Few areas of concern within our nation’s healthcare system have caused patients, their families and caregivers more consternation than surprise medical bills. Most of the new protections under the 2020 No Surprises Act became effective on Jan. 1, 2022. Last August, the Departments of Labor, Health and Human Services and Treasury released a statement providing information about “frequently asked questions” concerning the implementation of the act to respond to many of the questions that had been raised to date.a
The No Surprises Act primarily focuses on surprise billings in three circumstances:
- Where a patient receives non-emergency care at an in-network facility but is treated by an out-of-network provider, without having knowingly selected that provider or agreeing to being billed for out-of-network services.
- Where a patient receives emergency care at an out-of-network facility or from an out-of-network provider.
- Where a patient receives air ambulance services furnished by nonparticipating providers.
The IDR challenge
The No Surprises Act effectively absolves the patient of responsibility for paying the out-of-network amount. It then remains for the payer and provider to sort out what the payment will ultimately be for the service. The parties have 30 days to resolve this issue, and if they are unable to do so, the next step would be the independent dispute resolution (IDR) process.
Before the No Surprises Act, some states with surprise billing laws had followed a specific payment standard for setting the out-of-network payments, but they also had allowed providers to pursue the IDR process if they were dissatisfied with the amount suggested. This hybrid, two-pronged approach is not a part of the federal law.
Although the law relies on IDR, regulations issued by HHS, Labor and Treasury initially placed limits on the factors the arbitrators can consider in coming to a resolution. But two rulings by the U.S. District Court for the Eastern District of Texas in response to a legal challenge by the Texas Medical Association and others led first to a decision to vacate the October 2021 interim final rule and then to an August 2022 final rule relating to payment determinations and the dispute-resolution process.
The court action removed the requirement that arbitrators give more weight to the in-network payment rate for a service — or qualifying payment amount (QPA) — which usually refers to the payer’s median contracted rate for the service. The judge determined that there was nothing in the law that instructed arbitrators to consider one factor more heavily than other factors and therefore dismissed its use.
As a result of the guidance issued in March, about a month after the second court ruling, the IDR parties need to consider the QPA and all other permitted information submitted by each party before it can be determined which offer best reflects the value of the service being disputed.
Some information is expressly prohibited under the No Surprises Act from being considered in the IDR process, such as listing the reimbursement rate as a proportion of usual and customary charges as well as the amounts that would have been billed in the absence of a prohibition on balance billing. The rule also clarifies other aspects of the service under dispute, including that the IDR ultimately should determine the offer that best represents the value of the service under dispute.
Disputes surpass expectations
In a 2022 year-end report, HHS, Labor and Treasury disclosed that disputing parties had initiated nearly 164,000 disputes through the federal IDR portal between April 15, 2022, when the federal IDR portal was launched, and Dec. 5.b This number is substantially more than the 17,500 disputes the departments had assumed would be submitted for full year. What’s driving the higher-than-expected volume is not yet clear, although the departments say one issue is confusion over whether disputes are eligible for the IDR process.
Whether the IDR process will be adequate to resolve these disputes is also not yet clear.
What complicates the No Surprises Act is that enforcement is carried out at the state level, the federal government level or a combination of the two. Most states have opted to work with the federal government to enforce the act. However, because some states had similar laws in effect but with more protections, state law continues to prevail in these instances. Federal law will take precedence in states where the No Surprises Act offers more protection than state law.
The problem of disputed medical bills is not a new one. Whether the combination of state laws working in conjunction with a new federal law will improve adherence to these consumer protections or complicate their application is the main question that remains unresolved. AHIP and the Blue Cross Blue Shield Association released data for the first two months of 2022 claiming that the legislation had prevented more 2 million potential surprise bills across all commercially insured individuals.
Given the financial stakes at risk and the emotionally charged nature of the lawsuits between insurers and providers, it is unlikely that this will be the last round of changes relating to the law that was intended to solve the problem of surprise billing.
a. U.S. Department of Labor and Employee Benefits Security Administration, “Requirements Related to Surprise Billing: Final Rules,” Fact Sheet, Aug. 19, 2022.
b. CMS.gov, “Amendment to the calendar year 2023 fee guidance for the federal independent dispute resolution process under the No Surprises Act: Change in administrative fee,” Dec. 23, 2022.