It is a nightmare scenario. A young man is hit by a bus. While he is unconscious, paramedics rush him to an emergency facility that is out of network for his health plan. The result? A “surprise” medical bill of more than $27,500.

Another person – this one the victim of a violent attack – is relieved to learn that he has been taken to an in-network hospital. However, the doctor who performs the emergency surgery is not in network, and the result is an unexpected bill for $7,924.

Even individuals who have the ability to research and choose their health-care providers can find themselves stuck with surprise bills. For example, one expectant mother chose an in-network hospital and obstetrician but had to pay out-of-network rates for the pediatrician who was unexpectedly called in to treat her newborn child’s post-delivery complications.

While these examples are extreme, “surprise” medical bills, or bills insured individuals receive for out-of-network care, are not uncommon. Studies show that, for individuals with employer-sponsored health plans, nearly one in five emergency room visits, in-network elective surgeries, and in-hospital births involve a surprise bill for out-of-network charges, most of which are in the thousands of dollars.

To address this issue, Congress passed the No Surprises Act, which went into effect Jan. 1, 2022.¹ Under the Act, health-care plans must cover emergency care regardless of any preexisting contractual arrangements, and facilities and providers are barred from billing individuals for the difference between the plan’s payment and the full billed charges. Plans and providers are also required to provide up-front information regarding estimated costs for scheduled procedures.

Although the hope is that the Act will protect patients, increase competition, and lower the cost of care, in the short term it may leave providers and health plans scrambling. Lawyers have an opportunity to provide counsel to clients throughout the health-care payment system: providers and insurers, third-party administrators, and health-care consumers.

What is Surprise Billing?

For purposes of the No Surprises Act, a “surprise bill” refers to a situation when a health-care facility or provider bills a patient the difference between the patient’s health plan’s out-of-network benefit and the billed charges, also known as “balance billing.”

Bills received in these situations might surprise patients who were not able to choose in-network care or were not aware that the facility or provider was out of network. As an additional penalty, under many health plans, patients’ out-of-network payments do not count toward their deductible or maximum out-of-pocket payments. As a result, patients can end up with significant, and sometimes devastating, medical bills for reasons beyond their control.

How the No Surprises Act Limits Surprise Billing

The No Surprises Act addresses three major areas: emergency services, nonemergency services provided by out-of-network providers at in-network facilities, and air ambulance services.

Emergency Services. The most obvious area for regulation of surprise billing is in the context of emergency services, which, by their very nature, undermine the ability to research and select in-network care.

Under the No Surprises Act, health plans with emergency coverage must cover emergency treatment without prior authorization, without regard to whether a facility is in network, and regardless of other terms of the plan, with limited exceptions for certain exclusions and coordination of benefits. Plans also cannot deny claims for emergency care based on an after-the-fact assessment of the treatment through the billing codes or based on how long the patient had symptoms.

In turn, emergency facilities (including freestanding emergency departments and urgent care centers licensed for emergency care) cannot balance bill patients for out-of-network care. Patients’ bills are limited to the same cost sharing as in-network emergency care, and health plans must apply a patient’s payments to the patient’s deductibles and out-of-pocket maximums.

Taken together, these provisions allow patients with acute symptoms to obtain emergency care without worrying about whether the provider is in network, whether the plan may deny coverage after the fact for not seeking preapproval, or because the patient’s condition was less serious than it initially seemed.

More complicated issues arise for providers after the emergency has resolved but the patient still requires treatment or observation. Under the No Surprises Act, such post-stabilization care is subject to the Act’s protections. The only exception is if the patient’s treating physician determines that the patient could be moved to an in-network facility using nonmedical transport, such as a private car or public transportation. In that situation (and with certain other caveats), the patient may consent to pay out-of-network rates, rather than transfer to an in-network facility. This circumstance is intended to be – and in practice likely will be – an exception rather than the rule.

Nonemergency Services Provided by Out-of-network Providers at In-network Facilities. The No Surprises Act’s prohibition on balance billing also applies in another common scenario: when an out-of-network provider treats a patient at an in-network facility. This situation frequently arises with regard to ancillary providers who patients do not choose, such as anesthesiologists, surgical assistants, or radiologists. Patients pay out-of-network rates for these providers only if they choose to waive the Act’s protections in advance, as described below.

Air Ambulance Services. The No Surprises Act also bars balance billing for out-of-network air ambulance services, which are expensive. One study found a median cost of between $36,400 and $40,000 for air ambulance services in 2019, with 70 percent of those costs charged as out of network.

Patient Chooses to Use an Out-of-network Facility or Provider

What happens if a patient wants to use an out-of-network facility or provider, for convenience or personal preference, and is willing to pay the higher fees? The No Surprises Act allows patients to waive its protections before treatment begins, but only in limited circumstances. The waiver provision is intended to ensure that the patient understands the implications of choosing the out-of-network facility or provider.

For example, patients cannot waive the No Surprises Act protections for emergency services or ancillary services or when there is no in-network option available. Patients also cannot waive the No Surprises Act protections for complications that may arise during a surgical procedure.

Patients can waive the No Surprises Act protections only if they have been provided with written notice, at least 72 hours before a scheduled appointment or three hours before a same-day appointment, about the following: 1) whether pre-authorization is required, 2) which in-network providers are available, and 3) a good-faith estimate of the cost of the treatment.

The third requirement – a good-faith cost estimate –imposes a significant burden on providers and facilities and will not be immediately enforced. Nonetheless, the rules make clear that the good-faith cost estimates must be detailed, identifying costs for each provider, service, and billing code. The estimate triggers a corresponding requirement for health plans to provide an advanced explanation of benefits, identifying the patient’s likely out-of-pocket costs.

After receiving this information, patients can choose which (if any) out-of-network services or providers for which they will pay. This choice must be voluntary; providers or facilities cannot pressure patients by delaying necessary treatment or charging cancellation fees. Patients also can revoke consent before treatment.

At the same time, unless required by some other law (such as the Emergency Medical Treatment and Labor Act), facilities and providers can refuse to treat out-of-network patients. In other words, the No Surprises Act does not bar providers and facilities from charging out-of-network rates for nonemergency services; it just requires providers and facilities to give those patients more information to ensure that they are paying out-of-network rates voluntarily and with knowledge of their in-network options.

Patients Without a Health Plan and Patients Who Choose Not to Submit a Claim

While the No Surprises Act largely applies to patients who have health-plan benefits, it also requires providers and facilities to provide good-faith estimates to uninsured or self-pay patients who either do not have benefits for a particular item or service or who choose not to submit a claim to their plan. These good-faith estimates must include not only the expected charges for the primary items or services from the provider or facility, but also reasonably expected items from other providers or facilities, such as lab tests or anesthesia.

Payment for Out-of-network Care

Perhaps not surprisingly, some of the most controversial provisions in the No Surprises Act relate to calculating payments for out-of-network care.

Patient Payments. When the No Surprises Act applies, patients are subject to the same cost-sharing requirements for out-of-network care that apply for in-network care. This means, for example, that if a patient’s health plan has a 20 percent coinsurance requirement for in-network emergency care, that same 20 percent requirement applies to the out-of-network emergency care.

These patient cost-sharing calculations apply to the lesser of the billed charges or the qualified payment amount (QPA). In Wisconsin, where there is not an all-payer system or applicable state law, health plans calculate the QPA as the median of the plan’s 2019 contracted rates for the same or similar item or service provided by a similar provider in the same geographic region, and indexed for inflation. Because all of this information is within the health plan’s control, and based on contracted (rather than paid) amounts, it will be difficult for patients and providers to assess whether the QPA is correct.

Health-plan Payments. Unlike with regard to patient payments, the No Surprises Act does not set a formula for how much health plans must pay providers and facilities for out-of-network care. In states with all-payer models or state-law requirements for out-of-network payments, those amounts control. Otherwise, the Act merely contemplates that the health plan and the facility or provider will agree on the amount.

In practice, health plans must provide their intended full payment within 30 days after receiving a “clean” (or complete) claim, along with a notice providing the QPA. The provider or facility can either accept that payment or negotiate for more. If the parties do not agree within 30 business days, they then have four days to initiate independent dispute resolution (IDR).

In the No Surprises Act’s IDR process, both the facility or provider and the plan submit a proposed payment amount along with supporting information, and the arbitrator must select one of the proposals, rather than seeking compromise. Although the Act lists a variety of factors arbitrators must consider, the regulations require the arbitrator to pick the offer closest to the QPA, unless one party proves that the value of the item or service is materially different. Accordingly, while the No Surprises Act itself does not dictate health-plan payments, as a result of the regulations favoring the QPA during IDR, providers and facilities should expect to be paid the QPA (paid in part by the patient and in part by the plan) for out-of-network services.

What Patients Should Expect in the Short Term

Although many of the regulations that will dictate how implementation and enforcement of the No Surprises Act are forthcoming, its key provisions went into effect Jan. 1, 2022.

Starting now, health-care facilities and providers must distribute – to both the public and patients – a one-page disclosure providing a plain-language explanation of the No Surprises Act and its requirements. Moreover, health plans that cover emergency care must immediately extend that coverage to all emergency facilities, not only those in their networks.

Health-care facilities and providers also must immediately stop the practice of billing patients for out-of-network care and forcing the patients to take the laboring oar in determining coverage and payment amounts.

Issues That Remain

Congress passed the No Surprises Act with the lofty goals of not only protecting patients from unexpected and potentially devastating medical bills but also lowering health-care spending overall. The Congressional Budget Office projected that the Act will lower plan premiums by up to one percent and reduce the deficit by $17 billion over 10 years. But it is unclear who will bear the brunt of the costs – 1) health plans and insurers or 2) facilities and providers.

Already providers are pushing back, contending that the No Surprises Act IDR regulations give too much power to health plans. The American Hospital Association, the American Medical Association, the Texas Medical Association, and other providers have filed lawsuits to invalidate the rulemaking requiring arbitrators to choose the payment offer closest to the QPA, arguing that this requirement is inconsistent with the Act and unfairly favors health plans. The QPA is based on health plans’ contracted rates, which providers cannot verify, rather than actual payments, which might be higher because of risk sharing, bonuses, or incentives. Although calculation of the QPA is intended to lower patients’ premiums and out-of-pocket expenses, providers are concerned that plans will pay unreasonably low amounts, particularly in markets where plans have large market shares. Providers have also reported plans citing the No Surprises Act when negotiating for lower contracted rates.

While some in Congress have echoed providers’ concerns and urged the Department of Health and Human Services (DHHS) to reconsider the IDR regulations, DHHS Secretary Xavier Becerra has defended the regulations as a method to drive down prices. “Those who are overcharging either have to tighten their belt and do it better, or they don’t last in the business,” he said.²

The costs of implementing the No Surprises Act – and how those costs may be passed on – are also uncertain. Health plans, facilities, and providers have had to invest in technologies to compile data to create and securely transmit good-faith estimates and advanced explanations of benefits. Health plans also will need to determine how to quickly access contract data to calculate QPAs. The difficulties in overcoming these technological issues are one reason that the DHHS has delayed enforcement of portions of the No Surprises Act.

The level of governmental enforcement is not year clear. The regulations contemplate audits, and also a dispute-and-reporting mechanism for patients. The question is how frequently and strictly these enforcement mechanisms will be applied, and how much leeway the government will provide, especially in the early stages of implementation.

Conclusion

Will the No Surprises Act eliminate surprisingly high medical bills for patients? Not entirely. With the proliferation of high-deductible health plans, even in-network emergency care can be unexpectedly costly. Nonetheless, the No Surprises Act likely will help patients avoid the worst of those bills and receive significantly more information regarding nonemergency-care costs so they can make better financial decisions related to health care.

The No Surprises Act also will affect the relationships among health plans, facilities, and providers as they navigate the out-of-network payment process, including good-faith cost estimates and advanced explanations of benefits. Lawyers will play a role in each step of this process: advising health plans, facilities, providers, and patients as they interpret and apply these new rules in contracts, invoices, and audits.

Only time will tell what surprises will come with implementation of the No Surprises Act, but for now patients can rest easier knowing that they have increased protection against unexpected out-of-network bills.

Endnotes

¹ See generally Press Release, CMS.gov, HHS Kicks Off New Year with New Protections from Surprise Medical Bills, www.cms.gov/newsroom/press-releases/hhs-kicks-new-year-new-protections-surprise-medical-bills (Jan. 3, 2022). The No Surprises Act is part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182 (2020).

² Michael McAuliff, Doctors Are Mad about Surprise Billing Rules. Becerra Says Stop Gouging Patients, Nat’l Pub. Radio, www.npr.org/sections/health-shots/2021/11/22/1057985191/becerra-defends-hhs-rules-aimed-at-reining-in-surprise-medical-bills (Nov. 22, 2021).

» Cite this article: 95 Wis. Law. 36-41 (February 2022).