The No Surprises Act establishes protections against surprise billing by out-of-network providers and requires that participant cost sharing for emergency services be limited to the amount they would pay if care had been rendered by an in-network provider. The IFR implements many, but not all, of the important provisions of the No Surprises Act. It covers:

• Applicability of the No Surprises Act to group health plans
• Requirements that emergency services must be paid in the same manner both in and out of network
• Protection of participants against balance billing
• How to calculate the median in-network contracted rate used for both cost sharing and calculating the Qualifying Payment Amount
• Rules prohibiting nonparticipating providers, facilities and air ambulance services from balance billing participants unless certain notice and consent requirements are satisfied
• Plan obligations to provide notices to participants
• Protections against air ambulance balance billing
• Extension of certain ACA patient protections to grandfathered health plans
• Establishment of a new complaint process with respect to violations of the Act

A list of items not included in the IFR is included below. The IFR also contains regulations published by the Office of Personnel Management (OPM) that are applicable to carriers under the Federal Employees Health Benefits (FEHB) Program for contract years beginning on or after January 1, 2022. Comments on the IFR are due by 5 pm on September 7, 2021.

Background

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 prevents surprise billing of 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 certain non-emergency services from an out-of-network 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 in-network cost sharing, regardless of whether emergency services were rendered at a participating or nonparticipating provider or facility. Patients cannot be balance billed by the provider or facility for emergency services. 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. If a bill is disputed, it can be referred to Independent Dispute Resolution, on which regulations will be published later this year.

The No Surprises Act is applicable to most group health plans, including grandfathered group health plans. However, certain plans are excluded and do not have to comply, including retiree-only plans, plans consisting solely of excepted benefits (e.g., most dental and vision benefits and health flexible spending arrangements), health reimbursement arrangements or other account-based group health plans and short-term, limited-duration insurance.

The No Surprises Act has an extensive list of requirements for group health plans that we’ve summarized in a timeline. We recorded our February 2021 webinar on the No Surprises Act.

IFR details emergency services requirements

Most plan sponsors are familiar with the ACA’s requirements to cover care provided in an emergency room in the same manner both in and out of network. The No Surprises Act significantly expands these rules and applies them to both grandfathered and non-grandfathered group health plans.

Specifically, group health plans that cover any services in an emergency department of a hospital or independent freestanding emergency department must cover emergency services:

• Without any prior authorization
• Regardless of whether the provider is an in-network or out-of-network provider or facility
• Without imposing any administrative requirement or limitation that is more restrictive than that application to in-network providers and facilities
• Without imposing cost sharing greater than in-network cost sharing

Emergency services are defined broadly to include medical, mental health and substance use disorder services provided in the emergency room and those provided in any department of the facility to screen, treat and stabilize the patient.

Importantly, emergency services are defined using the “prudent layperson” standard, which requires the plan sponsor to consider the participant’s manifestation of symptoms such that a prudent layperson who possesses an average knowledge of health and medicine could reasonably expect the absence of immediate medical attention to result in serious impairment or serious dysfunction of any bodily organ or part. Additionally, plans can no longer deny an emergency service based solely on a diagnostic code.

In addition, cost sharing paid by the participant must count toward any in-network deductibles and out-of-pocket maximums in the same manner as if the services had been provided in-network. The same rules also apply to non-emergency services provided by an out-of-network provider at an in-network facility, unless the provider has obtained patient consent, as discussed below. Air ambulance services are also subject to the No Surprises Act.

Post-stabilization services are also covered by the No Surprises Act, unless the patient is able to travel to an in-network facility using nonmedical transportation (but elects to stay at the out-of-network facility).

Notice and consent exception

Out-of-network providers or facilities may, under limited circumstances, be able to continue to balance bill patients if they provide notice to them regarding potential out-of-network care and obtain the patient’s consent for that care. The Centers for Medicare & Medicaid Services has published a notice that providers and facilities are required to use in this situation. (The notice is available as a zip file from the CMS webpage.) Providers who obtain consent are required to inform the plan or insurer that the notice and consent criteria have been satisfied. Plans may rely on this information and calculate payment and cost sharing based on out-of-network rates unless and until the plan or issuer knows or reasonably should know that the notice and consent was not properly and timely given and received.

The notice and consent exception does not apply to hospital-based ancillary services providers, including emergency medicine providers, anesthesiologists, pathologists, radiologists, assistant surgeons and hospitalists.

Calculating the cost-sharing and payment amounts

Plans must calculate participant cost sharing using a detailed formula described in the No Surprises Act and IFR. Cost sharing must be calculated based on one of the following amounts:

• An amount determined by an applicable All-Payer Model Agreement (generally applicable in Maryland and Vermont)
• If there is no applicable All-Payer Model Agreement, an amount determined under an applicable state surprise billing law
• If neither above apply, the amount is the lesser of the billed charge or the Qualifying Payment Amount (QPA), which is based on the plan’s median contracted rate.

The QPA is also applicable to cost sharing for out-of-network air ambulance services.

Plans must also use this calculation to pay out-of-network providers and facilities. Providers and facilities are no longer allowed to balance bill participants for items and services covered by the No Surprises Act. Instead, they will bill the group health plan or insurer, and the plan must pay them an initial amount based on the above formula within 30 calendar days of receive a clean claim. With respect to non-emergency services, out-of-network providers must timely notify the plan that the item or service was furnished during a visit at an in-network facility. If the provider disputes the claim, they may request Independent Dispute Resolution (IDR) and the matter will be decided by an IDR entity. Rules on IDR will be published by the Departments later in 2021.

Explaining the QPA

Perhaps the most difficult compliance issue with respect to the new emergency services rules is how to calculate the QPA — generally the amount that the plan’s payment to the out-of-network provider is based on, as well as the amount that must be used to calculate the participant’s cost-sharing. If a state law prohibiting balance billing applies to an insured plan, the amount determined under that state law will be the QPA. In four states, Nevada, New Jersey, Virginia and Washington, self-insured plan sponsors may opt in to a state law. We anticipate that self-insured plan sponsors in those areas may wish to evaluate whether to opt-in to their state’s law.

In general, the QPA for 2022 is the median of the plan’s contracted rate on January 31, 2019, for the same item or service that is provided by a provider in that specialty in that geographic region, adjusted for inflation. The median contracted rate is generally determined with respect to all group health plans of the plan sponsor or all group or individual health insurance coverage offered by the health insurance issuer that are offered in the same insurance market. Self-insured plan sponsors have a choice whether to calculate the contracted rate based on their self-insured group health plans (other than account-based plans and excepted benefits) or the entirety of self-insured group health plans administered by the same entity (including a third-party administrator) that is responsible for calculating the QPA on behalf of the plan.

The median contracted rate for an item or service is calculated by arranging in order from least to greatest the contracted rates of all plans of the plan sponsor (or of the administering entity, if applicable) for the item or service (defined by service code) that is provided by a provider or facility in that geographic region and selecting the middle number. If there are even number of contracted rates, the median contracted rate is the average of the middle two contracted rates. The IFR provides several examples of how to calculate the median of the contracted rates. Plans that use a preferred provider network would use that network’s contracted rate. Each single contract is considered when calculating the median rate. However, ad hoc agreements designed to address a unique situation are not included in the calculation.

The geographic region is generally defined as one region for each metropolitan statistical area (MSA) in a state and one region consisting of all other portions of the state. Special rules apply if plans do not have sufficient information for a geographic region. Different rules apply for air ambulance services; a geographic region means one region consisting of all MSAs in the state and one region consisting of all other portions of the state.

Plans must use at least three contracted rates to calculate the median. Plans that do not have sufficient information to calculate the median rate may use special rules based on their circumstance, including relying on eligible databases that meet certain criteria and are not controlled by a health insurance issuer, provider, facility or air ambulance service. Plans that use bundled or capitated rate arrangements must still calculate a median rate based on their underlying fee schedule or the price they use for internal reconciliation. Risk-sharing, bonuses and other incentive arrangements are disregarded for purposes of calculating the median contracted rate.

The QPA for 2022 is calculated by increasing the median contracted rate by the percentage increase in the consumer price index for all urban consumers (CPI-U) over 2019, the percentage increase over 2020 and the percentage increase over 2021. The QPA is then adjusted annually thereafter.

Plans must disclose information about the QPA calculation with each initial payment or notice of denial of payment. They must provide additional information upon request of the provider or facility.

Group health plans must publish notices on their websites

Group health plans must give individuals a notice about their rights under the No Surprises Act. The Departments have published a model notice that may be used for this purpose. The notice must be posted on the plan’s website and be included on each explanation of benefits for an item or service covered by the No Surprises Act.

New rules for grandfathered plans

The No Surprises Act extends patient protections for choice of health care professionals to grandfathered health plans. Consequently, effective for plan years beginning on or after January 1, 2022, grandfathered plans that require a participant to designate a health care provider must permit them to designate any available participating primary care provider. Similar rules apply for access to pediatric providers and obstetrical and gynecological care.

Implications for plan sponsors

Plan sponsors should review the new requirements with their consultants, service providers and legal counsel and prepare to implement the law for the coming plan year.

While many of the tasks required by the No Surprises Act may be administered by a plan’s insurer or third-party administrator, the ultimate responsibility for compliance with these rules falls on the group health plan, as with the ACA. Plan sponsors should consider contacting their service providers to determine the impact of the rules on their plans. They should also consider completing a compliance plan that documents compliance efforts for all aspects of the new law.

Additional rules are expected

This IFR is Part 1 of rules from federal agencies implementing the No Surprises Act. Part 2, which is expected later this year, will describe rules for Independent Dispute Resolution under the Act.

The following chart lists the rules that are expected to be issued this year and the rules that may be issued after January 1, 2022.

Until the final rule related to these provisions are issued, plans are expected to implement these requirements using a good-faith, reasonable interpretation of the No Surprises Act. The Departments state that they will issue guidance in the near future regarding their expectations related to good-faith compliance with these provisions.