On July 1, 2021, the Departments of Health and Human Services (HHS), Labor, and Treasury (together, “the Departments”), and the Office of Personnel Management, issued Requirements Related to Surprise Billing; Part I (Interim Final Rules (IFR) with Request for Comments). This is the first set of regulations implementing the federal No Surprises Act (NSA), which was enacted as part of the Consolidated Appropriations Act of 2021.
Medicare and Medicaid already prohibit surprise billing/balance billing, and the NSA extends this protection to patients insured through employer-based and individual health plans. The NSA applies to fully insured and self-insured group health plans, including grandfathered plans, but they do not apply to excepted benefits (such as limited-scope dental and vision plans, and most health flexible spending arrangements), or to health reimbursement arrangements.
To be considered, written comments to the IFR must be received by 5 p.m. on September 7, 2021. If the agency is persuaded by any of the comments and so chooses, the rule can be amended in light of those comments.
The NSA will take effect on or after January 1, 2022 for group health plans, health insurance issuers of group or individual health coverage for plans/policies, and Federal Employees Health Benefits (FEHB) Program carriers.
For health care providers, facilities, and providers of air ambulance services, the NSA will take effect on January 1, 2022.
What are Surprise Medical Bills (Balance Bills)?
“Balance billing” refers to the practice of nonparticipating (out-of-network) providers billing patients for the difference between: (1) the provider’s billed charges; and (2) the amount collected from the plan or issuer plus the amount collected from the patient in the form of cost sharing (such as a copayment, coinsurance, or amounts paid toward a deductible). Surprise medical bills can arise from both emergency and non-emergency situations.
Under the Affordable Care Act (ACA) enacted in March 2010, if a non-grandfathered group health plan or health insurance issuer offering non-grandfathered group or individual health insurance coverage provides any benefits with respect to emergency services in an emergency department of a hospital, the plan or issuer must cover emergency services without the individual or the health care provider having to obtain prior authorization and without regard to whether the health care provider furnishing the emergency services is an in-network provider with respect to the services. The plan or health insurance issuer may not impose any administrative requirement or limitation on benefits for out-of-network emergency services that is more restrictive than the requirements or limitations that apply to in-network emergency services.
The Affordable Care Act did not prohibit balance billing and did not apply to grandfathered plans.
Under the Departments’ final regulations published in the Federal Register on November 18, 2015 (Patient Protections Final Rule), a plan or issuer satisfies the minimum payment standards for out-of-network emergency care in the ACA if it provides benefits for out-of-network emergency services in an amount at least equal to the greatest of the following three amounts: (1) the median amount negotiated with in-network providers for the emergency service; (2) the amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable (UCR) amount); or (3) the amount that would be paid under Medicare Part A or Part B for the emergency service.
If state law prohibits balance billing, or in cases in which a group health plan or health insurance issuer is contractually responsible for balance billing amounts, plans and issuers are not required to satisfy the minimum payment standards set forth in the regulations, but may not impose any copayment or coinsurance requirement for out-of-network emergency services that is higher than the copayment or coinsurance requirement that would apply if the services were provided in-network. See 26 CFR § 54.9815-2719A(b)(3)(iii); 29 CFR § 2590.715-2719A(b)(3)(iii); 45 CFR §147.138(b)(3)(iii); FAQs about Affordable Care Act Implementation (Part I), Q15 (Sept. 20, 2010), available here and here.
Prior to the enactment of the NSA, these minimum payment standards were the only federal consumer protections to reduce potential amounts of balance billing for individuals enrolled in group health plans and group and individual health insurance coverage.
What Types of Services Does the NSA Cover?
The IFR implements provisions of the NSA protecting patients from surprise billing for:
- emergency services (out-of-network emergency services must be billed at the same rate as in-network services without prior authorization);
- out-of-network air ambulance services; and
- non-emergency services rendered by out-of-network providers at facilities that are in the patient’s network in certain circumstances (also known as ancillary care).
Notice and Consent Exception
As a general matter, non-participating providers covered by the IFR (including non-participating emergency facilities and non-participating providers for emergency service, non-participating providers in participating facilities, and non-participating air ambulance providers) may not balance bill patients for a payment amount that exceeds the patient’s cost share.
A patient may voluntarily consent to an out-of-network provider’s rates, thus agreeing to a balance bill, but the ability of a provider to seek a consent waiver from a patient is limited. Providers can only ask a patient to sign a consent waiver for non-emergency services. Even for non-emergency services, providers are prohibited from asking for a consent waiver if: (1) the facility does not have an in-network provider; (2) the care needed is unforeseen and urgent; (3) the provider delivers ancillary services not typically selected by the patient (e.g., services provided by assistant surgeons, hospitalists, and intensivists; diagnostic services, including radiology, anesthesiology and laboratory services).
“Emergency services” include:
- pre-stabilization services that are provided after the patient is moved out of the emergency department and admitted to a hospital, and
- post-stabilization services unless all of the following conditions are met:
(1) the attending emergency physician or treating provider must determine that the patient is able to travel using nonmedical transportation or nonemergency medical transportation to an available participating provider or facility located within a “reasonable travel distance”, taking into consideration the individual’s medical condition. (45 CFR § 149.410(b)(1));
(2) the provider or facility furnishing post-stabilization services provides written notice;
(3) the patient must be in a condition to receive the information in the notice (45 CFR § 149.410(b)(3)) and to provide informed consent in accordance with applicable state law. Whether an individual is in a condition to receive the information in the notice is determined by the attending physician or treating provider using appropriate medical judgment;
(4) the provider or facility must satisfy any additional requirements or prohibitions as may be imposed under applicable state law. The IFR includes this criterion recognizing that some state laws do not permit exceptions to state balance billing protections, such as allowing individuals to consent to waive protections. Thus, states may impose stricter standards by which post-stabilization services will be exempted from the surprise billing protections under the IFR, or states might not permit exceptions at all. (45 CFR § 149.410(b)(5)).
The Departments seek comment on the definition of “reasonable travel distance.”
Under the IFR, “emergency services” provided at an emergency department of a hospital and at an urgent care center fall under the NSA if the urgent care center is properly licensed by the state to provide emergency care.
The term “emergency medical condition” means a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) 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 a condition described in the Emergency Medical Treatment and Labor Act (EMTALA), including: (1) placing the health of the individual (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy; (2) serious impairment to bodily functions; or (3) serious dysfunction of any bodily organ or part. See 42 U.S.C. § 1395dd(e)(1)(A). This definition includes mental health conditions and substance use disorders.
When a plan or issuer denies coverage, in whole or in part, for a claim for payment of a service rendered in the emergency department of a hospital or independent freestanding emergency department, including services rendered during observation or surgical services, the determination of whether the prudent layperson standard has been met must be based on all pertinent documentation and be focused on the presenting symptoms (and not solely on the final diagnosis). This determination must take into account that the legal standard regarding the decision to seek emergency services is based on whether a prudent layperson (rather than a medical professional) would reasonably consider the situation to be an emergency.
However, the NSA or the IFR do not prevent a plan or issuer from approving coverage for emergency services solely on the basis of diagnosis codes, or from taking diagnostic codes into account when deciding payment for a claim for emergency services, provided a denial of coverage is not based solely on diagnosis codes.
In covering emergency services, plans and issuers must also ensure that they do not restrict the coverage of emergency services by imposing a time limit between the onset of symptoms and the presentation of the participant, beneficiary, or enrollee at the emergency department. Similarly, plans and issuers may not restrict the coverage of emergency services because the patient did not experience a sudden onset of the condition.
Limitations on cost-sharing
The NSA and the IFR limit cost-sharing for emergency services provided by out-of-network emergency facilities and providers, and non-emergency services (that are subject to protections from the NSA) furnished by out-of-network providers at in-network facilities, to the “recognized amount,” which is:
- if the state has an All-Payer Model (APM) Agreement, the amount under such agreement; or
- if there is no such applicable APM Agreement, an amount determined by state law; or
- if neither of the above apply, the lesser of the billed charge or the plan’s or issuer’s median contracted rate, referred to as the qualifying payment amount (QPA), which is the median of the contracted rates of the plan or issuer for the item or service in the geographic region.
An APM Agreement is an agreement between the Centers for Medicare & Medicaid Services and a state to test and operate systems of all-payer payment reform for the medical care of residents of the state.
The IFR allows self-insured plans to voluntarily opt in to state law that provides for a method for determining the cost-sharing amount or total amount payable under such a plan. A group health plan that opts in to such a state law must do so for all items and services to which the state law applies. A self-insured plan that has chosen to opt in to a state law must prominently display in its plan materials describing the coverage of out-of-network services a statement that the plan has opted in to a specified state law, identify the relevant state (or states), and include a general description of the items and services provided by nonparticipating facilities and providers that are covered by the specified state law.
The NSA’s cost-sharing protections apply equally to air ambulances but there is no “recognized amount” because states are preempted from regulating these providers under the Airline Deregulation Act. However, consistent with the other services, plans and insurers must base any coinsurance or deductible for air ambulance services on the lesser of the provider’s billed charge or the QPA.
All cost-sharing for out-of-network providers must count toward in-network deductibles and out-of-pocket maximums.
Determining the out-of-network provider rate
The total amount paid by a plan or issuer for the services subject to these provisions, referred to as the out-of-network rate, must be equal to one of the following amounts, less any cost sharing payments:
- an amount determined by an applicable APM Agreement; or
- if there is no such applicable APM Agreement, an amount determined by state law; or
- if there is no state law determined rate, an amount agreed upon by the plan/issuer and provider/facility; or
- if no agreement is reached, an amount determined by an independent dispute resolution (IDR) entity, for which regulations are still to be published.
The IFR provides the following example.
An individual is enrolled in a high deductible health plan with a $1,500 deductible and has not yet accumulated any costs towards the deductible at the time the individual receives emergency services at an out-of-network facility. The plan determines that the recognized amount for the services is $1,000. Because the individual has not satisfied the deductible, the individual’s cost-sharing amount is $1,000, which accumulates towards the deductible. The out-of-network rate is subsequently determined to be $1,500. Under the requirements of the NSA and the IFR, the plan is required to pay the difference between the out-of-network rate and the cost-sharing amount. Therefore, the plan pays $500 for the emergency services, even though the individual has not satisfied the deductible. The individual’s out-of-pocket costs are limited to the amount of cost-sharing originally calculated using the recognized amount (that is, $1,000).
The following examples in the IFR illustrate how state laws may or may not apply. Each example assumes there is no applicable APM Agreement that would determine the recognized amount or out-of-network rate.
Example 1. (i) Facts. A health insurance issuer licensed in State A covers a specific non-emergency service that is provided to an enrollee by a nonparticipating provider in a participating health care facility, both of which are also licensed in State A. State A has a law that prohibits balance billing for non-emergency services provided to individuals by nonparticipating providers in a participating health care facility, and provides for a method for determining the cost-sharing amount and total amount payable. The state law applies to health insurance issuers and providers licensed in State A. The state law also applies to the type of service provided.
(ii) Conclusion. In this Example 1, State A’s law would apply to determine the recognized amount and the out-of-network rate.
Example 2. (i) Facts. Same facts as Example 1, except that the nonparticipating provider and participating health care facility are located and licensed in State B. State A’s law does not apply to the provider, because the provider is licensed and located in State B.
(ii) Conclusion. In this Example 2, State A’s law would not apply to determine the recognized amount and out-of-network rate. Instead, the lesser of the billed amount or QPA would apply to determine the recognized amount, and either an amount determined through agreement between the provider and issuer or an amount determined by an IDR entity would apply to determine the out-of-network rate.
Example 3. (i) Facts. An individual receives emergency services at a nonparticipating hospital located in State A. The emergency services furnished include post-stabilization services, as described in 26 CFR § 54.9816-4T(c)(2)(ii), 29 CFR § 2590.716-4(c)(2)(ii), and 45 CFR § 149.110(c)(2)(ii). The individual’s coverage is through a health insurance issuer licensed in State A, and the coverage includes benefits with respect to services in an emergency department of a hospital. State A has a law that prohibits balance billing for emergency services provided to an individual at a nonparticipating hospital located in State A and provides a method for determining the cost-sharing amount and total amount payable in such cases. The law applies to issuers licensed in State A. However, State A’s law has a definition of emergency services that does not include post-stabilization services.
(ii) Conclusion. In this Example 3, State A’s law would apply to determine the cost-sharing amount and out-of-network rate for the emergency services, as defined under State A’s law. State A’s law would not apply for purposes of determining the cost-sharing amount and out-of-network rate for the post-stabilization services. Instead, the lesser of the QPA or billed amount would apply to determine the recognized amount, and either an amount determined through agreement between the hospital and issuer or an amount determined by an IDR entity would apply to determine the out-of-network rate, with respect to post-stabilization services.
Example 4. (i) Facts. A self-insured plan, subject to ERISA, covers a specific non-emergency service that is provided to a participant by a nonparticipating provider in a participating health care facility, both of which are licensed in State A. State A has a law that prohibits balance billing for non-emergency services provided to individuals by nonparticipating providers in a participating health care facility, and provides for a method for determining the cost-sharing amount and total amount payable. The law applies to health insurance issuers and providers licensed in State A, and provides that plans that are not otherwise subject to the law may opt in. The law also applies to the type of service provided. The self-insured plan has opted in.
(ii) Conclusion. In this Example 4, State A’s law would apply to determine the recognized amount and the out-of-network rate.
The Departments are of the view that Congress did not intend for the NSA to preempt provisions in state balance billing laws that address issues beyond how to calculate the cost-sharing amount and out-of-network rate. To the extent state laws do not prevent the application of a federal requirement or prohibition on balance billing, the Departments are of the view that such state laws are consistent with the statutory framework of the NSA and would not be preempted.
In fact, Congress specifically indicated that such state balance billing laws may continue in effect along with the balance billing protections set forth in the statute, by requiring that providers disclose to participants, beneficiaries, and enrollees information about federal balance billing protections, plus any other protections that apply under state law. 45 CFR § 149.430.
Public Disclosure Requirements
The IFR implements the requirement of the NSA that certain health care providers and facilities make publicly available, post on a public website, and provide to patients a notice with the following information:
- the requirements and prohibitions under the NSA and implementing regulations;
- any applicable state balance billing limitations or prohibitions; and
- how to contact appropriate state and federal agencies if the patient believes the provider or facility has violated the requirements described in the notice.
Similarly, the NSA requires plans and issuers to make publicly available, post on a public website of the plan or issuer, and include on each explanation of benefits for an item or service with respect to which the requirements apply, information:
- on all applicable state and federal laws on out-of-network balance billing; and
- on contacting appropriate state and federal agencies in the case that an individual believes that such a provider or facility has violated the prohibition against balance billing.
To reduce burden and facilitate compliance with these disclosure requirements, the Departments are concurrently issuing a model disclosure notice that health care providers, facilities, group health plans, and health insurance issuers may (but are not required to) use to satisfy the disclosure requirements regarding the balance billing protections.
The Consolidated Appropriations Act directs HHS to establish a process for receiving consumer complaints regarding violations of the protections against balance billing and out-of-network cost sharing under the NSA and respond to such complaints within 60 business days. The IFR sets forth the process for such complaints.
The Labor and Treasury Departments generally have primary enforcement authority over private-sector employment-based group health plans. The IRS has jurisdiction over certain church plans. HHS has primary enforcement authority over nonfederal governmental plans. Office of Personnel Management has jurisdiction over FEHB plans, i.e., federal governmental plans. The departments will generally use these existing processes and authorities to ensure compliance.
Later this year, the Departments intend to issue further regulations detailing, inter alia:
- the IDR process that will settle disputes regarding the amount the insurer must pay an out-of-network provider;
- the audit process; and
- the price comparison tool that plans/issuers must offer to allow patients to compare cost-sharing amounts for a specific service/item.