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Congress passed the No Surprises Act (“the Act”) in order to prevent patients from being surprised by bills for out-of-network cost sharing amounts and balance bills for services provided by out-of-network providers after treatment for an emergency service or for treatment for a non-emergency service by an out-of-network provider at an in-network facility.  The Act also provided a framework for resolving disputes between payers and providers regarding the amount insurers would pay for out-of-network subject to the Act.  On September 30, 2021, the Department of Health and Human Services issued its proposed Part II rules under the No Surprises Act governing this dispute resolution process.

Before initiating the dispute resolution process, out-of-network providers and insurers must undertake a 30-day open negotiation period in an effort to agree on a payment rate.  If negotiations fail, either party can initiate the Act’s dispute resolution process. If the parties cannot agree on the independent dispute resolution entity to resolve the dispute, the government will appoint one. 

The dispute resolution process established by the Act is “baseball style.”  In other words, both the provider and the insurer make an offer regarding the amount to be paid for the out-of-network service and the independent entity picks one of the offers.  Each party is required to pay an administrative fee, which is set at $50 for 2022, and the loser is required to pay the independent dispute resolution entity’s fee.

The Act did not establish a benchmark amount for determining such payment amounts, but rather set various factors to be considered, including the sickness of the patient.  The proposed rules, however, set a standard In a move that has been strongly criticized by providers and applauded by the insurance industry, the rules create the presumption that the Qualifying Payment Amount (“the QPA”) is the appropriate out-of-network payment.  The QPA is the median of the contracted rate for the same or similar service in the geographic region in which the service was provided as of January 1, 2019, increased each year by the consumer price index.  Each party may submit additional information showing why the payment should be set at a different rate than the QPA, which the independent entity is required to consider if credible.  However, under the proposed rules, for the independent entity to deviate from the offer closest to the QPA, any information submitted must clearly demonstrate that the value of the service is materially different from the QPA.

In a statement criticizing the proposed rules, American Hospital Association Executive Vice President Stacey Hughes said:

The No Surprises Act was an important step forward in protecting patients from surprise medical bills. Hospitals and health systems strongly support these protections and the balanced approach Congress chose to resolve disputes. Disappointingly, the Administration’s rule has moved away from Congressional intent and brought new life to harmful proposals that Congress deliberately rejected. Today’s rule is a windfall for insurers. The rule unfairly favors insurers to the detriment of hospitals and physicians who actually care for patients.

Likewise, the American College of Emergency Physicians (“ACEP”) issued a strong statement against the proposed rules, stating:  “Emergency physicians are profoundly disappointed that the Administration’s interim final rule is almost entirely inconsistent with Congressional intent to create a fair and unbiased process to resolve billing disputes…ACEP is deeply concerned that by requiring arbiters to greatly prioritize the artificially low … QPA set by insurance companies, rather than giving equal weight to a mix of other factors….”

The ACEP statement further pointed out that the root cause of the “surprise billing” problem is insurers’ use of narrow networks of providers.

The proposed rules also addressed good faith estimates providers must share with uninsured and self-pay patients for scheduled services, the dispute resolution process regarding these good faith estimates, and an external review process for insurer compliance with the act.  HHS has also established a website for those interested in being certified as an independent dispute resolution entity.

The proposed rules are expected to be published in the Federal Register on October 7, 2021. Comments are due 60 days from the publication date. The final rules are scheduled to take effect on January 1, 2022.

The attorneys at Whatley Kallas, LLP will continue to review and report on regulations implementing the Act. 

The proposed regulations are linked here.  For Whatley Kallas, LLP’s previous article on a Health Affairs article demonstrating that health insurance companies are often at fault for the surprise medical billing issue is linked here.