The No Surprises Act Final Rule: Implications for State Regulators

Jack Hoadley, Kevin Lucia, and JoAnn Volk, Georgetown Center on Health Insurance Reforms 

On August 19, the federal government issued a new final rule to further implement the federal independent dispute resolution (IDR) process under the No Surprises Act (NSA). The final rule was accompanied by a press release, fact sheet, and a status update on the IDR process. Federal officials also released a new series of frequently asked questions (FAQs) on a range of topics, including the NSA’s application to plans without a network or with a closed network, international pickup by air ambulance companies, emergency services provided in a behavioral health crisis facility, and consumer notices.

The federal IDR process will be used to resolve disputes between out-of-network providers and self-funded plans as well as insurers in states that do not have an existing payment resolution mechanism; the federal IDR process will generally not apply to insurers in states with a “specified state law.”

This expert perspective reviews the final rule and discusses its implications for state balance billing protections and oversight. A detailed summary of the final rule can be found on the Health Affairs blog here, and a summary of the FAQs can be found here. 

Rules for the Federal Independent Dispute Resolution Process

The No Surprises Act protects patients from many common types of unexpected medical bills when they receive unanticipated out-of-network care. It prohibits out-of-network providers from balance billing patients who receive emergency or air ambulance services and when a patient receives non-emergency services from an out-of-network provider at an in-network facility. If the provider is unhappy with the payment offered by the patient’s health plan, they may seek to have the dispute resolved through negotiations or ultimately the IDR process. The key policy issue is how IDR entities under the federal process should decide whether to select the provider’s or the insurer’s number in determining the payment amount.

In an Interim Final Rule published in 2021 to implement the NSA, the federal agencies established a “rebuttable presumption” for IDR entities under which they would generally select whichever number came closest to the median in-network payment rate (referred to as the “Qualifying Payment Amount” or QPA in the statute) for a given service, although the IDR entity could consider other factors, such as patient acuity, the experience of the provider, or a prior contracted rate. Supporters of the rule argued that establishing the QPA as a key metric would help reduce the risk that the IDR process would place inflationary pressure on both in-and out-of-network provider reimbursement. However, providers successfully challenged the Interim Final Rule in federal court, leading the federal agencies to revise their initial approach.

The final rule published on August 19 instructs federal IDR entities to select the offer that best represents the value of the item or service under dispute. In determining which offer to select, IDR entities must always consider the QPA (a quantitative figure) and then consider additional information (typically subjective or qualitative data) that is not already reflected in the QPA to determine which offer best reflects the appropriate out-of-network rate. This “additional” information can only be considered if submitted by the parties themselves or requested by the IDR entity.

The rule includes several guardrails that govern how the different factors are considered by the federal IDR entity:

• Credible and related. When selecting the offer that best represents the value of the disputed item or service, IDR entities can consider only information that is considered accurate and credible and that is related to a party’s offer for the service under review in that specific IDR dispute.
• Nonduplication. IDR entities should not give weight to additional information submitted by the parties if it is already accounted for in any other information. For example, the medical complexity of an emergency department (ED) encounter is typically already reflected in the QPA through the coding for the ED visit, so IDR entities should not consider that as an additional factor when determining the appropriate reimbursement amount.
• Prohibited factors. Though not new, IDR entities must ensure that any additional information provided to them does not in any way incorporate the statutorily prohibited factors, such as the provider’s billed charges or the Medicare or Medicaid rate.
• Written explanations. IDR entities will have to explain and document their rationale for every determination, including the information used by the IDR entity in making their determination. These explanations should encourage decisions that comply with the policies set forth in the rule and provide federal agencies the ability to review decision-making patterns and make adjustments over time as needed.

The final rule also requires increased transparency around disputes that involve the use of “downcoding.” For example, an insurer’s claim review might reject the provider’s coding of a level 4 emergency department visit and recode it as a level 3 visit, leading to a lower payment to the provider. When sending the initial payment to the provider, the insurer must include information about the QPA for both the level 3 and level 4 visit. This could then be considered during the federal IDR process, providing the IDR entity more information for making its decision.

The rule also clarifies some other process issues related to determining the QPA and guiding the IDR process. For example, the rule prohibits payers from requiring providers to use a plan or insurer’s own web portal to initiate an open negotiation period.

Implications for States

The final rule does not change states’ role with respect to oversight and enforcement of the NSA, because the changes apply specifically to the operation of the federal IDR process. The federal IDR process will continue to apply to all disputes involving group health plans outside state jurisdiction and to disputes involving insurers in the individual and group markets in states without their own process for determining payment to out-of-network providers and facilities barred from balance billing (a “specified state law,” as further explained here). Where states have their own process for determining payment under a specified state law, that process will apply for state-regulated plans and is not changed by the policies included in the final rule.

Status Update on the IDR process

In a status update on the federal IDR process, the federal agencies reported that, since the process got under way on April 15, 2022, more than 46,000 disputes were initiated through the federal IDR portal. This number is much larger than the agencies’ projection that they would receive about 17,000 claims from providers and facilities and about 5,000 claims from air ambulance companies for a full year. Of these, nearly half—more than 21,000 disputes—have been challenged as ineligible. For example, a dispute may be ineligible because the services at issue fall outside the scope of the NSA’s protections, or the dispute rests under state, not federal, jurisdiction. At least 7,000 of those 21,000 disputes have been determined to be ineligible for the process; eligibility is still being determined for the others. So far, only about 1,200 disputes have been resolved, meaning an IDR entity issued a payment determination. Federal officials are required to report IDR outcomes on a quarterly basis, and it will be important to monitor federal IDR data over time.