The No Surprises Act: Fair Warning for Medical Expenses

by Apr 18, 2022Healthcare, Magazine

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To alert consumers to medical expenses they might not be able to afford, Congress passed the No Surprises Act in late 2020. Its ban on unexpected bills from out-of-network providers, out-of-network facilities, and out-of-network air ambulance providers took effect at the start of 2022.

“That’s where we see the biggest delta and kind of the most expensive billing situations,” says Tiffany Stock, vice president of marketing and client relations at RISQ Consulting in Anchorage.

To alert consumers to medical expenses they might not be able to afford, Congress passed the No Surprises Act in late 2020. Its ban on unexpected bills from out-of-network providers, out-of-network facilities, and out-of-network air ambulance providers took effect at the start of 2022.

The result is an end to surprise billing—also referred to as balance billing—in private insurance for most emergency care and many instances of non-emergency care, according to the US Department of Health and Human Services (DHHS). Balance billing is when a patient is stuck with the difference between the amount a provider bills and the amount the patient’s insurance pays.

“In general, unexpected healthcare expenses could have a huge impact on someone’s life,” says Jim Grazko, Premera’s senior vice president of the Alaska market and chief underwriting officer.

A report by DHHS found that such bills, common among privately insured patients, could average more than $1,200 for services provided by anesthesiologists, $2,600 for surgical assistants, and $750 for childbirth-related care.

In a variety of situations, especially emergencies, patients have little to no options of what air ambulance service they use, what facility they end up at, or what physicians carry out a procedure—even if these services are out of network. When it comes to elective care, a patient does not typically get to choose their anesthesiologist, assistant surgeon, or other ancillary providers.

“The biggest one we see is when someone has a planned in-hospital procedure at their in-network hospital, and they have an anesthesiologist—but you don’t get a choice of the anesthesiologist—and they’re not contracted with any insurance carrier,” Stock says. “So, we’ve seen a lot of balanced bills in those situations.”

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Many people who walk into a hospital don’t understand the complex relationship between all the different providers that handle their case, explains Amy Miller, the CFO for Providence Alaska.

“Not every physician that works within the Providence Hospital is a Providence employee. In fact, most of them are not,” Miller says, noting that type of arrangement is an industry standard. “The providers that work in any of these hospitals have their own businesses. They get to make their own choices around being contracted with insurance companies or not.”

Miller says an unwritten upside to the law might be that it encourages out-of-network providers to become in-network. Either way, even before the No Surprises Act took effect this year, Providence hospitals already had a practice in place not to balance bill.

“Even when we don’t balance bill, patients still have responsibilities for deductibles and coinsurance and all of those things,” Miller says. “Those elements are not part of what this bill covers.”

The Act also does not touch public insurance programs, such as Medicare and Medicaid, because those already include protections from balance billing.

“Our part is making sure our employer clients and the individual clients we work with understand when they’re protected but also understand that they could still be balance billed in scenarios that are not covered by the No Surprises Act,” Stock says. “This bill did not totally wipe out surprise medical bills.”

Cost Control

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In 2004, Alaska attempted to tackle surprise billing with what is known as the 80th Percentile Rule. Put in place by the Alaska Division of Insurance, the rule established a minimum amount that insurance companies must pay when Alaskans with private insurance plans are treated by out-of-network providers. The rule requires the insurer to base payments for out-of-network procedures at or above 80 percent of what all providers in a given area of the state charge for the specific service.

Stock explains that because most Alaskans who don’t work for larger organizations have fully insured health plans, they have been somewhat protected from huge disparities in billed versus allowed charges because of the 80th Percentile Rule.

Grazko argues that the No Surprises Act voids the need for the 80th Percentile Rule.

“Now that Congress, at the federal level, is intervening… we think it’s time to finally get rid of the cost-increasing 80th Percentile Rule once and for all,” Grazko says. “We feel that that is a constant cost driver and no longer needed with this federal No Surprises Act.”

Grazko points out that in Alaska, with a small number of certain specialty providers, it’s easy to drive the cost of a service up 20 to 30 percent, forcing the 80th percentile to float up with it.

“It provides a disincentive to providers to want a contract to begin with because they know that if they say, ‘Hey, we’re not going to do a contract at a reasonable rate with a payer like Premera, then we’ll get the 80 percentile, so why should we even come to the table?” Grazko says. “It’s a really bad fit for Alaska.”

Stock points out that often the biggest differences in prices between in-network and out-of-network providers are created because the insurance company and the out-of-network provider couldn’t agree on what an allowable rate for a service should be.

“In some cases we’ve seen [out-of-network cost] two to three times more than the in-network charge,” Stock says.

Stock says the new law could drive down costs of healthcare over the long term, “but I think it’s a little bit too soon to tell.”

Insurance rates are roughly calculated by adding together in-network payment and out-of-network payments, then projecting them forward with trends, Grazko says.

“If we ended up paying less overall, then it could bring down premiums, as well as cost-sharing for the members,” Grazko says.

The Congressional Budget Office estimates that the law will reduce commercial insurance premiums by up to 1 percent. This would save taxpayers $17 billion over ten years and save consumers about $34 billion in reduced premiums and cost-sharing.

Estimates and Arbitration

In addition to tackling balance billing, the new law also requires providers and hospitals to publish rates and give patients good faith estimates for procedures as part of what Premera Blue Cross describes as a multi-year trend toward increasing transparency in medical billing.

“I think transparency is a good thing. We support transparency,” Grazko says. “I see benefits really all accruing to the member at this point, with regard to how the member is made aware of costs.”

Miller agrees. “We continue to see legislation coming with an intent to protect consumers, which I always think is a good thing,” Miller says. “I think every patient has a need to understand an estimate of what their bill is. We believe no patient should be caught in the middle of coverage disputes or surprise medical bills.”

Even before the law took effect, Providence had a process that provided estimates to patients when requested. The new rule requires it to provide them nearly automatically for uninsured patients.

“You don’t even have to ask for it,” Miller says. “If you’re uninsured, we will simply provide it as long as you have a reasonable window between when you schedule and when the appointment is. Our ongoing efforts to help patients understand healthcare costs and plan for their care are in line with the requirements of the No Surprises Act.”

The complexity of medical procedures, however, can make it difficult to provide accurate estimates, Stock explains.

These good-faith estimates are based on the diagnostic codes the provider expects to relate to a procedure.

“We use that in relationship with the patient’s stated insurance to tell us, on average, what are we seeing for reimbursement,” Miller says, noting that once the procedure is underway things may change.

Miller explains that as more and more estimates are created for various procedures with patients covered by various insurance providers, the accuracy of those estimates will get better and better.

“If we’re able to provide patients with estimates and get them to understand their own responsibility as early as possible, we’re able to help with payment plans,” Miller says. “For some people, these services, even the high-cost services, are necessary to sustain a quality of life.”

The No Surprises Act also creates a new final-offer arbitration process to determine how much insurers must pay out-of-network providers.

“One of the big strengths that we see in this bill is that it basically takes the member out of the middle so that providers can no longer bill the patient for the difference in cost for out-of-network services,” Grazko says. “It basically takes it off their plate. One less thing to think about at a time when they’re sick and they need to seek care.”

In cases where a provider or facility receives a payment denial notice or an initial payment from a health plan for certain out-of-network services, any of the parties can choose to open a 30-business-day negotiation period. If the parties can’t agree on a payment amount, they can begin the new, independent dispute resolution process through a certified dispute resolution entity. This entity selects a final, non-negotiable payment amount.

“One of the big strengths that we see in this bill is that it basically takes the member out of the middle so that providers can no longer bill the patient for the difference in cost for out-of-network services… It basically takes it off their plate. One less thing to think about at a time when they’re sick and they need to seek care.”

—Jim Grazko, Senior Vice President of the Alaska Market, Premera Blue Cross

Slow to Roll Out

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The No Surprises Act has not come without opposition. In December, the American Hospital Association (AHA) and the American Medical Association (AMA) filed a joint lawsuit against DHHS, among other defendants, challenging what it characterized as a “narrow piece of the implementation of the No Surprises Act.”

The suit targets the independent dispute resolution process, claiming that, as implemented, it favors commercial insurance companies.

“The skewed process will ultimately reduce access to care by discouraging meaningful contracting negotiations, reducing provider networks, and encouraging unsustainable compensation for teaching hospitals, physician practices, and other providers that significantly benefit patients and communities,” the AHA states in a December news release.

The organizations are clear that the lawsuit is not aimed at the core ideas of the No Surprises Act.

“The AHA and AMA strongly support protecting patients from unanticipated medical bills and were instrumental in passing the landmark No Surprises Act to protect patients from billing disputes between providers and commercial health insurers,” AHA states.

While the implementation of some of the law is disputed, the rollout of other aspects of the No Surprises Act have been delayed, says Stock.

“I think that is why there’s a lot of confusion on how exactly this is impacting patients,” Stock says. “Because many parties are still waiting on regulations to be released to implement the other pieces that will connect it all.”

Miller urges Alaskans to take advantage of financial counseling services. “Our financial counseling team is trained to sit with patients—virtually or in person—and look at all the available options,” Miller says.

At Providence, financial counseling for those experiencing hardship is available at any point throughout a patient’s care, and eligible patients may have their costs reduced or completely covered.

“I’m so thankful for the team we have in financial counseling, as they know how to access way more than you ever thought possible,” Miller says.

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