Surprise, Surprise!: CMS Issues the “No Surprises Act” in its Interim Final Rule Parts I and II

Introduction

The No Surprises Act, part of the Consolidated Appropriations Act of 2021, prohibits surprise medical bills for patients when they seek emergency services or when patients receive certain services from out-of-network providers at in-network facilities. Under the Act, patients are only liable for their regular in-network cost-sharing amounts. The Act also requires providers, patients, and insurance issuers to resolve disputes about payments among themselves.

CMS issued two Interim Final Rules implementing the No Surprises Act. Part I covers the prohibition of balance billing for emergency services, calculation of cost-sharing amounts, and notice to consumers. Part II lays out the Federal Independent Dispute Resolution Process, the good faith estimates requirements for uninsured (or self-pay) individuals, patient-provider dispute resolution processes for uninsured individuals, and the external review provisions of the No Surprises Act. This Client Advisory will summarize what providers should know about Parts I and II of the Interim Final Rule. Importantly, Part II of the Rule is open for public comment until December 6, 2021, and any comments should be submitted before that date.

Part I

Emergency Services

When a patient receives care from an out of network provider, their insurance usually will not cover the out-of-network cost. Surprise billing happens when the provider bills the patient the difference between the charge from the out-of-network provider and the amount the insurance plan covered and typically happens when a person with health insurance unknowingly gets medical care from a provider outside their health plan’s network. The No Surprises Act prohibits out-of-network providers of emergency services from balance billing a patient for any amount above their corresponding in-network cost sharing responsibilities — i.e., the patient’s in-network deductible, copayment, or coinsurance amount.

Part I of the rule defines “emergency services” for the purposes of the No Surprises Act to include pre-stabilization services provided after the patient is moved out of the ER and admitted. Emergency services also includes additional services after the patient is stabilized as part of outpatient observation or as an inpatient. These post-stabilizations qualify as emergency services unless:

• the patient can travel using non-medical transportation (or they have access to medical transportation) to an in-network provider in a reasonable traveling distance;
• the provider providing the post stabilization-services satisfies the notice and consent requirements (laid out below);
• the patient can understand the notice and give informed consent; and
• the provider satisfies any additional requirements or prohibitions under state law.

Emergency services also includes emergency services provided at Independent Freestanding Emergency Departments and urgent care centers if they are licensed by the state to provide emergency services.

Cost-Sharing

The No Surprises Act generally prohibits air ambulance services and out-of-network providers of emergency and non-emergency services that are provided at in-network facilities from billing the patient for more than their cost-sharing responsibility for their corresponding in-network services. The patient’s cost sharing amount is the “recognized amount,” which is:

(1) the amount determined by an applicable All-Payer Model Agreement;

(2) if there is no All-Payer Model Agreement, an amount determined by a specified state law; or

(3) if there is no All-Payer Model or state law, then the lesser of the amount billed by the provider or the qualifying payment amount (QPA).

The QPA is the median of the contracted rates of the plan for the service in the geographic region. Any cost-sharing amount a patient pays must also count towards the patient’s deductible and out-of-pocket payment maximums in the same way cost-sharing payments would count for in-network services.

Insurers will have to pay providers the out-of-network payment amount. This amount equals one of the following, minus the patient’s cost sharing responsibility:

• an amount determined by an applicable All-Payer Model Agreement;
• if that does not apply, then an amount determined by a specified state law;
• if none of the above apply, an amount agreed upon by the insurer and the provider; or
• if parties cannot settle on an amount, they may use the Federal Independent Dispute Resolution Process (discussed below).

Because there are not many state laws that apply to air ambulance service payments, most air ambulance service payments will be left to the insurer and providers to negotiate via an agreement or through use of the Federal Independent Dispute Resolution Process.

Notice to Patients

Patients can waive the balance billing protections for certain non-emergency and post-stabilization services. To do so, the rule requires providers give patients a plain-language customer notice. This notice should explain that patients must give their consent to receive care at an out-of-network provider before the provider can bill at a higher out-of-network rate. This notice must be provided as a standard notice document provided by HHS. The notice may not be incorporated into any other form, and it must be written on paper or electronically provided if the patient choses. The notice must include the good faith estimate amount the facility may charge the patient and an estimate of the cost of a service reasonably expected to be provided with the care the patient is seeking.

The provider must provide this notice at least 72 hours before the date of the appointment, if the patient scheduled the appointment 72 hours ahead of time. If the appointment was scheduled within 72 hours, the provider must give notice on the day the appointment was made. If a patient makes no appointment and seeks same day care, the provider must give the notice no later than 3 hours before the appointment.

Part II

Federal Independent Dispute Resolution Process

Insurers and providers can use the federal independent dispute resolution (“IDR”) process to determine the out-of-network rate for a service or item covered by the No Surprises Act after the provider receives an initial payment or notice of denial from a health plan or insurance issuer.[1] Before beginning the IDR process, the health plan must have a 30-day open negotiation period. If a payment agreement is not reached within that period, they have four business days to begin the resolution process.

The insurer and provider may jointly select a certified IDR entity. If they cannot decide on an IDR entity, CMS will choose one. Within 10 days of the IDR entity’s selection, the insurer and provider must submit their payment offers to the IDR entity with documentation supporting that payment determination. Supporting documentation may include the provider’s level of training, the market share of the provider, the acuity of the patient and complexity of the service, the contracted rates between the parties for the previous four years, and any good faith efforts made to try to enter into network agreements. The IDR entity is precluded from considering information about usual or customary charges, the amount that would have been charged if there were no surprise billing rules, or the reimbursement rate under Medicare or Medicaid for the services.

The IDR entity has 30 days after it is selected to make a binding payment determination based on one of the parties’ offers. In making their decision, the IDR entity must consider the QPA, and generally must chose the offer closest to that amount. However, if the information submitted by one of the parties shows the QPA is materially different from the appropriate out-of-network rate, the IDR entity does not have to select the amount closest to the QPA. The party whose payment offer is not chosen must pay the IDR entity’s fees, and both parties must pay a $50 administrative fee.

The Texas Medical Association (TMA) has filed a lawsuit regarding this section of the rule. They argue that requiring the IDR entity to choose the offer closet to the QPA creates a bias and is a short-sighted approach that could lower rates and cause insurers to narrow their networks. TMA argues that the IDR entity should be allowed to use their discretion, weigh all relevant factors, and select the reimbursement rate that most accurately reflects fair market reimbursement and individual circumstances. The complaint was filed on October 28, 2021, and the case is pending in the US District Court for the Eastern District of Texas.

How to Become a Certified IDR Entity

Eligible entities may apply to become a Certified IDR entity through the Federal Portal. To be eligible, an entity must provide written documentation demonstrating that they meet eligibility criteria, including that:

• They have sufficient expertise and staffing to make payment determinations on a timely basis;
• They are free of conflicts of interests;
• They are accredited by a nationally recognized and relevant accrediting body or can otherwise ensure that the entity personnel possess the requisite training to conduct payment determinations (such as providing documentation that personnel have completed training by the American Arbitration Association, the American Health Law Association, or similar organizations);
• They have policies and procedures in place to maintain the confidentiality of PHI;
• They will provide fixed fees for single determinations and separate fees for batched determination;
• They have procedures in place to retain Certified IDR entity fees and retain and remit administrative fees;
• They meet appropriate indictors of fiscal integrity and stability;
• They can collect and transmit information required to be reported to the appropriate departments; and
• They can properly carry out all the requirements of the Federal Independent Dispute Resolution Process in accordance with the law.

As part of the certification process, providers, facilities, air ambulance services, health plans, or members of the public can petition for the denial or revocation of an entity’s IDR certification. CMS is certifying IDRs on a rolling basis. CMS will issue additional guidance regarding the Federal Portal in the weeks to come.

Good Faith Estimates for Uninsured or Self-Pay Patients

When an item or service is scheduled for a patient, providers must ask if they have health insurance or if they will submit a claim to their health insurance company to cover the item or service. If the individual is uninsured (or a self-pay individual), the provider must give them a good faith estimate of the expected charges for the items or services. The estimate must include charges for all items or services reasonably expected to be provided, including services that may be provided at another facility or by a different provider. However, because it may take time for providers and facilities to develop a system to provide good faith estimates, from January 1, 2022 through December 21, 2022, HHS will not take action against providers who do not include expected charges from other providers and facilities involved with the patients’ care in their good faith estimates.

CMS offers this example of a good faith estimate in the Rule:

In the instance of a knee surgery, a good faith estimate could include an itemized list of items or services in conjunction with and including the actual knee surgery (such as physician professional fees, assistant surgeon professional fees, anesthesiologist professional fees, facility fees, prescription drugs, and durable medical equipment fees) that occur during the period of care. An individual would not typically schedule days in the hospital post-procedure separately from scheduling the primary service of a knee surgery. HHS would therefore expect that all the items or services that are reasonably expected to be provided from admission through discharge as part of that scheduled knee surgery, from all physicians, facilities, or providers, be included in the good faith estimate. Additionally … a provider or facility would furnish separate good faith estimates upon scheduling or upon request for any items or services that are necessary prior to or following provision of primary item or service beyond the period of care. Examples could include certain pre-operative or post-operative items or services that are not typically scheduled during the period of care for the knee surgery, such as certain laboratory tests or post-discharge physical therapy.

The Patient-Provider Dispute Resolution Process

Separate from the federal IDR process, the Patient-Provider Dispute Resolution Process has been established for when uninsured (or self-pay) patients receive good faith estimates and then are billed an amount “substantially in excess” of the estimate. A patient is eligible for this dispute resolution process if (1) they start the process within 120 calendar days of receiving the bill and (2) the bill is substantially more than the good faith estimate. A bill is considered “substantially in excess” if the billed charges are at least $400 more than the good faith estimate. Patients must pay an $25 administrative fee (which will be updated in future guidance) to start the process. A Select Dispute Resolution (SDR) entity will then be chosen the resolve the dispute and make a payment determination. SDR entities provide similar services and must meet similar requirements as certified IDR entities.

After the process begins, the provider must submit a copy of the good faith estimate it provided to the patient, a copy of the bills charged, and other documentation to support the discrepancy between the estimate and the bill. The patient may also submit additional information. The SDR entity reviews all the information and determines if the provider’s reasons for the discrepancy between the estimate and the bill are credible and justifiable, in addition to whether the good faith estimate for the item or service was credible. If the SDR entity finds that the provider has not submitted sufficient information to justify the difference, then the SDR entity shall determine that the appropriate amount to be paid is the good faith estimate. If they find there was enough information to justify the difference, the SDR must determine what amount should be paid. That amount should be the lesser of the billed charge or the median payment amount paid by an insurer for the same or similar service by a similar provider in the geographic area. The Patient-Provider Dispute Resolution Process is further laid out at 45 C.F.R. 149.620.

It is important to note that some states, including Virginia, have their own surprise billing laws. In cases where the scope of a state dispute resolution process dealing with managed care pricing differs from the scope of the No Surprises Act, the claim may be split up, with one portion going through the state process while the other goes through the federal process.

External Review

Finally, the rule amends and expands the scope of adverse benefit determination claims that are eligible for external review by CMS. When the rule becomes final on January 1, 2022, CMS will be able to review determinations that involve whether a plan or issuer is complying with the surprise billing and cost-sharing protections under the No Surprises Act and its implementing regulations. Grandfathered plans that are excluded from other external review requirements will be subject to external review for these coverage decisions as well.

Conclusion

The No Surprises Act was passed to help protect consumers from surprise and balance billing for some types of medical services or care. CMS has released an interim final rule to implement the No Surprises Act. Part II of the Rule is open for public comment until December 6, 2021. Both Part I and Part II go into effect on January 1, 2022, however, the rules for certifying IDR entities and how to become an IDR entity became effective on October 7, 2021.

If you or your practice have any questions about this Interim Final Rule or would like assistance submitting a comment, please contact Peter Mellette, Harrison Gibbs, or Elizabeth Dahl Coleman at Mellette PC.

This client alert is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have and does not cover all the provisions of the interim final rule. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.

[1] The Office of Personnel Management’s interim final rule establishes that Federal Employee Health Benefits (FEHB) are also subject to the Federal Independent Dispute Resolution Process.