) responds where a provider submits a claim via the IDR process. In situations where there is no network, there is no QPA, and the correct response is that the IDR process does not apply. That is likely to become a future legal challenge.
There is also a need for better guidance, perhaps a template, on how to triage which appeals qualify for the IDR process. Additionally, electronic processing could speed the process where the agencies provide specific guidance on maintaining HIPAA compliance. Finally, enforcement of the time limits for filing an IDR appeal will expedite the process. Since there is no default, such as a Solomon-type decision where IDR processing is not competed in a timely fashion, we expect the backlog of IDR submissions will easily reach six digits early in 2023.
‘Great Expectations’ for Reference-Based Pricing
Many plan sponsors are adopting "pure" reference-based pricing as a means to avoid much of the NSA requirements, especially IDR.
The NSA’s IDR process applies when a TPA or plan can calculate a QPA, typically the median in-network rate. RBP plans that use narrow networks or have negotiated contracts with providers and plans that utilize RBP as the mechanism to price out-of-network claims will be affected by this legislation. In both instances, there would exist a median in-network rate pursuant to which a QPA could be calculated.
A more effective way for employer-sponsored health plans to address the challenge of NSA legislation is to adopt a “pure” RBP plan. Pure RBP plans that do not contract with providers should remain unaffected by NSA because there aren’t any out-of-network claims; nor is there any QPA determination of a median in-network rate.
This strategy has wide appeal since it often eliminates the negative effects of excessive charges otherwise shared by the plan sponsor and the participant. As a cost-containment strategy, RBP uses Medicare pricing multiples as a pricing benchmark to establish reasonable payments for services to providers. Broadly, this creates a ceiling for payments and establishes a standard of integrity and transparency for service payments.
Adopting a “pure” RBP structure, coupled with tech-driven data support, may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage and employee point of purchase cost sharing. Given the wide variation of provider charges for the same services, without any difference in quality, a pure RBP design offers an opportunity to avoid excessive and unreasonable provider fees and charges.
Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.