For years, healthcare balance billing has been common practice. It occurs when a provider bills a patient for the difference between the healthcare provider’s fee and what the patient's insurance pays. As an example, if a patient needs a $400 x-ray and their insurance covers only 75% of the cost, their insurance will pay $300 and the patient is responsible for the remaining $100. Traditional balance billing is justifiable: If a patient’s policy covers only a percentage of the cost of services rendered, it makes sense for the patient to shoulder the difference.
Surprise balance billing, however, is another matter entirely. It’s the practice that the recently passed No Surprises Act aims to remedy. In this article, we explain what’s in the No Surprises Act and how it affects payer organizations. Read on to learn more.
What is the No Surprises Act?
The No Surprises Act is aimed at ending surprise out-of-network (i.e., out of group health plan) billing for emergency services and even elective cases. The provisions of the act have been debated for years, but near the end of 2020, Congress finally reached an agreement to include the No Surprises Act in the year-end Consolidated Appropriations Act (CAA), and the act was signed into law on December 27, 2020. On July 1, 2021, the Department of Health and Human Services (HHS), Department of Labor, and Treasury Department, as well as the Office of Personnel Management, issued the interim final rule implementing the Act.
To understand the No Surprises Act itself, it’s important to understand how surprise out-of-network billing occurs, and what it means for patients.
Imagine waking up in the middle of the night with severe abdominal pain. You drive yourself to the nearest hospital (which is in-network), where the attending physician orders imaging and confirms that your appendix has burst and you need surgery immediately. Unfortunately, the surgeon who performed the appendectomy is out-of-network. So even though you have great insurance and you went to an in-network facility, your policy doesn’t cover out-of-network services—even in emergencies. As a result, you receive a medical bill for $35,000 or more.
But surprise balance billing can also occur in unexpected ways. Even in cases of elective procedures where patients choose an in-network facility and an in-network physician, their surgical team could include an out-of-network anesthesiologist or assistant surgeon—and patients don’t realize it until they receive a medical bill for the provider's services.
The No Surprises Act is designed to protect patients from getting hit with out-of-network charges in cases where there were no other reasonable options for in-network healthcare providers or facilities available to them.
Events leading to the No Surprises Act
The No Surprises Act in its current form was introduced in Congress in 2019, following on proposals by the Senate Health, Education, Labor, and Pensions Committee and the House Energy and Commerce Committee in the same year.
Although 28 states already had enacted some form of patient protection from surprise balance billing, the rules in each state varied. By enacting a federal law, the legislators of the federal government aimed to provide patient protection nationwide.
What protection does the No Surprises Act offer?
The No Surprises Act offers protection for nearly all out-of-network medical services where surprise bills are a regular occurrence. Under the NSA, out-of-network providers are prohibited from billing patients more than their in-network cost-sharing amounts for:
- All out-of-network emergency facility and professional services
- Post-stabilization care at out-of-network facilities (until the patient can be safely transferred to an in-network facility)
- Air ambulance services (transports) in emergency and non-emergency situations
- Out-of-network services delivered at, or ordered from, an in-network facility
Out-of-network providers can bill patients above and beyond their in-network cost-sharing amounts, but only if they notify the patient of their out-of-network status and obtain the patient’s written consent to receive out-of-network care more than 72 hours before the care is delivered. However, this exception does not apply to the following services:
- Emergency medicine/emergency services
- Anesthesiology
- Pathology
- Radiology
- Neonatology
- Diagnostic testing
- Any services provided by assistant surgeons, hospitalists, and intensivists
The No Surprises Act covers a wide swath of emergency services, with one exception: regular ground ambulance services. As of now, these services are not bound by the provisions of the new law.
Who does the No Surprises Act apply to?
Protection against surprise bills already exists in public insurance programs like Medicare, Medicare Advantage, and Medicaid. The No Surprises Act expands that protection to include all patients with commercial insurance, whether employer-provided or purchased on their own.
How does the No Surprises Act affect payers?
The No Surprises Act will have a significant impact on payer organizations, particularly in terms of out-of-network claims, payment processes, and member communications.
Changes to reimbursing out-of-network claims
Under the new law (effective in January 2022), payer organizations will be required to treat all services—except for those that qualify for the exception outlined above—as in-network in terms of patient cost-sharing, deductibles, and out-of-pocket limits.
New payment processes
The No Surprises Act will change how payer organizations collect and pay out providers for services. Surprise out-of-network services can no longer be billed directly to the patient; rather, payer organizations have 30 days to make an initial payment or send a notice of denial to the provider.
The initial payment is based on the “qualifying payment amount,” which is the median rate in a given geographical area and insurance market for a particular service. If the provider feels the amount the payer organization paid is too low based on their existing rates and their usual medical billing amounts, the No Surprises Act allows for a new process. Providers have the option to begin a 30-day “open negotiation,” during which the provider and the payer can negotiate on a mutually agreeable payment amount.
If an agreement is not reached, the provider can trigger “final offer” arbitration, wherein the provider and the payer organization each submit a final payment offer amount and an independent arbitrator chooses the payment amount they deem more reasonable of the two.
New explanation of benefits (EOB) requirements
Under the No Surprises Act, payers will be required to send their members an Advanced Explanation of Benefits (EOB): 1) if the patient schedules a healthcare service at least 72 hours in advance of the service, or 2) at a member’s request. The Advanced EOB must include the following information:
- Whether the provider or facility is in-network
- If yes, the EOB must also include contract rate information
- If no, the EOB must include information about accessing in-network providers
- A good faith estimate for upcoming services from the provider or facility
- A good faith estimate of what the member’s group health plan will pay
- An estimate of the member’s cost-sharing amount
- A good faith estimate of where the member stands in terms of group health plan limits (e.g., deductibles and out-of-pocket costs)
- Prior authorization requirements, if any
- A disclaimer that the EOB is an estimate based on currently available information and is subject to change
Penalties for noncompliance
The No Surprises Act’s penalties for payer noncompliance are the same as the penalties for failure to comply with any other provisions of Chapter 100 of the Internal Revenue Code. Specifically, an insurer will incur a tax of $100 per instance per day the organization is noncompliant and does not correct it.
For providers and facilities, HHS will be authorized to impose civil monetary penalties of up to $10,000 per violation. However, there is an exception for providers and facilities who violate the provisions of the No Surprises Act if they did not know (and could not reasonably know) they were violating the law, and they withdraw the bill within 30 days of the violation and reimburse the patient for any payments.
Tips for payer organizations
Payer organizations likely will need to make significant adjustments to their business processes to avoid violating the new law. Below are some key ways payer organizations can adapt to the No Surprises Act and ensure they avoid any potentially costly medical billing errors.
Review revenue cycle processes
The healthcare revenue cycle consists of three main steps:
- Scheduling, registration, and treatment
- Claims processing
- Payment collection
According to recent studies, roughly 27% of claims denials occur as a result of errors during the registration process, and nearly 50% of denials are caused by issues in the front end of the revenue cycle. For payer organizations, reviewing and revamping revenue cycle management to ensure clean billing and avoidance of mistakes will be essential for adjusting to the No Surprises Act.
Review in-network and out-of-network contracts
Reviewing in-network and out-of-network contracts should also be a priority for payer organizations. Because insurers will bear the costs of arbitration for payment disputes (i.e., private/independent dispute resolution), it benefits payers to take steps to avoid such proceedings unless they are absolutely necessary. To do that, payers must seek equilibrium on their rates, which will make it easier for the open negotiation process to result in a favorable rate number for both sides.
Operational performance reviews
The No Surprises Act likely will cut into the revenue generated from out-of-network billing, so it will be vital for payer organizations to assess their operational performance and identify opportunities to cut costs and reduce wasteful spending. By taking this step now, payer organizations can give themselves greater financial flexibility once the law takes effect.
Build or expand out-of-network mitigation strategies
Insurers will also need to find ways to reduce instances of out-of-network coverage—or, at minimum, lower the cost of each instance. That could mean negotiating new contracts with out-of-network providers and facilities to bring them in-network, or it could mean a greater emphasis on member education to reduce the number of cases where members can credibly argue that they were unaware that a provider or facility was out-of-network before receiving care.
Keep healthcare provider directories up to date
Another key element of mitigating out-of-network costs will be to ensure provider directories are current and accurate. Remember, healthcare insurers can face stiff penalties for instances of surprise out-of-network care, and these organizations should do everything they can to ensure that in-network providers are verified and attested as being in-network. If a provider’s network status cannot be verified, payer organizations should have a process in place to remove that provider from their directory as soon as possible.
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