The No Surprises Act Interim Final Rule on Dispute Resolution, Uninsured Protections, and External Review: Implications for States
JoAnn Volk and Jack Hoadley, Georgetown University Center on Health Insurance Reforms
On October 7, the U.S. Departments of Health and Human Services (HHS), Treasury, and Labor (DOL) and the Office of Personnel Management (OPM) published a third rule implementing the No Surprises Act (NSA), the comprehensive federal law banning balance bills in emergency and certain non-emergency settings beginning January 1, 2022. This rule follows an interim final rule (IFR) issued July 1 covering notice and consent to waive protections, the methodology for calculating the “qualifying payment amount,” the federal complaints process, and state law interaction with federal law. That rule is summarized in this expert perspective. A second rule discussed data collection on air ambulances, enforcement of the NSA, and broker compensation disclosure and reporting requirements. That proposed rule is summarized in this expert perspective.
This third rule, an interim final rule, provides details on the independent dispute resolution process (IDR), good faith estimates for enrollees on the cost of services, the dispute resolution process for uninsured patients, and external review. Detailed summaries can be found here and here. This expert perspective summarizes the provisions of the IFR and notes particular implications for state regulators. Comments on the IFR are due December 6, 2021.
Independent Dispute Resolution
The NSA uses a federal IDR system to determine the amount to be paid by insurers and health plans to out-of-network providers and facilities for NSA-covered items and services. Under the federal IDR system, parties to a disputed out-of-network bill may elect to use IDR if they are unable to reach agreement on a payment amount through negotiations. Once in arbitration, the NSA directs the IDR entity to consider the qualifying payment amount (QPA), allows for consideration of other factors the parties may raise (e.g., patient acuity, provider market share, and prior contracted rates), and bars consideration of billed charges and Medicare or Medicaid rates.
To implement these provisions, the IFR maps out a process for negotiation and arbitration that seeks to minimize the use of IDR and, if invoked, to ensure outcomes do not lead to inflation in health care costs, consistent with the Congressional Budget Office’s estimate that the NSA would reduce premiums by up to one percent. The IFR does this by directing the IDR entity to choose the party’s offer that is closest to the QPA (generally, the insurer’s or plan’s median in-network rate). Parties to the dispute can submit “credible” information on other factors that clearly demonstrates the QPA is “materially different” from the appropriate out-of-network rate. The IFR also provides guidance on IDR entity certification standards, the fees that apply for use of the federal IDR process, reporting requirements, and other operational considerations.
This federal IDR process will 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,” further explained in this expert perspective). Where states have their own process for determining payment, that process will apply for state-regulated plans. States that want to keep their own systems in place may want to consider the downstream effects for consumers, providers, and insurers of having separate systems for state-regulated and self-funded plans. Alternatively, states may consider dropping their systems in order to have one system for all disputes or to defer to the federal system if they expect it to be less likely to raise premiums.
Good Faith Estimate
The NSA requires providers and facilities (including air ambulance providers) to give uninsured individuals a good faith estimate of the cost of scheduled or requested procedures or services. Facilities that must furnish a good faith estimate include any institution that is required to meet state or local licensing requirements. Uninsured individuals include those who have insurance but opt to self-pay and those who have coverage other than group or individual health insurance, such as those with short-term plans, excepted benefits, and health care sharing ministries.
The IFR details the timing and content of the estimate, which must include, among other things, expected charges that should reflect any expected discounts or adjustments that may apply. HHS will provide but not require use of a model notice, which must comply with Section 1557 and other non-discrimination requirements.
The IFR requires a “convening” provider or facility to include in the good faith estimate charges from co-providers and co-facilities. Recognizing that it may take time for providers and facilities to develop the systems needed to provide good faith estimates that include information from other providers and facilities, HHS will exercise enforcement discretion for estimates owed to uninsured and self-pay individuals in 2022 in situations where a good faith estimate does not include expected charges from co-providers and co-facilities. Similarly, recognizing states are the primary enforcers of these provisions, HHS will not consider a state to be failing to substantially enforce these requirements if it takes a similar approach for 2022.
Note that NSA also requires providers and facilities to develop good faith estimates for insured individuals, but the departments issued guidance delaying enforcement of those provisions pending future rulemaking.
HHS seeks comment on whether providers and facilities must disclose the undiscounted amount in addition to any discounts that may apply. States that have laws limiting charges for uninsured patients with qualifying income may want to consider how those laws interact with the NSA provisions and whether any required discounts or limits should be disclosed separate from billed charges in the good faith estimate.
Uninsured Dispute Resolution
The NSA also provides for a dispute resolution process for uninsured or self-pay individuals where the billed charges are “substantially in excess” of the expected charges in the good faith estimate. To hear these cases, the IFR establishes selected dispute resolution (SDR) entities and defines “substantially in excess” to include billed charges that are at least $400 more than the good faith estimate. Uninsured or self-pay individuals will have to pay a fee of $25 to use an SDR entity to resolve a disputed bill (but get the fee back if they win).
HHS will defer to state dispute resolution systems for uninsured patients, as long as the state process meets or exceeds the NSA’s standards. If HHS defers to the state process, the federally run SDR will not be available in that state. Where states have other programs for resolution of payment disputes for uninsured or self-pay, HHS notes that nothing would prevent uninsured or self-pay individuals from voluntarily choosing to use the state program.
HHS seeks comment on their proposed standards for evaluating state programs. States may also wish to consider how any state-required limits on charges to uninsured may be applied or factored into the SDR’s deliberations.
The NSA requires federal and state external review processes under the ACA to apply to disputes over the application of the NSA beginning January 1, 2022. To implement this provision, the IFR amends the scope of external review to include any adverse determination that involves whether a plan or insurer is complying with the NSA and adds to the regulations five new examples of the expanded scope.
In addition, since the NSA applies to grandfathered plans, the IFR extends to grandfathered plan enrollees the right to external review for adverse benefit determinations of claims subject to the NSA. The departments seek comment on this amendment and whether additional guidance is needed to help plans and insurers comply.
The IFR also recognizes that grandfathered plans are exempt from the ACA’s standardized internal appeals process that precedes external review. The IFR therefore requires grandfathered plans and insurers to make external review available once an individual has exhausted any appeals rights under state law or the terms of their coverage.
States with a broader scope of services subject to external review (for example, allowing all denials other than those related to an enrollee’s eligibility under the plan, as originally required under 2010 rules) may want to consider how the NSA’s expanded scope of external review applies to their state requirements.