Surprise Billing Rules Would Give Private Health Plans Advantage in Disputes

Federal legislation designed to protect patients from being slapped with surprise medical bills is all fine and dandy. But in an ironic way, the No Surprises Act (Act) is proving to be a big surprise to labs and other providers affected by the law’s billing provisions. And it’s not at all pleasant. As with the Protecting Access to Medicare Act of 2014 (PAMA), the problem with surprise billing isn’t the legislation, but the proposed regulatory rules for its implementation, specifically with regard to resolution of billing disputes between out-of-network providers and commercial health plans.

The No Surprises Act IDR Process

The Act, which took effect on January 1, 2022, bans providers from billing commercially insured patients (surprise billing was already banned under Medicare and other federal healthcare program rules) for more than the in-network cost-sharing due under the patient’s insurance. Rather than stipulating a rate, the Act establishes a process for providers and plans to settle on the payment amount.

First, plans must provide the out-of-network provider initial payment or notice of denial within 30 days of the date of service. If the provider is dissatisfied with the initial payment, it can trigger a 30-day “open negotiation” process. The Act creates a new independent dispute resolution (IDR), aka, “final offer” arbitration process that the sides can use if no resolution is reached. The way it works: Both sides submit their final payment offer and the arbitrator chooses between the two.

The interim regulations list the factors the arbitrator must consider in deciding which final offer is more “reasonable,” including “qualifying payment amount” (QPA), defined as essentially the insurer’s median in-network rate for similar services in the geographic region as of 2019, indexed for inflation by the Consumer Price Index for All Urban Consumers (CPI-U). Other factors:

• Demonstrations of good faith efforts (or lack thereof) to reach a network agreement and any contracted rates between the parties in the last four years;
• The market share of each party;
• Patient acuity; and
• The level of training, experience, and quality of the clinician, or the teaching status, case mix, and scope of services offered by the facility.

The QPA Controversy

While it isn’t the only factor, the interim regulations say the arbitrator “must look first” to the QPA and then move to other considerations, while devaluing those additional factors by noting the “limited guidance” the Act contains on how to apply them. By assigning QPA primary importance, the regulations basically make health plans judge, jury, and executioner of what constitutes “reasonable” payment under the IDR process.

Of course, none of this has been lost on providers. The head of the large and influential American Medical Group Association (AMGA) issued a statement calling on the Centers for Medicare & Medicaid Services (CMS) to “recognize the danger of effectively predetermining the outcome of the arbitration process.” The IDR process might also “influence how payers negotiate future contracts with providers.”

Last April, the American Hospital Association (AHA) and American Medical Association (AMA) upped the ante by filing a lawsuit asking the US District Court for the District of Columbia to strike down the interim regulation IDR provisions, claiming that placing primary emphasis on the QPA misinterprets the text and intent of the Act that gives payers too much control over reimbursement rates.

Two months earlier, a federal judge in Texas sided with the Texas Medical Association (TMA) in its own surprise billing lawsuit by ruling that the IDR interim regulations violated the policies Congress intended to promote by adopting the Act.

And it’s not just the providers who are up in arms over the QPA rules. On November 9, 2021, a bipartisan group of 152 House members has also urged the secretaries of Health and Human Services, Treasury, and Labor to amend the interim IDR regulations. “We urge you to revise the [regulations] to align with the law as written by specifying that the certified IDR entity should not default to the median in-network rate and should instead consider all of the factors outlined in the statute without disproportionately weighting one factor,” the representatives stated in the letter.

Takeaway

The departments that authored the interim regulations are expected to issue a final version of the rule some time this summer. However, there is little to suggest, at least so far, that any substantial changes will be made to the IDR provisions.