By Christine Cooper, CEO of aequum LLC
Most sections of the No Surprises Act (NSA) went into effect Jan. 1, 2022, yet very little progress has been made since its implementation to resolve surprise balance billing. Legal challenges to the NSA continue – mostly focused on federal agency regulations.
The NSA applies to employer-sponsored health plans for certain emergency services and services received from out-of-network providers at in-network facilities.
Once initial processing of the benefit claim is completed, the NSA provides for a period of negotiation for payment disputes. Where negotiation does not resolve the dispute, the NSA provides for an arbitration process known as Independent Dispute Resolution (IDR). The IDR process is flawed and ineffective. Significantly more IDR appeals were initiated, 90,000+ in the first six months, than the Centers for Medicare and Medicaid Services (CMS) anticipated for an entire year, 22,000. Only 3,500 determinations have been made.[i] CMS has not provided results regarding the 3,500 cases that have been resolved. We do not know which decisions accepted the provider or the payor offer in arbitration.
There are only thirteen IDR Entities (arbitrators) and only eleven accepting new disputes, which is simply not enough. The IDR process is also occurring piecemeal. Appeals are initiated in the federal portal - every other step is managed by the IDR Entity. Each IDR Entity manages the process differently, some by e-mail, some by their own portal. Progress is difficult to track and monitor, and some IDR Entities have failed to follow deadlines; rather they pause the acceptance of offers upon receipt of new disputes. It has been very difficult to communicate with the IDR Entities, as most do not respond to phone calls or e-mails.
The maximum fees to the IDR Entities have been increased to $700 for single determinations and $938 for batched determinations. However, with the requirement of a written decision for each IDR arbitration, even that increase is not likely to be enough incentive to eliminate the ever-increasing backlog of unresolved cases.
Legal Challenges to the NSA
On Feb 23, 2022, Eastern District of Texas Judge Jeremy Kernodle sided with the Texas Medical Association (TMA), a trade association representing more than 55,000 physicians, deciding that the Department of Health and Human Services (HHS) interim final rule governing the Independent Dispute Resolution (IDR) process conflicted with the No Surprises Act statute when it created a rebuttable presumption that the Qualifying Payment Amount (QPA) (which is typically the median in-network rate) was the appropriate out-of-network rate for purposes of the IDR process.
The court found that the federal agencies exceeded their authority by instructing IDR arbitrators to favor some factors over others in determining the QPA. In response to the litigation, the departments issued a memorandum withdrawing the vacated provision and indicating that IDR arbitration should not otherwise be affected by the court’s decision. Despite the litigation and ongoing controversy, the departments have opened the arbitration portal - confirming that due to a pause necessary to address litigation, “there may be a backlog of IDR requests and high case volume.”
Prior to the Court’s ruling, the IDR arbitrator would have had to select the offer closest to the QPA absent extraordinary circumstances. TMA was able to show that the rules deprived them of the NSA’s arbitration process and that the rules would unfairly pressure providers to lower their offers to increase the likelihood their offer would be selected. Further, TMA was able to show harm based on HHS assertions that the rules would “systematically reduce out-of-network reimbursement compared to an IDR process without such a presumption.”
The Court determined that the NSA unambiguously establishes the framework for deciding payment disputes and concluded that the rule conflicts with that statutory text.
Litigation is not over. TMA has initiated a new lawsuit challenging the calculation of the QPA. TMA asserts that the QPA is an arbitrary, statutorily determined amount, and that the definition in the regulations is inconsistent with the statute.
The Advantage of Reference-Based Pricing as a Compliant Response to NSA
The NSA may prompt a significant expansion in the prevalence of Reference-Based Pricing (RBP) plans since this strategy often eliminates the negative effects of excessive charges otherwise shared by the employer and the participant.
As a cost-containment strategy, RBP uses Medicare pricing multiples as a pricing benchmark to establish reasonable payments for services to providers. Broadly, this creates a ceiling for payments and establishes a standard of integrity and transparency for service payments.
There is still a potential risk to RBP. The NSA’s IDR process applies when a TPA (or plan) can calculate a qualifying payment amount, which is typically the median in-network rate. RBP plans that use narrow networks or have negotiated contracts with providers and plans that utilize RBP as the mechanism to price out-of-network claims will be affected by this legislation. In both instances, there would exist a median in-network rate pursuant to which the qualifying payment amount could be calculated.
A more effective way for employer-sponsored health plans to address the challenges of the NSA legislation is to adopt a “pure” RBP plan. Pure RBP plans that do not contract with providers should remain unaffected by NSA because there aren’t any out-of-network claims; nor is there any determination of a median in-network rate.
Adopting a “pure” RBP structure, coupled with tech-driven data support, may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage and employee point of purchase cost sharing. Given the wide variation of provider charges for the same services, without any difference in quality, a pure RBP design offers an opportunity to avoid excessive and unreasonable provider fees and charges.
RBP at the State Level
Some state health purchasers are using reimbursement rates paid by Medicare as a reference-point to inform their programs’ hospital payments. Through these initiatives, state purchasers are seeking to set their reimbursements to more accurately reflect the cost of providing services, rather than negotiating from the much higher hospital rates. Each state program is establishing its payment as a multiple of the Medicare rate, so the provider will continue to receive a rate higher than that paid by Medicare. Additionally, programs are using RBP to inform the cost of the service but are not necessarily adopting Medicare’s fee-for-service approach.
On September 29, 2022, the Tennessee Advisory Commission on Intergovernmental Relations announced that it was studying “the overall effect on health insurance prices when reference-based pricing is used.” A draft report is expected any day and the final report will be presented at a January 2023 meeting. Tennessee may be the latest state to adopt reference-based pricing to control health care costs.
A recent study published by RAND shows how much more private health plans are paying for hospital services compared to Medicare. Prices varied widely between states, with Tennessee seeing prices more than 325% higher than Medicare rates. According to the study’s lead author, employers lack easy access to data on healthcare pricing despite the fact that it's typically their largest expense after wages. Employers have been largely hands-off when it comes to demanding price transparency for healthcare costs. The RAND report asserts price transparency efforts will put a spotlight on the extent of the pricing variation but will do little to curb it.
How to Make a Reference-Based Pricing Work For an Employee Benefit Health Plan
Employer sponsors should take strategic action to ensure their plans incorporate the most effective strategies for NSA compliance, as well as for addressing today’s economic challenges to the “health and wealth” of their participants.
A successful RBP plan should have the following components:
- Carefully drafted plan documents that strengthen the rights of the patient to dispute bills
- Avoidance of contracts with providers or limited use of contracts
- A defensible repricing mechanism
- A robust patient advocacy process that includes legal representation
- Utilize Tech-Driven Medical Billing Support
Plan administrators benefit from data insights through innovative software and tech-driven data analysis solutions. Real-time price information of the true cost of care enables engaged plan administrators make the most advantageous cost-benefit decisions. A medical billing partner can facilitate all these strategic designs and processes and also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as participant legal representation. This support provides invaluable guidance to navigate federal and state healthcare regulations, identify areas to lower risk, reduce costs, and maximize value.
Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.
[i] Centers for Medicaid & Medicare Servs., Calendar Year 2023 Fee Guidance for the Federal [IDR] Process under the No Surprises Act, 10/31/22. “… Between the launch of the Federal IDR portal on April 15, 2022, and September 30, 2022, parties initiated more than 90,000 disputes through the Federal IDR portal, which is substantially more than the Departments’ initial estimates. During that time, non-initiating parties challenged over 41,000 disputes’ eligibility for the Federal IDR process, which constitutes nearly half of all disputes initiated. These contested eligibility disputes involved complex eligibility determinations that have required certified IDR entities to expend considerable time and resources to review. As a result of eligibility challenges, as of September 30, 2022, certified IDR entities have found over 22,000 disputes ineligible for the Federal IDR process. While the process for eligibility determination informs the overall rate that certified IDR entities are permitted to charge, certified IDR entities may not collect fees for those cases that they ultimately determine are ineligible for the Federal IDR process. Further, only about 3,500 payment determinations were made by certified IDR entities. …” Accessed 11/22/22 at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CY2023-Fee-Guidance-Federal-Independent-Dispute-Resolution-Process-NSA.pdf