Insights

Departments Issue Final Rules on Requirements Related to Surprise Billing


On August 19, 2022, the DOL, HHS and IRS (the departments) released final rules (the final rules) related to the surprise billing requirements of the No Surprises Act (NSA) of the Consolidated Appropriations Act, 2021 (CAA). The final rules modify certain requirements under the July 2021 and October 2021 interim final rules, which implemented the NSA provisions and federal independent dispute resolution (IDR) process, respectively. (Please see our prior articles on the July 2021 and October 2021 interim final rules.) The final rules also address portions of the October 2021 interim final rules related to payment determinations under the federal IDR process that were vacated by a Texas district court earlier this year. Several highlights of the changes under the final rules are outlined below.

The NSA provisions of the CAA apply to both insured and self-funded group health plans and became effective for plan years beginning on or after January 1, 2022. Amongst other items, NSA provisions protect participants from surprise bills for certain unexpected out-of-network (OON) items and services, including emergency services, air ambulance services and OON services received at in-network facilities. Absent an applicable All-Payer Model Agreement or state surprise billing law (generally only applicable to insured plans), participant cost-sharing for covered services is based upon the lesser of the OON billed charge or qualifying payment amount (QPA), which is the median contracted rate for the item or service in the geographic region. Plans and insurers must then address the remainder of the bill with the OON healthcare provider, facility or air ambulance provider (the provider).

Under the July 2021 interim final rules, the plan or insurer must send the provider an initial payment or notice of payment denial that includes the QPA if the QPA serves as the amount upon which participant cost-sharing is based. In response to public comments and to ensure providers have the necessary information to engage in meaningful payment negotiations, the final rules require an additional disclosure if the plan or insurer has “downcoded” the provider’s billed claim. The final rules officially define the term “downcode,” which occurs when the plan or insurer changes the service code or modifier submitted by the provider for the OON item or service to another deemed more appropriate and results in a lower reimbursement. Under the final rules, if a QPA is based on a downcoded service code, the plan or insurer must provide a statement that the service code or modifier billed by the provider was downcoded, an explanation of why the claim was downcoded, including a description of which service codes or modifiers were altered, added or removed, if any, and the amount that would have been the QPA had the service code or modifier not been downcoded.

The July 2021 interim final rules also require that a plan or insurer’s initial payment or notice of denial provide contact information, including a telephone number and email address, in the event the provider wishes to initiate a 30-day open negotiation period to determine the total payment. If the provider (or the plan or insurer) chooses to initiate the open negotiation period, the October 2021 interim final rules specify that the party must use the standard notice of initiation of open negotiation issued by the departments. This notice may be sent electronically if the party sending the notice has a good faith belief that the electronic method is readily accessible to the other party, and a paper copy is provided free of charge upon request. Accordingly, the departments emphasize that a plan or insurer cannot require providers to use their own online portal to initiate the negotiation period and must accept the standard notice of initiation of open negotiation from a provider.

A party may initiate the federal IDR process within four days after the end of an unsuccessful 30-day open negotiation period. The departments note that these timeframes are measured in business days and that plans and insurers should reflect this in statements to providers. Under the October 2021 interim final rules, the certified IDR entity (i.e., the arbitrator in the IDR process) may consider various factors when determining the proper OON payment amount to resolve disputes between providers and plans or insurers. However, the rules required that the certified IDR entity select the offer closest to the QPA, unless the certified IDR entity determined that any additional credible information submitted by the parties demonstrated that the QPA was materially different from the appropriate OON rate.

The Texas district court vacated this requirement in rulings in February and July 2022 due to inconsistency with the CAA, 2021 statutory language. (See our article on the Texas court decision in the March 1, 2022, edition of Compliance Corner.) As a result, the final rules remove the provisions of the October 2021 interim final rules that the district court vacated. Instead, the final rules specify that certified IDR entities should select the offer that best represents the value of the OON item or service under dispute after considering the QPA and then all permissible additional information submitted by the parties. Such additional information may include, for example, the level of training, experience, and quality and outcomes measurements of the provider, or the complexity of providing the service to the participant. In all cases, the certified IDR entities must evaluate whether the submitted information relates to the payment amount offered by either party and whether the additional information is credible. Under the final rules, the certified IDR entity must also assess whether the information is already accounted for by the QPA or by any of the other submitted information (to avoid double-counting). The final rules include five examples that illustrate how a certified IDR entity would evaluate submitted information to determine which party’s offer best represents the value of the disputed item or service.

The final rules also modify provisions of the October 2021 interim final rules requiring certified IDR entities to explain their payment determinations and underlying rationale in a written decision submitted to the parties and the departments. The final rules require that the written decision explain the information upon which the certified IDR entity based its decision that the selected offer is the OON rate that best represents the value of the item or service. The explanation must include the weight given to the QPA and any additional credible information regarding the relevant factors. The departments believe these requirements will ensure that certified IDR entities carefully evaluate all credible information, promote transparency and help the parties better understand the outcome of a payment determination. Additionally, if the certified IDR entity relies on additional information or circumstances when selecting an offer, the final rules require that the written decision must include an explanation of why the certified IDR entity concluded the information was not already reflected in the QPA. This requirement may provide the departments with information to inform future policymaking related to the QPA methodology.

Employers that sponsor group health plans should be aware of the release of the final rules and consult with their insurer or service provider for further information. The July and October 2021 interim final rules became effective for plan years beginning on or after January 1, 2022. The final rules, which modify certain provisions of the interim final rules, are scheduled to take effect on October 25, 2022.

Final Rule »
Fact Sheet »