Feds finalize No Surprises Act dispute resolution process

By Nona Tepper and Maya Goldman\August 19, 2022

Federal regulators completed policies related to the independent arbitration process under the No Surprises Act in a final rule issued Friday.

The regulation, which follows a court decision that struck down part of an earlier policy, instructs arbiters to consider both an insurer's median contracted in-network rate and additional information when determining the correct payment for a surprise bill, including for air ambulance services. The Health and Human Services, Labor and Treasury departments jointly published the final rule.

The government also implemented policies that require additional disclosures about the median contracted rate and written explanations from arbiters about how they reached a payment decision. 

"The increased transparency required under these final rules will help providers, facilities and air ambulance providers engage in more meaningful open negotiations with plans and issuers and will help inform the offers they submit to certified independent entities to resolve claim disputes," the federal departments said in a press release. 

President Donald Trump enacted a law to ban surprise billing practices in 2020. Since then, regulators have published three interim final rules and one proposed regulation derived from the law. This is the first final rule to implement the statute. HHS, Labor and Treasury acknowledge this narrow regulation doesn't address provisions from previously released interim final rules and will publish additional regulations on surprise billing, the departments wrote in the regulation.

Insurers and providers that fail to come to payment agreements may engage in independent dispute resolutions. Through this mediation process, third-party arbiters decide between the payment amounts proposed by the providers and the insurer, respectively.

A previous interim final rule instructed arbiters to begin deliberations with the assumption that an insurer’s median contracted in-network rate is the appropriate out-of-network rate. Providers argued this "qualified payment amount" unfairly favors insurers and would lead to lower reimbursements. 

A federal court ruled in February that arbiters may not give more weight to previous payment arrangements between a provider and insurer than to other factors, which prompted the Centers for Medicare and Medicaid Services to update its guidance outlining the arbitration process. The court subsequently decided that the policy should apply to air ambulance bill disputes, too. More litigation is likely to arise under the final rule, lawyers said prior to its release. 

Under the final regulation, arbiters don’t have to choose the offer closest to a median contracted rate but should select the best offer after considering that amount and other information.

The regulation also requires insurers to share information about the median contracted rate for a service with each initial payment or denial of payment when that rate is the amount upon which cost-sharing is calculated. If an insurer changes the code or modifier of a service being disputed to one associated with a lower contracted rate, insurers have to disclose the downcoding and explain its purpose, and reveal what the rate would have been. 

Additionally, the rule instructs arbiters to explain payment decisions, including the weight they gave to the median contracted rate. If an arbiter relies on additional information to decide the final payment amount, they should explain why they believe that information was not already reflected by the contracted rate.

Providers have complained that insurers were not submitting information needed to commence arbitration. The regulation states that if either a provider or insurer fails to submit qualified payment amounts or other disclosures in a timely manner, the mediator does not have to consider that information. Providers have 30 days after a denied claim to begin the process.

Insurers insist they are working to reduce patient costs. The new law shielded health insurance policyholders from an estimated 2 million surprise bills during the first two months of the year, according to a report from health insurance industry groups AHIP and the Blue Cross Blue Shield Association.

Some providers had chosen to maintain out-of-network status to generate income via balance billing. Patients are particularly susceptible when they cannot choose specific providers, such as in emergency departments, or when receiving care from ancillary providers such as radiologists, anesthesiologists or hospitalists at in-network facilities. Specialists who can bill out-of-network without warning charge significantly more relative to Medicare than other specialists, according to the Brookings Institution. From 2012 to 2017, emergency department and anesthesiology charges rose more quickly relative to Medicare than did prices other specialists charged, a Brookings Institution study found.

Shifting from balance billing to rates negotiated via the No Surprises Act policy will reduce health insurance premiums by up to 1%, the Congressional Budget Office estimated in 2019.

CMS can fine providers up to $10,000 for billing a patient more than the amount established under the No Surprises Act process. Regulators also can assess penalties against health insurance companies that improperly calculate the qualifying payment amount. Federal authorities are responsible for auditing insurers’ median in-network rates to ensure they adhere to federal guidelines.

The final rule drops a proposed requirement that providers inform patients of providers' responsibilities under the No Surprise Act, according to a guidance document that accompanied the final rule. Providers will still have to notify patients about the ban on balance billing in certain circumstances, about any applicable state laws and about how to contact state or federal agencies if they believe they have been inappropriately billed.

The guidance also underscores that emergency medical services apply to physical and behavioral healthcare.

Regulators plan to issue additional guidance for air ambulance providers on how a qualified payment amount should be calculated when transporting patients outside the U.S.