The Consolidated Appropriations Act, 2021, signed by President Trump on December 27, 2020, included within its over 5,900 pages the controversial and long-debated No Surprises Act (the Act), addressing surprise medical bills. The Act seeks to protect patients from unexpected medical bills for out-of-network services they receive, and also establishes an arbitration system for resolving billing disputes between out-of-network health care providers and payers. The Act takes effect on January 1, 2022, and it is anticipated that regulations will be adopted to clarify a number of provisions in the Act prior to that time. New Jersey health care providers and insurers are already subject to the Out-of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act (the New Jersey Act), which was passed by the state legislature and signed by Governor Murphy in 2018, and is similar in several significant aspects to the federal Act. This alert will review the patient protection and payer-provider billing dispute procedures of the new federal Act, compare them to the New Jersey Act and discuss how providers have fared under the arbitration process established by the New Jersey Act.
New Federal Legislation
Over the past year, there has been a good deal of discussion around federal legislation to address the issue of surprise billing. Three different bills addressing surprise billing were proposed in late 2019, but Congress did not reach agreement on the legislation until December 2020. The Act received bipartisan leadership support from four key congressional committees: the Senate HELP Committee and the House Committees on Energy and Commerce, Education and Labor, and Ways and Means. While 17 states, including New Jersey and New York, have already adopted comprehensive legislation to address surprise billing, there are limitations on state surprise billing laws due to the fact that states cannot regulate health plans that are self-funded by employers and cannot regulate billing by air ambulances, which are often the source of surprise bills.
Patients Held Harmless
The Act, which most closely resembles the bill previously proposed by the House Ways and Means Committee, requires health plans to hold patients harmless from surprise medical bills and provides that patients are only required to pay the in-network cost-sharing amount for out-of-network emergency care, for certain ancillary services provided by out-of-network providers at in-network facilities, and for out-of-network care provided at in-network facilities without the patient’s informed consent. Thus, the Act protects consumers from surprise medical bills whether they receive medical care in an emergency or non-emergency setting. Further detail around the various provisions in the Act will be determined through the rule-making process.
The Act also protects consumers from surprise medical bills for air ambulance services. A patient will only be required to pay the in-network cost-sharing amount for out-of-network air ambulance services, and the cost-sharing amount is applied to the patient’s in-network deductible. Air ambulance providers are also required to submit two years of cost data to the Secretaries of Health and Human Services (HHS) and Transportation, and payers are also required to submit two years of claims data related to air ambulance services to the HHS Secretary, all of which will be published in a comprehensive report. It is important to note that the Act does not apply to ground ambulance providers.
In non-emergency situations, the Act prohibits out-of-network providers from billing patients unless the provider gives the patient notice of their network status and an estimate of charges 72 hours prior to receiving the out-of-network services, and the patient consents to receiving the out-of-network care. It is important to note that the notice and consent requirement does not apply to out-of-network providers of radiology, pathology, emergency, anesthesiology, diagnostic and neonatal services; assistant surgeons, hospitalists, intensivists, and providers offering services when no other in-network provider is available.
The Act does not adopt a payment rate or benchmark to establish the amount to be paid by payers to out-of-network providers. Instead, the Act primarily relies on negotiations between payers and providers to determine the payment amount, with disputes proceeding to a binding “baseball-style” arbitration process, referred to as an independent dispute resolution (IDR) process. In this arbitration process, each party presents an offer of payment, and the IDR entity chooses one offer from the two. In other words, the IDR entity cannot “split the difference” between the two offers. In determining the offer to choose, the IDR entity is required to consider the market-based median in-network rate, along with relevant information brought by either party, information requested by the reviewer, as well as other factors. The IDR entity cannot consider, however, the provider’s billed charges or public payer rates in determining which party’s offer to accept. The approach adopted by the Act is generally preferred by health care providers, whereas the use of a benchmark payment is favored by payers. Importantly, the losing party is responsible for paying the administrative costs of arbitration, a requirement that is meant to deter parties from seeking arbitration unnecessarily. In addition, the party that initiates the IDR process is prohibited from taking the same party to arbitration for the same item or service for 90 days following a decision through the IDR process. However, once the 90-day period has ended, the party may submit appropriately grouped claims from the 90-day period to IDR. Finally, the Act defers to existing state law that provides a method for determining the total amount payable in surprise billing situations. Therefore, state laws on surprise billing, where applicable, will continue to play a major role in determining how payer-provider billing disputes related to out-of-network services are resolved.
The New Jersey Act establishes rules regarding (i) limits on balance billing for emergency and inadvertent services provided by out-of-network providers; (ii) disclosure requirements to patients receiving out-of-network services; and (iii) the creation of an arbitration system for certain out-of-network billing disputes. Following passage of the New Jersey Act, on November 20, 2018, the New Jersey Department of Banking and Insurance (DOBI) issued Bulletin 18-14 which provided guidance regarding claims processing, the arbitration process and insurance carrier disclosure obligations under the New Jersey Act. In late 2019, DOBI published an advance notice of its intended rulemaking action which provides insight on how DOBI interprets certain aspects of the law, but such regulations have not yet been finalized.
Out-Of-Network Balance-Billing Prohibition
The New Jersey Act prohibits out-of-network providers and health care facilities in New Jersey from balance billing patients for (i) emergency or urgent medically necessary services, and for (ii) inadvertent out-of-network services in excess of the patient’s deductible, copayment, or coinsurance amount applicable to in-network services. The New Jersey Act defines “inadvertent out-of-network services” as health care services (1) covered under a managed care health benefits plan that provides a network; and (2) provided by an out-of-network provider at an in-network health care facility when in-network services are unavailable at that facility.
While a patient can no longer be balanced billed, out-of-network providers may still bill the patient’s insurance carrier for such out-of-network services. If the insurance carrier disputes the out-of-network provider’s charges as excessive, the parties may engage in a negotiation process, including arbitration, in an effort to reach an agreement regarding payment.
Disclosure Requirements for Health Care Facilities and Providers
Health care facilities are required to make certain disclosures to patients prior to scheduling appointments for non-emergency or elective procedures. An in-network facility must advise a patient that (i) their financial responsibility will not exceed his or her copayment, deductible, or coinsurance and, unless the patient has knowingly, voluntarily, and specifically selected an out-of-network provider, the patient will not incur any out-of-pocket costs in excess of the charges applicable to the in-network procedure; and (ii) any attempt to collect an amount in excess of the patient’s copayment, deductible, or coinsurance should be reported to the patient’s insurance carrier and the relevant regulatory agency. Health care professionals are also required to provide certain disclosures regarding their affiliation with or participation in health benefit plans and other service-specific disclosures before providing non-emergency services to a patient.
Health care providers cannot bill patients for the balance of any charges for inadvertent or emergency out-of-network services; however, providers may still bill insurance carriers for these costs. When an insurance carrier receives such a bill, the carrier can either (i) pay the billed amount, or (ii) within 20 days, notify the out-of-network provider that the claim is excessive and remit payment only for the amount the carrier initially determines to be the allowed charge for those services.
If the out-of-network provider does not accept the carrier’s initial determination regarding allowed charges as payment in full, the out-of-network provider has 30 days to contact the carrier to negotiate a final reimbursement amount. If a settlement is reached, the carrier must remit the additional payment to the out-of-network provider within 30 days. If no settlement is reached in that 30-day negotiation period, the carrier must pay its final offered reimbursement amount to the out-of-network provider within 7 days, assuming the carrier offered an amount higher than its initial allowed charge. Then, either party may submit a request for a binding “baseball-style” arbitration to MAXIMUS, DOBI’s out-of-network arbitration vendor, provided that (i) the difference between the carrier’s final offer and the provider’s final offer is equal to or greater than $1,000, and (ii) the matter does not involve a dispute regarding the characterization of services. Arbitration does not apply in situations where a patient knowingly, voluntarily and specifically selected an out-of-network provider.
Case Study of New Jersey’s Arbitration Decisions
The arbitration system implemented by the New Jersey Act appears to have been, thus far, advantageous to out-of-network hospitals and other providers, according to a study published in the January 2021 edition of Health Affairs. For the study, researchers analyzed 1,695 surprise billing arbitration cases that were filed and completed in New Jersey in the year 2019. The study found that providers won 59%of arbitration decisions (with the carriers prevailing in the remaining 41%), and that the median arbitrator decision awarded to the provider was an out-of-network payment equivalent to 5.7 times the prevailing median in-network rate. In addition, nearly one-third of arbitrator decisions awarded to providers awarded a payment of more than 10 times the median in-network rate. Additionally, even when the carrier “won” in arbitration, it still paid 1.76 times the median in-network price, on average.
Summarized below are several other key findings of the study:
On average, the billing disputes resolved through arbitration involved two procedure codes, and 30%of arbitrations involved a single procedure code.
The average arbitration awards were considerably higher than the typical in-network payment amounts.
While both insurance carriers and providers tended to bid above the carrier’s in-network rates, there was considerable divergence between the magnitude of their bids. The median provider bid among cases won by providers was 9.6 times the median in-network price for the same set of services (versus 10.5 times when providers lost). The median carrier bid among cases won by carriers was 1.8 times the median in-network price for the same set of services (versus 1.5 times when carriers lost).
Providers won arbitration disputes over higher-priced services more often than disputes involving lower-priced services.
Study authors believe they found evidence that “arbitrators in New Jersey place a strong emphasis on the 80th percentile of charges for services in dispute” and that the 80th percentile of charges “served as a strong guidepost for arbitration decisions.”
The four most common specialties that participated in arbitrations in New Jersey were orthopedics, general surgery, plastic surgery, and trauma and emergency medicine.
The recently-passed federal Act is an important development in the long history of provider-payer billing and coverage disputes in New Jersey and throughout the country. When the Act takes effect in January of 2022, disputes between out-of-network providers and payers (insured plans and self-insured plans) in New Jersey will be covered by either the federal Act or the New Jersey Act, and a “baseball style” arbitration procedure will be utilized to resolve those disputes. The early results of arbitrations in New Jersey should be encouraging to out-of-network providers in that the process has often resulted, to date, in fair compensation for their services at amounts greater than in-network rates. This will be a long game, however, and providers and payers should take the time to understand the arbitration procedures and practices and review the results to determine how to select the cases to submit to arbitration and how to best present the case to increase their chances of prevailing. The New Jersey DOBI has announced its plans to issue regulations under the New Jersey Act and the federal government is expected to publish regulations clarifying and expanding upon the provisions of the federal Act before January 1, 2022. Providers and payers should monitor these regulatory developments as they engage in arbitrations under the New Jersey Act in 2021 and prepare for arbitrations under the federal Act beginning in 2022.