Title I of Division BB of the Consolidated Appropriations Act, 2021 (the “Act”), and interim final rules issued by the Departments of Health and Human Services, Treasury and Labor (the “Departments”) in July 2021 (see our post here) and October 2021 (see our post here), ushered in a new era for group health plans, health insurance issuers and providers of medical care that is aimed at both preventing surprise medical bills and providing a system for resolving disputed claims.

On August 19, 2022, the Departments issued final rules (the “Final Rules”) incorporating comments received on the interim rules, clarifying some of the requirements set forth in the Act and the interim rules and accounting for relevant federal court rulings.  In particular, the Final Rules primarily address three distinct but related topics: (1) eliminating the “rebuttable presumption standard,” (2) adding new rules regarding “downcoding,” and (3) reminding the arbitrators of their written requirements.  The Final Rules will be effective on October 25, 2022.

Background: The Act

Broadly speaking, the Act created a structure for resolving billing disputes arising from out-of-network emergency care and services furnished by an out-of-network provider at an in-network facility.  For these out-of-network services, the cost of such services should be based on the “recognized amount” - the amount determined under state law (if applicable) or the lesser of the billed amount and the qualifying payment amount (the “QPA”).  The QPA is generally a plan/issuer’s median contracted rate for a particular item or service, indexed for inflation.  Upon receipt of a bill from an out-of-network provider, the plan/issuer can make an initial payment or deny payment.  In either situation, the plan/issuer must provide to the out-of-network provider the QPA, statutorily-specified information and contact information should the provider wish to start the 30-day open negotiation period.  If the provider and plan/issuer cannot agree on an appropriate cost during the 30-day open negotiation period, the dispute enters the “federal IDR process.”  Simple, right? Not exactly.

Elimination of the Rebuttable Presumption

The interim final rule issued back in October 2021 required the certified IDR entity (the arbitrator) to select the offer closest to the QPA (in most cases) and created a “rebuttable presumption” that the QPA was the correct price.  Federal courts in Texas, however, invalidated this rebuttable presumption standard.

Taking the courts’ view into consideration, the Final Rules issued on August 19th eliminate the rebuttable presumption that the QPA is the correct price.  The Final Rules also abandon the requirement that the certified IDR entity must select the offer closest to the QPA.  Instead, the certified IDR entity must select the offer that best reflects the value of the item or service provided, by first considering the QPA and then considering “additional information” that is relevant to the dispute.  For these purposes, the “additional information” includes information related to:

• the level of training, experience, and quality and outcomes measurements of the provider;

• the market share held by the provider or the plan/issuer in the region in which the item or service was provided;

• the acuity of the individual receiving the medical service or the complexity of providing the medical service to the individual;

• the teaching status, case mix and scope of services of the facility that provided the medical service;

• a demonstration of good faith efforts (or lack thereof) made by the provider or the plan/issuer to enter into network agreements or contracted rates with each other during the previous 4 years; and

• requests made by the certified IDR entity.

Increased Transparency When Downcoding

The Departments recognized that a plan/issuer might “downcode” when determining the QPA.  As defined in the Final Rules, downcoding means “the alteration by a plan or issuer of a service code to another service code, or the alteration, addition or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services.”  For example, if a patient goes to the emergency room for the flu, but the plan/issuer decides to determine the QPA based on the service code/rate for a cold. 

As mentioned briefly above, when a plan/issuer makes an initial payment on a claim or denies payment, the plan/issuer must provide in writing to the provider the QPA for each item or service, a statement certifying that the plan/issuer determined that the QPA is the “recognized amount,” a statement that the QPA was calculated in accordance with applicable regulations and information about the 30-day open negotiation period and the subsequent federal IDR process.  In addition, if the provider requests, the plan/issuer must provide: information about whether the QPA included contracted rates that were not on a fee-for-service basis and whether the QPA was determined using underlying fee schedule rates or a derived amount, information to identify an eligible database (if used to determine the QPA), information to identify a related service code (if used to determine the QPA), and a statement that the plan/issuer’s contracted rates include risk-sharing, bonus, penalty or other incentive-based or retrospective payments or payment adjustments.    

As part of the goal of increasing transparency and smoothing the open negotiation process, the Departments decided that if a QPA was downcoded, the plan/issuer must, in addition to the information noted above, provide a statement that a service code was downcoded, an explanation of why the claim was downcoded (including a description of which code was changed) and the amount the QPA would have been had the code not been downcoded.

Reminder to Arbitrators

After arriving at a final determination, the certified IDR entity must, in all cases, explain in writing its determination, including the reason behind its determination, the information it considered and the weight given to the QPA and the other information it considered.  This written determination must be provided to the parties and to the Departments.  The Departments are considering the form and manner of such written determination, which will be released in future guidance.

Key Takeaways

In the aftermath of the enactment of the No Surprises Act and the subsequent release of the interim final rules, the perception was that the rules favored the plans/issuers at the expense of the providers.  The Final Rules level the playing field in three ways. 

First, the Final Rules eliminate the rebuttable presumption about the QPA and require the certified IDR entity to consider not only the QPA, but other factors as well.  The other factors may indicate that a rate higher than the QPA is appropriate. 

Second, the Final Rules attempt to curb downcoding.  A plan/issuer now has to provide significant information if it downcoded.  The provision of additional information comes with an increased compliance cost, while also allowing the certified IDR entity even more data to be used in determining the correct price. 

Finally, a correctly done QPA will undoubtedly include some of the additional factors listed above, and the inclusion of certain of these factors, provided, of course, that these additional factors are not double counted, may make the QPA more accurate than a calculation done in a vacuum.  

The Final Rules expand on the interim final rules and incorporate the court’s striking of certain provisions.  They add a high degree of transparency and balance the interests of the plans/issuers and the providers.  However, the myriad rules surrounding the process increase complexity and compliance costs for both medical providers and plans/issuers.  Additionally, the Final Rules almost pre-suppose that certified IDR entities are well-trained in medical procedures, medical billing and insurance.  We suspect that the Departments will issue more guidance, making the Final Rules not as final as their name might suggest.