New Law Requires Transparency and Prohibits Surprise Billing

Most group health plans and health insurers are subject to the No Surprises Act, which amends ERISA, the Public Health Service Act and the Internal Revenue Code effective for plan years beginning on or after January 1, 2022.

The No Surprises Act was signed into law as part of the Consolidated Appropriations Act, 2021, commonly referred to as the COVID stimulus package, which includes several additional mandates affecting health plans, including:

• Requirements for provider contracting
• Amendments to strengthen the Mental Health Parity and Addiction Equity Act (MHPAEA)
• Mandatory prescription drug reporting

This insight summarizes all of the above requirements except the expansion of MHPAEA, which we’ll discuss in another insight.

Plan sponsors will need to dedicate significant efforts and resources toward complying with the new requirements. What compliance will entail is potentially overwhelming, which is why we recommend developing a compliance strategy.

Price transparency requirements

The No Surprises Act includes numerous transparency requirements that apply to providers and plans.

Beginning January 1, 2022, healthcare providers and facilities must:

• Post on a public website notice of the balance billing rules, any other applicable state laws and information on how patients can report violations.
• Provide a timely notification in clear and understandable language of the good-faith estimate of the expected charges for providing items and services to the plan or insurer (or if uninsured, the individual).

For plan years beginning on or after January 1, 2022, plans and insurers must:

• After submission of charges by a provider or facility, give a participant or dependent a timely Advanced Explanation of Benefits (EOB) notification in clear and understandable language, including certain elements. Download a list of those elements.
• Offer price-comparison guidance by telephone and make available on the public website of the plan or insurer a price-comparison tool that (to the extent practicable) allows an enrolled individual to compare the amount of cost sharing that the individual would be responsible for paying for items and services by a participating provider and by geographic region.
• Include in clear writing, on any physical or electronic plan or insurance identification card issued to participants or dependents, deductibles, the out-of-pocket maximum and a telephone number and internet website address to seek network and other consumer-assistance information.
• Notify each participant who is a “continuing-care patient” with respect to a provider/facility at the time of a termination of a contract (or change in terms of participating), on a timely basis of the termination and the individual’s right to elect continued transitional care from the provider/facility under the same terms and conditions as prior to the termination (for a limited time period). Generally continuing-care patient are those being treated for serious conditions, including pregnancy.
• Create a process to verify the accuracy of their provider database at least every 90 days.

The transparency requirements in the No Surprises Act are similar to and augment requirements in a recent final rule on health plan price disclosure that we summarized in our November 5, 2020 insight.

Surprise billing prohibited for certain emergency services

The No Surprises Act protects patients who receive emergency services in the emergency department of a hospital, at an independent freestanding emergency department and from air ambulances. In addition, the law protects patients who receive emergency services from a non-participating provider at an in-network facility.

Effective for plan years beginning on or after January 1, 2022, these patients will only be responsible for paying their in-network cost sharing. Patients cannot be balance billed by the provider or facility for emergency services.

Plans and insurers that are subject to state balance-billing laws must continue to comply with those rules because the No Surprises Act does not generally preempt state balance-billing laws.

Plan and provider responsibilities

The No Surprises Act sets up a process that health plans and providers must follow when a bill for emergency services is sent to the plan by a non-participating provider. When it comes into effect in 2022, the Act will replace the current ACA rules for emergency room payments.

Health plans must send an initial payment or a notice of denial of payment to the provider or facility within 30 calendar days of the non-participating provider sending the bill. The provider and the plan may initiate negotiations to determine a payment amount agreed on by the provider or facility and the plan for the service, and this process is described in more detail below.

Process for resolving payment disputes

Providers or facilities may initiate open negotiations with a health plan for purposes of determining a payment for the item or service within 30 days of receiving an initial payment or notice of denial of payment. From this date, an open-negotiation period begins with respect to the item or service, and runs for the next 30 days.

If an agreement on a final payment amount is not reached during the open-negotiation period, the provider or facility may initiate an independent dispute resolution (IDR) process. The process will involve using an IDR entity certified by the Secretaries of Labor, HHS and Treasury.

The Act establishes a process for IDR in which both parties will submit an offer for resolution of the payment amount, and the IDR entity will select one of the offers as the final payment. This is often referred to as “baseball arbitration,” where a last best offer is selected by the arbitrator. The parties may also agree to settle the amount during this process.

The parties will provide the IDR entity with an offer. The No Surprises Act notes factors that must be included in the offer (and some that are prohibited). The IDR entity must consider, among other things, the plan’s median in-network rate in the same geographic region, as well as the provider’s training and experience; the patient acuity and the complexity of providing the item or service; demonstrations of good-faith efforts (or lack of good-faith efforts) to enter into a network agreement; and prior contracted rates during the previous four plan years.

Additional factors must be considered for air ambulance IDR. Those factors include the clinical capability level of the vehicle and population density of the pickup location.

The IDR entity is prohibited from considering usual and customary charges, billed charges or rates from Medicare, Medicaid, the Children’s Health Insurance Program or TRICARE (the health insurance program for the military).

Plans will be assessed an administrative fee by the government for the IDR process. The cost of an IDR will be paid by the party whose offer was not chosen. However, if the matter is settled, the parties may agree on the allocation of the costs.

Contract requirements

The Consolidated Appropriations Act, 2021 prohibits plans and insurers from entering into an agreement with a provider, network, third-party administrator or other service provider that would directly or indirectly restrict the plan from:

• Providing provider-specific cost or quality information to referring providers, plan sponsors and/or participants
• Electronically accessing de-identified claims and encounter information for each participant in the plan upon request and consistent with HIPAA’s privacy rules, including financial information, provider information, service codes or other data elements included in claim or encounter transactions
• Sharing information with a HIPAA business associate

In addition, as of December 27, 2021 (one year after the law was signed), plans governed by ERISA must ensure that contracts with consultants or brokers contain disclosure of services and all direct and indirect compensation received by the service provider. A transition rule applies to contracts executed prior to the effective date.

Prescription drug cost reporting

No later than December 27, 2021, and no later than June 1 of each year thereafter, group health plans (or insurers offering group coverage) must submit to the secretaries of Labor, HHS and Treasury detailed prescription drug cost information from the previous plan year.

Implementing rules to come

Rules implementing the No Surprises Act will be issued jointly by the Departments of Health and Human Services, Labor and Treasury by July 1, 2021.

Action items

Plan sponsors should review the new requirements with their consultants, service providers and legal counsel. It’s important to recognize that, while many of the tasks required by the Consolidated Appropriations Act, 2021 may be administered by a plan’s insurer or third-party administrator, the ultimate responsibility for compliance with these rules falls squarely on any self-insured health plan.

We recommend plan sponsors develop a compliance strategy to demonstrate their good-faith efforts to comply. Ideally, the compliance strategy will evaluate the impact of the requirements on the plan, determine which service providers are responsible for tasks and monitor compliance efforts.

In addition, sponsors should begin to evaluate the potential cost impact of these rules for 2022 and beyond. It’s likely that the No Surprises Act requirements will increase plan costs (both claims and IDR fees) and that insurers will ask for increased administrative fees in order to provide the services required.

Plan sponsors should also monitor federal guidance on these and other new requirements.

Legal counsel should review any plan or contract modifications before adoption.

We’ve created a chart that summarizes the new requirements.