Plan participants can be hit with surprise medical bills when they receive care from out-of-network providers. Sometimes, this happens when participants do not know that the care they are receiving is from an out-of-network provider, like when they have surgery at an in-network facility only to find that the facility-appointed anesthesiologist, for example, is out-of-network.  Now, employers have a bit more clarity about how those surprise medical bills are supposed to be paid, beginning January 1, 2022, under new “No Surprises Act” regulations.

The U.S. Department of Labor (DOL), U.S. Department of Health and Human Services, and U.S. Department of the Treasury have issued guidance focused on Section 102 of the No Surprises Act, which was enacted as part of the Consolidated Appropriations Act (CAA), 2021 in December 2020. The guidance, in the form of an interim final rule (IFR) and a request for public comments, applies to the first plan, policy, or contract year beginning on or after January 1, 2022.

Notably, this guidance focuses only on the mechanics of initial payments by group health plans and insurers. Future No Surprises Act guidance will provide detail on a complicated new arbitration process for resolving disputes between providers and plans or insurers.

The IFR applies to fully insured and self-insured group health plans, including grandfathered plans, but it does not apply to excepted benefits (such as limited-scope dental and vision plans and most health flexible spending arrangements), or to health reimbursement arrangements.

The No Surprises Act and the IFR add patient protections for three medical billing scenarios: emergency services, nonemergency services by out-of-network providers at in-network facilities, and non-network air ambulance services. All three regularly cause heartburn for employers and plan participants.

Coverage of Emergency Services

Under the IFR, plans that cover emergency services must cover them without any prior authorization, even for out-of-network services, and without regard to whether the provider or facility is in- or out-of-network. Further, plans cannot limit what constitutes an emergency medical condition solely on the basis of diagnostic codes, and plans must provide emergency services benefits without regard to any other condition of coverage, except coordination of benefits, waiting periods, or cost sharing.

Additional requirements will apply when out-of-network providers (i.e., providers with whom the plan does not have a contractual relationship, whether directly or indirectly) furnish emergency services. Plans may not impose any stricter administrative requirements or limitations on coverage for these out-of-network providers or facilities than those that are applied in-network, and they may not impose any cost-sharing requirements that are not applied in-network.

Also, for emergency services rendered by an out-of-network provider, plans must do the following:

• Calculate the cost sharing as if the total amount that would be charged for the services by an in-network provider or facility were equal to the “recognized amount” for the services (generally either an amount set by state law or the lesser of the billed charges and the “qualifying payment amount”). (For more on the definition of “qualifying payment amount,” please see “Determining the Amount Subject to Cost Sharing” below.)

• Count any cost-sharing payment that a participant makes for emergency services toward any in-network deductible or in-network out-of-pocket maximum (including the 2022 out-of-pocket maximums set by federal law—$8,700 for self-only and $17,400 for family coverage) in the same manner as if the payments had been made for services furnished by an in-network provider or facility.

Coverage of Nonemergency Services by Out-of-Network Providers at In-Network Facilities

Under the IFR, unless an out-of-network provider gives prior notice and obtains participant consent, a plan cannot charge higher cost sharing for nonemergency services provided by out-of-network providers at an in-network facility than it would if the services were provided by in-network providers at the in-network facility.

A plan must calculate the cost sharing as if the total amount that would be charged for the services by the out-of-network provider was equal to the “recognized amount” for the services (generally either an amount set by state law or the lesser of the billed charges and the qualifying payment amount).

The plan must also count any cost-sharing payments made by the participant toward any in-network deductible and out-of-pocket maximums (including the 2022 out-of-pocket maximums set by federal law) applied by the plan as if the cost-sharing payments were made with respect to services furnished by an in-network provider.

The IFR also details a specific and cumbersome process that providers must go through to obtain participant consent to be treated by an out-of-network provider at an in-network facility. Such consent does not apply to the provision of ancillary services (i.e., services, such as ambulance services, rendered in support of the primary provider’s care) or to services provided due to urgent unforeseen medical needs. Under the IFR’s notice-and-consent requirements with respect to nonemergency services rendered by out-of-network providers at in-network facilities, a provider generally would have to provide notice to a participant no later than 72 hours before a scheduled procedure, and the provider would have to let the participant choose to receive the notice in any of the 15 most common languages in the relevant state or geographic region served by the provider.

Coverage for Air Ambulance Services by Out-of-Network Providers

When an out-of-network provider provides air ambulance services, a plan may impose only the same cost-sharing requirements that it would impose on an in-network provider. In addition, with respect to out-of-network air ambulance services, a plan must:

• calculate the cost-sharing amount as if the total amount that would have been charged for services was equal to the lesser of the billed charges or the “qualifying payment amount”; and

• count cost-sharing amounts toward any in-network deductible and out-of-pocket maximum applied under the plan in the same manner that those amounts would be counted if the payments were made for services by an in-network provider.

Determining the Amount Subject to Cost Sharing

Cost sharing for all three of the situations described above is determined by reference to the “recognized amount” for an item or service. The “recognized amount” is determined in one of three ways: by a separate agreement under the Social Security Act (if applicable), as specified by state law (if there is not an applicable agreement under the Social Security Act), or (if there is not an applicable agreement under the Social Security Act and a state law is not specified) the lesser of the amount billed by the provider and the qualifying payment amount (QPA).

Importantly, the IFR details how to calculate the QPA. Generally, the QPA is set by reference to the median of the plan’s contracted rates for an item or service on January 31, 2019. First, the plan must identify all the contracted rates for items and services that are (i) the same as or similar to the item or service in question; (ii) provided by a provider in the same or similar specialty, or by a facility of the same or similar facility type; and (iii) provided in the geographic region in which the item or service is furnished. Once all of the contracted rates are identified, the plan must order them from least to greatest. The middle number (or, if there are two middle numbers, the average of those numbers) is the median contracted rate.

The IFR contains specific definitions for the terms “contracted rate,” “same or similar item or service,” “provider in the same or similar specialty,” “facility of the same or similar facility type,” and “geographic region.” Special rules apply for deriving the QPA for unit-based services (such as anesthesia or air ambulance services), which are calculated by multiplying the contracted rate by another unit (such as time or mileage). Because these amounts are determined as of January 31, 2019, the No Surprises Act provides for increasing the median contracted rate to account for inflation. The Internal Revenue Service will publish the relevant inflationary factors each year.

If a plan—or, more realistically, its third-party administrator—lacks adequate information to calculate the median contracted rate for a particular item or service, it can use an alternative method. Both the No Surprises Act and the IFR contemplate that the alternative method will be the exception rather than the rule. Under the IFR, a plan cannot use the alternative if the plan had at least three contracted rates on January 31, 2019.

For years in which a plan does not have enough information to calculate the median contracted rate, the plan will use an eligible database that meets requirements set by the IFR. According to the IFR, a state all-payer claims database will always qualify, while other databases would have to meet certain standards (such as independence from interested parties, sufficiency of information, and a sufficient level of detail in the data). Special rules apply to plans that later gain three contracted rates (so that they can calculate a median contracted rate) and to new plans and new service codes. Under those special rules, an alternative methodology may no longer be used as of the year following the year in which the plan has at least three contracted rates that it can use to calculate a median.

Payment by the Plan to Out-of-Network Providers

In all of the out-of-network provider situations discussed above, the IFR requires the plan or insurer to determine within 30 days of receiving a bill for services whether the services are covered under the plan and send to the provider either an initial payment or a denial of payment. Within 30 days of making that determination, the plan or insurer must provide a total payment directly to the out-of-network provider or facility, equal to the difference between the out-of-network rate and the cost-sharing amount (less any initial payment already made).

In the case of a dispute between a plan and an out-of-network provider (including a provider of any of the above types of services—emergency, nonemergency, air ambulance, etc.), regarding the amount to be paid by the plan, the No Surprises Act provides for an “independent dispute resolution” (IDR) process, the outcome of which will be binding on both parties. The departments will likely issue additional guidance on that IDR process.

DOL Complaint Process

Employers may want to note that the DOL will establish a process to administer complaints that health plans and insurers are violating the No Surprises Act rules. Though employees could file such complaints, it appears that providers would be more likely to use the new system. Options for the DOL under the new process include referring the plan or insurer for an investigation or for enforcement action.

More to Come in Future Rulemaking

This IFR provides guidance on only one section of the No Surprises Act. Much more guidance is expected in the near future on the surprise medical billing protections, as well as on CAA provisions such as pharmacy benefit and drug cost reporting, required disclosures of broker and consultant compensation, and the prohibition on “gag clauses” concerning price and quality information.