Dovetailing the State No Surprises Acts with the Federal No Surprises Act
The federal No Surprises Act (the “Act”) will go into effect on January 1, 2022. Regulations are expected in July, October and December, 2021. The Act is complicated on its own, but it is designed to recognize and dovetail with pre-existing state No Surprises Acts in a couple of situations.
But first, a brief review of the basic tenets of the Act:
- The Act applies to comprehensive individual and group health plans, including fully insured plans sold through the individual and group markets as well as self-funded (ERISA) plans.
- Health insurers must cover emergency services without any prior authorization and regardless of whether the provider is in or out of the health plan’s network.
- The health plan must cover emergency services provided by an out-of-network (OON) provider as if it were in-network (IN), and impose cost-sharing requirements (both payment amounts and maximums per year) only as they would apply if the provider had been IN.
- The health plan must either pay or issue a notice of payment denial to the provider within 30 calendar days after receiving the bill for the services.
- Payment to the OON provider must be directly to the provider; not through the patient.
- In addition to this treatment of emergency services, the Act applies these same rules to OON non-emergency services provided at an IN facility.
So where does state law come in? There are three defined financial terms that are to be determined by state law if the services were provided in a state that has enacted such a law: “recognized amount,” “qualifying amount” and “OON rate.”
If there is no state law establishing a process for determining these amounts or rates:
- “Recognized amount” is the dollar amount against which an IN discount would be applied to determine the patient’s cost-sharing obligation (copayment and deductibles). The federal law refers to:
- The amount required under any applicable state law, like a state medical surprise billing law;
- The amount established through an all-payer rate setting model (as in Maryland); or
- The “qualifying amount.”
- “Qualifying amount” is determined based on historic rates between the plan and the provider or, if unavailable, an independent database of historic payment rates for such items and services.
- More specifically, the qualifying amount is based on median contract rate recognized by the health plan on January 31, 2019 within the same insurance market.
- This amount is trended forward to the applicable year.
- For new plans, or those with insufficient information to calculate, the plan must use median contract rate from the first plan year the plan covered the item or service or information from an independent database, such as an all-payer claims database.
- DHHS, in consultation with Treasury and Labor departments, must issue regulations by July 1, 2021 to establish the qualifying amount. Many factors must be considered, including the insurance market (individual, small or large group) and the geographic area (rural or underserved area).
- “OON rate” is what the health plan pays the out-of-network provider for the services.
- This will depend on state law establishing the reimbursement amount or the process for determining it, or state law establishing an all-payer rate- setting model.
- If no such state law exists, the OON rate will be either the rate agreed upon by the plan and provider or, if they cannot agree, then the rate determined by the independent dispute resolution process under the Act.
Applying the Act to the state laws in Nebraska and Iowa results in a mixed bag:
Iowa Code § 514C.16 was adopted in 2017. It is a partial statutory effort, achieving only a couple of the objectives of the federal No Surprises Act.
- Affected insurance carriers, including those covering public employees, are required to provide coverage for emergency services and to cover charges for such services whether the provider is IN or OON.
- Prior authorization cannot be required.
The Iowa statute does not contain any provisions that would affect the determination of the “recognized amount,” the “qualifying amount” or the “OON rate.” So, the federal Act will control.
Nebraska’s LB 997 became effective January 1, 2021. It provides:
- Neither health care professionals nor health care facilities are permitted to balance bill emergency service patients in excess of cost-sharing applicable to IN providers’ emergency services.
- Insurance companies must pay OON health care providers (both facilities and professionals) directly for emergency services.
- The OON provider submits a bill to the insurance company.
- The claim will be considered reasonable if it is based on the higher of
- The contracted rate under any then-existing IN contractual relationship between the insurer and the OON provider for the same or similar services or
- 175% of the Medicare rate for the same or similar services.
- The insurance company must provide the OON provider with a remittance of payment, specifying the cost-sharing amount and the proposed payment to the provider.
- If the OON provider considers the insurer’s payment unreasonable, the OON provider must return payment to the insurer and utilize the dispute resolution procedure under LB 997.
Based on the federal Act alone (without the benefit of the anticipated regulations), it appears that Nebraska’s No Surprises Act would be relied on only for calculation of the OON rate, underlined above. There does not appear to be any Nebraska process for determining the “recognized amount” or the “qualifying amount” for calculation of the patient’s cost-sharing obligation. Although the dispute resolution processes are somewhat similar under the federal and Nebraska No Surprises Acts, it appears that federal law would apply rather than Nebraska law.
However there are a couple of questions that are not so simple to answer:
- Since the Nebraska No Surprises Act does not apply to critical access hospitals, would OON CAHs handle their OON claims for emergency services strictly under federal law?
- Since the Nebraska Act applies only to emergency services, would cases involving non-emergency services provided by OON providers in IN facilities be governed only by federal law?
Perhaps the forthcoming federal regulations will provide guidance. We will wait and see.