Surprise billing ban details yet to be determined, leaving industry fights to come

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Providers and insurers will continue their fight over surprise billing as federal officials figure out how to put the No Surprises Act into practice, according to experts.

The new law protects consumers from receiving unexpected medical bills resulting from out-of-network emergency care delivered by an out-of-network facility or out-of-network providers at an in-network facility. It also blocks out-of-network providers at in-network facilities from balance billing patients for non-emergency care unless they get patient consent. But patients will still be responsible for paying the in-network cost-sharing amount.

The heart of the law is a new independent dispute resolution process, which gives providers and insurers 30 days to agree to a price for the medical services delivered. If they don’t settle, they’re supposed to enter arbitration, during which each side will present a final offer and make their case for why their offer is best. The arbitrator must then pick one of the two offers. They can’t split the difference.

Congress’ decision to go with baseball-style arbitration to settle payment disputes between providers and insurers was a victory for providers since insurers’ preferred benchmarking approach would have led to lower payments for doctors and hospitals.

But the battle isn’t over yet, as federal regulators still have a lot of details to work out before the law takes effect next year.

Policymakers must recruit entities to carry out the arbitration process and provide them with guidance about how to consider a range of factors during arbitration.

The No Surprises Act bans arbitrators from considering provider charges during the arbitration process. Congress had worried that healthcare costs would rise faster if providers’ settlement amounts were significantly higher than the amounts insurers paid to in-network providers. The legislation also bars arbitrators from considering how much public payers like Medicare and Medicaid pay for comparable services. That’s a win for providers since those payers often have much lower reimbursement rates than commercial plans.

But lawmakers allowed arbitrators to mull over several other factors when making payment decisions, including the median in-network rate paid by an insurer, any good faith effort by a provider to join an insurer’s network, providers’ and insurers’ market share, and previously contracted rates from the last four years, among other considerations. Congress left it up to HHS to figure out how to calculate qualified payment amounts, which are tied to the median in-network rates paid by insurers.

Agency officials could issue guidance about how arbitrators should weigh those factors, which could meaningfully affect how much insurers must pay out-of-network providers, said Jack Hoadley, research professor emeritus at the Health Policy Institute of Georgetown University’s McCourt School of Public Policy.

For example, regulators could make clear whether arbitrators could consider billed charges when choosing between settlement amounts. That could have a sizable effect on who wins in arbitration since research shows that arbitrators’ decisions are significantly affected by the information they can consider. A recent Health Affairs study found that arbitrators in New Jersey picked the settlement offer closest to the 80th percentile of provider charges—one of the few data points arbitrators had available—in two-thirds of cases in 2019. As a result, arbitration awards were almost six times higher than the median in-network price for the same service.

“The amount that providers can expect to receive through the arbitration process also affects their bargaining leverage with insurers, which could affect in-network negotiated rates more broadly. Therefore, basing arbitration decisions or a payment standard on unilaterally set provider-billed charges appears likely to increase healthcare costs relative to other surprise billing solutions and perversely incentivizes providers to inflate their charges over time,” the study said.

Avalere Health consultant Chris Sloan said several providers and payers had asked him how HHS would handle qualifying payment amounts. Congress left it up to federal regulators to decide how to adjust qualifying payment amounts for inflation and set them for new entrants that haven’t established contracted rates in a specific region or market.

Experts are also curious to see how officials will deal with the various deadlines Congress laid out in the law. For instance, providers and health plans will have four days to agree upon a neutral arbiter approved by the federal government and go to arbitration if they can’t settle within 30 days. But it’s unclear what would happen if the provider and payer don’t meet the four-day deadline or can’t agree on a referee. Nobody knows whether an organization would be able to appeal to regulators if their counterpart refuses to play ball, Sloan said.

There are also other “fuzzy bits” that federal officials need to sort out, Sloan said. For example, Congress didn’t sketch out what constitutes a similar geographic area or how providers and arbiters could confirm that the information a payer makes available—such as its median in-network rate—is correct. When it comes to setting the rules, Sloan wasn’t sure whether regulators would see how things play out among providers, payers and arbiters or if they would take a more prescriptive approach from the start.

He thought the number of payment disputes that go through arbitration could decline over time, as providers and payers figure out how arbiters reach decisions and what the settlement amounts look like.

With the No Surprise Act set to take effect on Jan. 1, healthcare executives should expect HHS and other federal agencies to start issuing their proposed rules in the coming months. The details of those rules will significantly affect what cards they’ll be able to play at the negotiating table.

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