No Surprises Act Gets its First Interim Rule | Citizens Against Government Waste

No Surprises Act Gets its First Interim Rule

The WasteWatcher

The Biden administration has released the first interim final rule that will set the guardrails for the provisions in the No Surprise Act, which was passed late last year to stop surprise medical billing as part of the Consolidated Appropriations Act, 2021.  The rule, written by the Department of Health and Human Services, the Department of Labor, the Department of the Treasury, and the Office of Management and Budget, was released July 1, and is entitled, “Requirements Related to Surprise Billing; Part I Interim Final Rule with Comment Period.” Interested parties that wish to comment will have 60 days to do so once the regulation is published in the Federal Register.

The rule protects patients from surprise bills for emergency services, air ambulance services provided by out-of-network providers, and non-emergency services provided by out-of-network providers at in-network facilities in certain circumstances.  (Ground non-network ambulance services were excluded from the bill.)  The Act’s provisions are scheduled to take effect on January 1, 2022 and prohibits balance billing beyond applicable in-network cost sharing requirements.  Balance billing can occur for non-emergency procedures at an in-network facility from an out-of-network provider if the patient is given notice at least 72 hours in advance and gives permission.

The rule provides for patient cost-sharing amounts and the figure to be paid will be determined by a Section 1115 waiver All Payer Model Agreement.  If no agreement exists, the amount will be determined by state law.  If neither apply, it will be the lesser amount of either the bill charged or the qualifying payment amount, generally the plan’s median contracted rate.

Essentially the same rules will be used to determine provider payments but could also include an amount agreed to by the plan and the provider or facility, or an amount that will be determined by an Independent Dispute Resolution (IDR) process.

More rules are forthcoming for this controversial legislation.  The second should be published by October1, 2021 and will establish an audit process.  The third should be published by December1, 2021 and will lay out the IDR process and patient transparency requirements.

In the long run, the Act and regulations will create more problems because the entire system is based on price controls.  Costs will go up and access to much-needed providers, especially in rural areas, will be limited.

The No Surprises Act finally came to fruition after years of wrangling when a deal was reached in early December 2020 by House Ways and Means Committee Chairman Richard Neal (D-Mass.) and the four health committees that had jurisdiction over the legislation in the House and Senate.  While it was claimed at the time the bill would use an IDR process to settle disagreements on what a provider should be paid, it uses price controls.  For example, the law requires health plans to cover surprise medical bills for emergency services, including air ambulances, at in network rates, and for non-emergency services, an out-of-network provider will be based on a “recognized amount,” which will likely be the median in-network rate at a hospital or other facility for the same or similar service.

For states that already had surprise billing laws on the books, their laws will not be pre-empted unless their law prevents the application of the federal law.

While members of Congress had long agreed that patients should be protected from surprise billing, the disagreement revolved on how to accomplish this undertaking.  Some members of Congress wanted to use an IDR process. which was often falsely compared to baseball arbitration.  In baseball, players and owners enter contracts willingly that include situations where the parties agree they will submit to arbitration to solve differences.  But there are no contracts between insurers and their out-of-network providers so this “agreement” is coerced by the government.

Other members of Congress wanted to establish a benchmark payment, perhaps based on a health plan’s median in-network payment for a health procedure or service provided by an out-of-network provider.  The Kaiser Family Foundation wrote in its summary breakdown of the law’s provision that the Congressional Budget Office (CBO) said using the IDR approach would be inflationary and drive up costs, while the benchmark payment would limit payment for surprise bills and significantly reduce costs and the federal deficit.

However, to pass the bill before the end of 2020, a “compromised” was reached.  The law allows an IDR process for any surprise medical bill following a 30-day period in which the health plan and the provider disagree on a payment and try to negotiate a fee.  Each side submits a final offer for payment and the IDR entity can consider many factors, like a plan’s median rate or perhaps the regional rate and will decide which of the opposing parties offered a fair payment amount.  The IDR cannot consider an undiscounted provider charge or any public healthcare payment amount, like that found in Medicare.  The loser must pay what the IDR entity decides and for the cost of arbitration.

CAGW had long argued that neither establishing a benchmark price to solve the problem of surprise billing or using the IDR process would work, since each are price controls, one immediate and upfront, while the other is delayed since payment will likely be based on am average regional rate.  Both will disrupt the market.

Instead, CAGW favored a plan put forth in December 2019 by Doug Badger and Brian Blase at the Galen Institute, entitled “A Targeted Approach to Surprise Medical Billing.”  Instead of getting the federal government heavily involved, their plan incorporates truth-in-advertising protection for when a patient goes to an in-network facility and receives treatment from an out-of-network provider, or when a patient receives a large bill after receiving scheduled treatment without being provided an estimate beforehand.

When an insurer advertises that a healthcare facility, like a hospital, is in their network and a hospital advertises it is within a certain insurer’s network, a patient should not receive a surprise bill from an out-of-network provider that works in that facility.  Penalties would be established for both the insurer and hospital for false advertising for any medical service provided to a patient that did their due diligence and utilized their in-network facility and got an out-of-network bill.  This would also apply to any emergency care provided at an in-work facility by an out-of-network provider.  For planned medical treatments, the facility would have to provide the patient a good faith estimates in advance of receiving any scheduled care.

The result would be that the facility would reach an agreement with the out-of-network provider for the service and the insurer would work out an agreement with the hospital to avoid balance billing problems and to avoid the hefty fines.  For urgent care, Badger and Blase recommend that for receiving emergency care at an out-of-network facility,  patients would also be protected from balancing billing.  Congress would only need to apply existing federal regulations to determine the amount the insurer would pay the provider.

CAGW suspects this law will end up being the proverbial can of worms that will cause more problems that Congress will need to “fix.”  Patients and taxpayers should hope when that time comes, Congress agrees to adopt instead the truth-in-advertising plan and allow health plans and providers to work out payments in advance without more intrusive and disastrous big government remedies.

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