By: HUB’s EB Compliance Team

On July 1, 2021, the Departments of Health and Human Services (HHS), Labor, and the Treasury (collectively, the “Departments”) released an initial set of rules and related guidance called “Requirements Related to Surprise Billing; Part I.” This is part of the set of rules to implement the “No Surprises Act” (the “Act”) that was part of the Consolidated Appropriations Act, 2021 passed at the end of 2020 (sometimes called the year-end COVID-relief bill). 

The Act creates new protections from surprise billing and cost-sharing under group health plans. Because these changes are effective January 1, 2022, the rules were issued in “interim final” form, meaning they are effective as of January 1, 2022. No proposed rules were issued. Most of the responsibility for these changes will fall on the carrier or third-party administrator/administrative services only provider (“TPA”). However, employers should confirm with their carriers and TPAs that they plan to implement these rules.

Background

In short, surprise medical bills are bills from out-of-network providers requiring more money from the patient after the health plan has paid its part. This can happen in an emergency setting (where the patient does not realistically have a choice of providers) or where a patient goes into an in-network hospital, but is treated there by an out-of-network provider. It is also common with air ambulance providers. 

The following states have enacted some form of balance billing protections: Arizona, Colorado, Delaware, Indiana, Iowa, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, Pennsylvania, Rhode Island, Texas, Vermont, and Washington. However, this results in a patchwork of laws and not all the laws address all aspects of balance or surprise billing.

The Act aimed to curb surprise billing by effectively outlawing most surprise billing and instead setting specified formulas to determine what plans would pay for these out-of-network services. It also provides that, in some circumstances, out of network providers can still balance bill if they get the patient’s informed consent first (thus eliminating the “surprise” element of the bill). Finally, it provides an arbitration process if the provider does not agree with the amount of reimbursement and cannot balance bill. This initial set of rules deals with the formulas and the notice and consent procedure, but not the arbitration process.

Summary of the Rules

These new rules are designed to protect plan participants from surprise medical bills for emergency services and air ambulance services provided by out-of-network providers. They also are designed to prevent surprise medical bills from non-emergency services provided by out-of-network providers at in-network facilities in certain circumstances.

Emergency Services. To do this, the rules set forth a new set of reimbursement rules for emergency services. Specifically, if a health plan covers emergency services, they must be covered:

  1. Without any prior authorization (i.e., no approval beforehand can be required);
  2. In-network and out-of-network on the same basis; and
  3. Regardless of any other term or condition of the plan (other than benefit exclusions, coordination of benefits, or affiliation or waiting periods).

For purposes of these rules, emergency services can include certain services after the person has been stabilized in certain circumstances. This is in addition to typical emergency services in a hospital or independent emergency department.

Cost-Sharing Limits: For emergency services and certain non-emergency services that are provided by out-of-network providers at in-network facilities, the rules also impose cost-sharing limits. These non-emergency services are those that have not satisfied the notice and consent requirements described below.

The rules require that out-of-network cost-sharing for these services be the same as for in-network services. Additionally, amounts spent for out-of-network care must count toward the in-network deductible and out-of-pocket maximum. Balance billing is not allowed for any of these services.

When calculating the cost-sharing amount (e.g., 20% co-insurance) that the covered member owes, the plan must use one of the following amounts:

  • An amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act.
  • If there is no such applicable All-Payer Model Agreement, an amount determined under a specified state law.
  • If neither of the above apply, the lesser amount of either the billed charge or the “qualifying payment amount.” The “qualifying payment amount” is generally the plan’s or TPA’s (as selected by the plan sponsor) median rate that it pays to in-network providers. There is extensive guidance on how the qualifying payment amount is determined that TPAs will need to navigate.

Similarly, cost-sharing amounts for air ambulance services provided by out-of-network providers must be calculated using the lesser of the billed charge or the plan’s qualifying payment amount.

Determining Out-of-Network Rates: For determining the total amount to be paid, including any cost sharing, the rules are similar, but not precisely the same. They must be calculated by reference to:

  • An amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act.
  • If there is no such applicable All-Payer Model Agreement, an amount determined by a specified state law.
  • If there is no such applicable All-Payer Model Agreement or specified state law, an amount agreed upon by the plan and the provider.
  • If none of the three conditions above apply, an amount determined by arbitration (rules around the arbitration process are to come later).

Note that some states have adopted surprising billing laws of their own. The rules confirm that self-funded plans can opt-in to those state laws, where the state law allows it, instead of following these rules.

Notice and Consent Exception: In limited cases, a provider can get a covered person to agree to be balance billed for many non-emergency services. The provider must give a good faith estimate and provide some additional information. This all must be provided sufficiently in advance to give the individual a chance to consider whether they are willing to pay the balance billed amount. The rules also specify that providers must notify plans if they obtain this consent.

However, the notice and consent exception is not available in certain situations when surprise bills are likely to happen. These include for specified ancillary services connected to non-emergency care, such as anesthesiology or radiology services provided at an in-network healthcare facility. These were some of the more common non-emergency surprise bills that individuals would receive.

Providers also generally must post a one-page notice on their website about these surprise billing protections.

Plan Notice Rules: Starting with the 2022 plan year, plans must also post publicly and include on all EOBs a notice describing the surprise billing protections. There is a model notice contained in the rules for this purpose.

Payment Rules: Under the rules, plans must make an initial payment within 30 days of receiving a clean (i.e., complete and accurate enough to make a payment) claim. The initial payment should be the amount the plan expects to pay and not just a first installment.

One issue these new rules raise is the interaction between the arbitration process and the ERISA claims procedures. These new rules state that the ERISA claims procedures apply when the participant is personally liable for payment to the provider. However, if the dispute is just over the amount the plan will pay the provider, then the arbitration process will apply. While a helpful clarification, this still raises additional questions where determining the payment amount is a mixture of both (for example, where the participant owes co-insurance). While the distinction described above between how cost-sharing amounts are calculated and how the full payment is determined will help, there will likely still be situations that are less than clear-cut in making this distinction. As a result, employers may need to work with their TPAs and consult with experienced counsel on how best to navigate these distinctions.

Takeaways for Employers

While most of the heavy lifting here will be done by carriers and TPAs, employers should consider taking the following steps:

  1. Confirm with their carrier or TPA that they are on track to comply with these rules by January 1, 2022.
  2. Confirm your carrier/TPA will include the notice with EOBs and on the plan's public-facing website.
  3. Update any plan communications that describe how payment for emergency or other services are calculated to reflect these new rules (or review communications that the carriers or TPAs provide).
  4. For self-funded plan sponsors, expect TPAs to issue new contract amendments to potentially cover these rules as well as other changes that were made by the year-end COVID-relief bill. Employers may want to consider engaging competent counsel to review those amendments.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.