On December 27, 2020, President Trump signed into law the No Surprises Act, which was part of the consolidated appropriations bill intended to provide stimulus payments and other relief to individuals and businesses affected by the COVID-19 pandemic. The act comes after years of negotiation between health plan insurers, employers, and providers, and represents a significant change in the way that providers can bill and be reimbursed for “out of network” services.

The act is intended to eliminate surprise medical bills that are often received by patients from medical providers that are not part of an insurance plan’s preferred network of providers. This is often referred to as “balance billing” because the out-of-network provider bills a patient directly for the part of the bill that is not covered by insurance (the “balance”). Recently, some states have passed laws that attempt to eliminate such surprise bills, but state laws only apply to fully insured group medical plans and do not apply to some medical services that are governed exclusively by federal law. The passage of the federal law effectively applies balance billing rules to group medical plans that are not governed by state law — self-insured plans — and also to medical services such as air ambulances that are exclusively governed by federal law.

The act amends Title XXVII of the Public Health Service Act to eliminate surprise medical bills in three primary circumstances:

• Patients who receive emergency medical services from out-of-network providers can only be billed for in-network cost-sharing requirements and limitations from the patient’s initial evaluation until stabilization. This effectively means that patients will only be responsible for in-network deductibles, copayments, and other out-of-pocket expenses associated with emergency treatment regardless of where the patient receives emergency care.

• The same rule above applies to patients receiving air ambulance services, which have historically issued significant balance bills to patients. Patients who receive air ambulance services will therefore be subject only to a medical plan’s cost-sharing requirements.

• Patients who receive nonemergency services at an in-network facility can only be billed by out-of-network providers at in-network rates. This means that ancillary services provided by doctors that are not in a facility’s network (such as anesthesiologists) will be subject to the facility’s in-network cost-sharing requirements. There is a limited exception in this circumstance that allows out-of-network providers to bill their full rate if a patient is notified in advance (not less than 72 hours prior to receiving out-of-network services) and consents to the provider’s charges.

While the act benefits patients who receive out-of-network services, it does not specify who bears responsibility for the cost of the care that is not otherwise covered by insurance or other form of reimbursement arrangement (e.g., Medicare or Medicaid). In anticipation of disputes that will undoubtedly arise between providers and payors, the act provides for an independent dispute resolution process. Under this process, the parties have 30 days to negotiate a payment amount. If the negotiation fails, then either party may invoke binding arbitration, with the losing party paying the prevailing party’s costs and fees. No minimum payment threshold exists for access to this arbitration process. Under the arbitration procedures, the parties will submit a proposed payment for the services and the arbitrator must select one of the proposed payments, with no ability to split the difference between the two proposed settlement figures. This approach is a departure from the resolution process favored by insurance plans and employers, which had for the most part sought a standard reimbursement framework to be set up and administered for balance bills.

In addition to the provisions intended to prohibit balance billing, the act also includes transparency and compliance provisions that apply to health insurers, providers, and consultants. The relevant provisions include:

• A prohibition on medical plans and insurers from entering into agreements with providers that prevent the disclosure of cost and qualify information.

• Brokers and consultants must disclose the direct and indirect compensation received from referral services they provide to a group medical plan.

• Group health plans and insurers must disclose to the federal government the cost of pharmacy benefits, including premiums for drug coverage, manufacturer rebates, and the most utilized drugs under the plan.

• Group health plans and insurers must implement a “price comparison tool” that allows plan participants to compare the cost of items and services under the plan.

• Plan ID cards must include in clear writing deductibles, out-of-pocket limits, and consumer assistance information.

• Group health plans and insurers must verify and update the status of providers as in-network or out-of-network at least every 90 days and must respond to participant inquiries about the status of a provider within one business day.

• Group medical plans and insurers that provide mental health or substance use disorder (MH/SUD) benefits must submit detailed reports regarding compliance with the Mental Health Parity Act, including authority for any nonquantitative limitations (e.g., requirement of prior authorization) imposed on mental health services.

The act contains enforcement provisions similar to those under the Affordable Care Act and HIPAA, meaning that states will continue to regulate fully insured group medical plans and the Department of Labor will regulate self-insured plans. The federal enforcement provisions provide for civil monetary penalties up to $10,000 per violation and the creation of a federal process to receive consumer complaints related to surprise medical bills.

The act’s provisions are scheduled to take effect beginning January 1, 2022. In the meantime, regulations on the contours of the act’s provisions are likely to be drafted and finalized prior to the act’s effectiveness.