No Surprises Act: Impact on Employer-Sponsored Plans

Seyfarth Synopsis: The No Surprises Act (the “Act”) was part of the Consolidated Appropriations Act of 2021 signed into law last December 2020. The Act was aimed at protecting insured individuals from getting a bill from a health care provider for the balance of amounts not covered by their health plan. The first set of interim final regulations (IFRs) under this new Act were released last week by the Departments of Treasury, Labor, and Health and Human Services. This alert provides an overview of the impact on employer-sponsored plans. For our broader overview of the regulations, see our July 9 Legal Update.

Overview

While most people do expect to pay some portion of the cost of their medical services after their plan pays, the “surprise” comes when these non-covered balances are exceedingly large. This is often the case when the health care provider is not “in-network” under the health care plan and is therefore free to charge whatever rate it wants for the service provided. Even when individuals make efforts to ensure their health care is provided by an in-network doctor or hospital, out-of-network services can sneak into the overall care and treatment program without their knowledge or consent. Surprise!

Prior to the No Surprises Act, the Affordable Care Act provided some level of financial protection for participants who incurred emergency services by setting a minimum level of reimbursement for health plans. These new IFRs, however, will effectively replace those rules, as of January 1, 2022. Notably, the ACA’s rules only apply with respect to so-called “non-grandfathered plans” (i.e., those that had been modified from a cost-sharing perspective since 2010 when the ACA passed into law). These new rules apply to all group health plans, without regard to grandfathered status.

The IFR tries to implement the protections for covered individuals for balance billing surprises by putting various requirements on both health care providers as well as health plans, including insurers and self-funded employer-sponsored plans.

Briefly, the rule accomplishes this goal through the following steps:

1. Identifies three settings in which the law has determined participants should not be held accountable for balance billing. These settings include: non-network emergency services, services performed by a non-network provider in a network facility, and non-network air ambulance services.
2. Requires plans to pay for services in those settings at certain minimum rates and to allow participants to pay at cost-sharing levels akin to what would be paid in-network.
3. Requires providers to object and/or negotiate an agreed-upon payment amount with the plan within 30 days.
4. If no agreement is reached, the rule requires plans and providers to submit to a binding independent dispute resolution where a third-party determines the appropriate payment rate.

This alert provides additional details on each of these steps, including:

Coverage Rules

• Health plans must cover emergency services without any prior authorization and regardless of whether the facility is in-network.
  
  Observation: Most employer-provided health plans already meet this requirement, as the ACA mandated this coverage for all non-grandfathered plans. Although, the definition of emergency services has been broadly interpreted under these rules and should be reviewed in conjunction with your claims administrator.

• Health plans must cover certain out-of-network services, performed as part of an in-network visit, even if generally excluded.
  
  Observation: So, a plan that generally excludes all coverage for services performed by out-of-network providers, such as an HMO or EPO, may have to adjudicate related claims for out-of-network provider services where they are performed as part of a participant’s visit to an in-network facility.

Cost-Sharing Rules

• Health plans must limit required participant cost sharing for out-of-network services in these settings to no more than the level required for the same in-network services.
  
  Observation: This may require plans to modify their network cost-share to match. For example, both in- and out-of-network cost sharing would be set at 80%-20%, as opposed to setting out-of-network at a lower level, such as 70%-30%.

• Health plans must count any participant cost share—whether incurred in- or out-of-network—toward in-network accumulators (deductibles and out-of-pocket maximums).
  
  Observation: This may require a change to how some plans currently tally the participant-paid portion of their health services.

• Getting to the crux of the matter for employer health plans—to the extent that a plan typically reprices non-network claims, the plan must calculate the payment to out-of-network providers (and the resulting cost-share required of participants) as if the total amount that was charged was equal to the “recognized amount.” This recognized amount is lesser of the All-Payer Model Agreement of the Social Security Act (APMA), state law where the APMA does not apply, or the “qualifying payment amount” (QPA) where state law does not apply.
  
  Observation: The QPA will generally be the applicable standard for employer group health plans, except where the plan is fully insured. In that case, the relevant state law (if any) would apply. Self-insured plans are permitted (but not required) to opt-in to governing state laws, but to the extent such a plan opts in, the plan will be required to notify participants of the law’s applicability.

• The QPA is the lesser of the provider’s billed charge or the plan’s median contracted rate for the same or similar service in the geographic region where the service is performed. The IFRs start out by looking at the contracted rates in place under a plan as of January 1, 2019.
  
  Observation: The QPA (or state law) will replace the traditional usual, customary and reasonable standard (UCR) or Medicare rate that many plans used, as well as other external measures (e.g., Fair Health) that many providers have pushed (at least in the context of services covered by the No Surprises Act). The agencies are particularly looking for comments on how to determine the QPA.

• Any “clean claim” for a service covered by the IFR must be processed by the health plan within 30 days.
  
  Observation: Typically, ERISA requires that a plan issue a notification of an adverse benefit determination on a post-service claim within 30 days, so this largely aligns with how these types of claims would typically be processed.

Prohibition on Balance Billing

• The IFRs limit the amount required to be paid to an out-of-network provider by the plan to the amount agreed to by the employer’s plan (where state law is not applicable) or, if there is no agreement, to an amount determined by an “IDR entity.” The IDR is directed to consider the QPA when making its determination. The IFR defers on the details of the IDR entity process for future regulatory guidance.
  
  Observation: As this rule is slightly different from the cost-sharing rule above, the payment to the provider might result in a different amount from the recognized amount less the cost-share portion.

• The rules require providers to obtain consent from patients to waive balance billing protections, if they want to have the right to balance bill for certain post-stabilization services or non-emergency services by an out-of-network provider at a network facility.
  
  Observation: While this requirement generally applies to health care providers and not the health plans, it is important to know that participants must receive this notice and provide their consent in order for the out-of-network provider to try to impose any obligation on the participant for the balance after the plan has paid.

Notice Requirements

• Both plans and providers must post a publicly available notice about the protections for balance billing, and plans must include relevant language on each EOB for a covered service. The agencies issued a model disclosure notice that may be used.
  
  Observation: Employer plans should work with their administrator to ensure the required information is available on the website and added to each EOB. Further, plan administrator may want to include this information in the plan’s SPD.

The regulations are generally effective for group health plans for plan years beginning on or after January 1, 2022. That means any planning for required changes to plans should start now.

More Information

Hylant is offering a two-part webinar series, New Transparency Requirements Imposed on Health Plans, that will cover these and other transparency requirements. For more information and to register, follow the links for part one and part two.

Reach out to your Hylant representative for further information. Don’t have one? Contact us here.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.

This information was posted with permission from Seyfarth Shaw LLP and was written by:
Benjamin Conley, Partner, Employee Benefits, Seyfarth Shaw LLP
Diane Dygert, Partner, Employee Benefits, Seyfarth Shaw LLP