The Best Surprise Is…No Surprises

The 5,000-plus page 2020 year-end omnibus bill includes the long-awaited “surprise medical billing” fix.

Those provisions are designed to protect consumers from surprise medical or “balance” bills from out-of-network (OON) providers in certain situations. They take effect Jan. 1, 2022.

The most contentious piece of the “surprise billing” legislation was the payment resolution mechanism that applies when providers and payers cannot agree on price. Providers favored a strict arbitration process; payers favored a price benchmarking tactic.

The legislators took an arguably middle ground approach. Each payer is required to establish “qualifying payment amounts,” which are the median payments they have contracted to make for the same items or services in the same geographic region to in-network providers. Self-insured plans are defined as a separate “insurance market” (alongside individual, small-group and large-group markets) when compiling these “qualifying payment amounts.”

As discussed in more detail below, these median contracted rates are the point of departure for both the OON payment discussions and the ensuing dispute resolution process if the parties are unable to come to a price agreement. Both payers and providers have lodged objections to the approach, but it should create some stickiness for those median contracted rates given the way in which they are deployed.

First, the basics. The new law caps cost-sharing obligations for patients who receive OON care to their applicable in-network levels (and requires plans to make up the difference) in the following circumstances:

• For emergency services performed by an OON provider and/or at an OON facility
• When non-emergency services are performed by OON providers at in-network facilities
• For air ambulance services provided by OON providers.

There are several exceptions, and the providers have an array of new notice obligations.

To determine the amount the patient’s plan owes the provider(s) when the OON rules apply, the legislation imposes three different rules.

1. If the care is provided in a state that has a law in place that would apply on its own terms to determine the amount the plan would owe to the provider, the state law applies.
2. If the care is provided in a state that participates in the All-Payer Model Agreement (currently, just Maryland and Vermont), then the state-approved amount applies.
3. For care provided in states with no applicable rule and for air ambulance service disputes, the law prescribes an initial negotiation phase that is followed by an arbitration process if no agreement can be reached.

Under the statutorily defined process, the amount that the insurer/health plan is required to offer initially if it does not issue a denial of payment is the “qualifying payment amount” discussed above. There will be audit processes for reviewing “qualifying payment amounts” on both a random basis and in response to provider complaints.

Under the new independent dispute resolution (IDR) process, an HHS-certified arbitrator must pick between the two submitted resolution offers (so-called “baseball style arbitration”). The arbitrator must first consider the applicable “qualifying payment amount” and then also must consider any of the following information if it is submitted in an effort to demonstrate why deviation from that “qualifying payment amount” is warranted:

• The level of training, experience and quality of the provider/facility
• The provider/facility’s market share in the relevant geographic region
• The acuity of the patient and the complexity of the service
• The extent to which the parties engaged in good faith efforts to enter into network agreements.

The law also explicitly bars the arbitrator from considering the amount the provider invoiced, the provider’s “usual and customary charges,” or the amount public payers pay for the item or service.

A few other points are worth noting.

• The IDR entity’s decision is final and generally may not be appealed.
• The parties may batch together in a single proceeding similar items and services for which there is a payment dispute in the same geographic market. One important issue for self-insured plans is whether they can jointly participate in the batching process if they are all utilizing the same preferred provider network and contracted provider rates.
• The same parties may not commence another IDR process for the provision of an item or service within 90 days of receiving an IDR payment determination for the same item or service.
• The losing party pays the arbitration costs/fees.
• All IDR parties will be assessed fee for program administration costs by HHS.
• All of the details of the process are subject to agency rulemakings with a statutory deadline for putting the initial rules in place by July 1, 2021.

HHS also is required to publish information on a quarterly basis reporting on all of the details of the payment disputes resolved through the IDR process (number; sizes of the participating parties; extent to which the final payment determination varied from the “qualifying payment amount”; the amount of HHS’s administrative fees and the total fees paid to certified IDR entities). So—no surprise—more to come.