On December 22, 2020, Congress passed a government funding deal, which includes a long-awaited federal fix for "surprise billing." Most of the new requirements take effect with plan years beginning January 1, 2022, and they apply to group health plans (including self-insured plans) and health insurance issuers of group and individual plans. The statute directs the Departments of Health and Human Services, Labor and Treasury (the "Departments") to draft rules implementing these requirements. The new law includes some "wins" for providers and is intended to bring greater certainty to providers, payers and patients regarding out-of-network reimbursement.

Background

Surprise billing generally occurs when a patient receives care at an out-of-network facility (often in an emergency) or from an out-of-network provider at an in-network facility (often when a hospital-based provider does not participate in the same health plans as the hospital). The patient then receives a "surprise" bill that is higher than what the patient expected, because of the provider's out-of-network status. In other words, because the provider does not have a contract (i.e., a negotiated rate) with the patient's health plan, the patient is subject to greater out-of-pocket expenses.

Reimbursement for Out-of-Network Services

The new law ensures that patients receiving services in a hospital emergency department, or emergency services in an independent free-standing emergency department: (i) have the same cost-sharing responsibility for such services, regardless of whether the provider is in-network; and (ii) receive credit towards any applicable in-network deductible or out-of-pocket maximums for these payments. Items and services furnished by a provider following stabilization of the patient's emergency medical condition (as part of outpatient observation or an inpatient or outpatient stay resulting from the visit) are also included under this provision in situations when a patient is not able to choose an in-network provider.

Payers will be required to promptly (i.e., within 30 days) make an initial payment directly to out-of-network providers for these services at an "out-of-network rate," less any applicable cost-sharing amount for the services. The out-of-network rate is equivalent to the state-mandated amount, if applicable. Otherwise, the out-of-network rate is: (i) a mutually agreed upon amount; (ii) the amount determined through an independent dispute resolution process; or (iii) the state-approved amount under an All-Payer Model Agreement, if applicable.

In non-emergency situations, a facility (including a hospital or ambulatory surgery center), or a provider furnishing services in a facility, will have to (i) give the patient detailed notice and an estimate of charges, generally 72 hours prior to the patient receiving out-of-network services; and (ii) obtain the patient's consent to receive out-of-network care. Without this notice and consent, the patient can only be held liable for his/her in-network cost-sharing amount. As of January 1, 2022, providers must also publish on their websites a one-page notice regarding these protections.

The government may enforce these requirements by imposing a civil monetary penalty of up to $10,000 per violation.

Reimbursement Rate Disputes

Providers and payers will be able to resolve payment disputes through either negotiation between the parties or an independent dispute resolution ("IDR") process to be developed by the Departments. Under the IDR process, each party will submit a proposed payment amount to an independent third-party arbiter certified by the Departments. The arbiter will determine the required payment amount by choosing one of the two proposed amounts, based on the criteria explained below. Notably, there is no minimum payment threshold to enter IDR.

In a major win for providers, the arbiter is prohibited from considering Medicare and Medicaid rates, which are typically lower than commercial reimbursement rates However, the arbiter is also prohibited from giving consideration to "usual and customary" charges or billed charges. Instead, the arbiter is required to consider the plan's median in-network contracted rate for the item or service in the same insurance market; the training and qualifications of the provider; each party's market share; any prior contracting history between the parties; the complexity of the services provided; and other information submitted to determine the fairest payment. The cost of IDR is to be paid by the non-prevailing party, or by the parties equally if they settle the claim while IDR is pending. The payer must pay the claim within 30 days of the date of the arbiter's determination or settlement.

Other provisions to alleviate the potential of surprise billing and increase health care price transparency include:

  • Air ambulance providers will be subject to similar surprise billing requirements. Ground ambulance providers are not, but the Departments must convene an advisory committee to discuss billing protections for those services.
  • Health plans must generally provide an Advance Explanation of Benefits at least 3 days in advance of a scheduled service, to give patients transparency into which providers are expected to provide treatment, the expected cost and the network status of the providers. Providers will have a corresponding obligation to inquire about the patient's insurance status and provide a good faith estimate of its expected charges.
  • Patients with complex needs are eligible for a 90-day continuity of coverage period when a provider changes network participation status. Most states already have similar laws.
  • Health plans must provide a price comparison tool for patients, and must update provider directory information at least once every 90 days. Patients cannot be held liable for more than the in-network cost-sharing amount if they relied on incorrect information in the payer's directory.
  • States may apply for grants to create and improve State All-Payer Claims Databases, which will collect de-identified patient health care data to promote a better understanding of health care costs.
  • The new law prohibits clauses in managed care agreements between payers and providers that block sharing of cost or quality information with patients.

Practical Takeaways

  • Providers should take inventory of their in-network and out-of-network relationships to determine when notices will be required. Hospitals and ambulatory surgery centers will also need to compile this information for their facility-based physician groups that bill separately for their services.
  • Additionally, providers should begin organizing revenue cycle operations so they will be able to provide advance notice to patients of out-of-network scenarios.
  • Finally, providers should consider the impact of this new law on the decision of whether to be in-network or out-of-network with a particular payer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.