By Brie Alford.
At the close of 2020, Congress enacted the long-awaited No Surprises Act, a bill providing federal protections against surprise medical bills. The Act will fill gaps in protection caused by states’ patchwork legislation and help prevent American families from incurring crippling medical debt.
For the past decade, medical debt has been the leading cause of U.S. bankruptcies. This is largely due to surprise medical bills, which occur when a provider bills a patient for the difference between their fee for a service and the amount covered by the patient’s health insurance. Health insurance plans, most notably HMO’s, have a network of covered providers and facilities. When a patient visits an “in-network” physician or healthcare facility, the insurance company will cover the majority of the cost, and the patient will only be responsible for their copay, coinsurance, or deductible. However, when a patient visits a provider or facility that is “out-of-network,” or not included in their insurance’s list of covered providers, the provider will bill the insurance company at a much higher “out-of-network” rate. The insurance company will only pay a fraction of the bill, and then the provider will charge the patient the balance.
Surprise medical bills are most common in emergency medicine, where patients often have little choice in providers. The last thing on patients’ minds during a medical emergency is choosing an in-network hospital. And even if a patient happens to be treated at a covered facility, they could still receive a surprise bill if one of their treating physicians, such as an anesthesiologist, is not in-network. The COVID-19 pandemic has only exacerbated this problem. Surges in cases have filled emergency departments to capacity, leaving desperate patients with little choice in facilities or providers. If the only emergency department with room is out-of-network, the patient may receive a surprise medical bill, which can surpass $100,000 depending on the service rendered.
Many states have enacted legislation prohibiting balance-billing. This legislation, however, does not apply to many health insurance plans. The Employment Retirement Income Act of 1974 (ERISA) prevents states from regulating employee benefit plans administered by their employers. Seeing as though 67% of covered employees received insurance through these “self-funded plans” in 2020, millions of Americans fell through the cracks of state legislation.
No Surprises Act to the Rescue
For nearly two years, Congress has tried to pass federal legislation prohibiting surprise medical bills for all Americans, regardless of their health plan. However, partisan divides and disagreements over competing approaches resulted in a deadlock. In December 2020, Congress finally reached a consensus and passed the No Surprises Act.
The No Surprises Act shields consumers from the cost of unforeseen medical bills. The Act works two-fold. First, it requires health plans to fully cover surprise medical bills for emergency services and out-of-network provider bills for services provided at in-network facilities. They are no longer allowed to bounce the half-paid bill back to the provider. Second, out-of-network providers are required to accept the insurer’s payment for emergency medical services as payment in full. This provision also applies to out-of-network physicians providing non-emergency services at in-network facilities. In effect, the Act requires providers and insurers to negotiate among themselves to resolve out-of-network payment disputes, rather than using unsuspecting patients as a scapegoat.
Insurers and providers are encouraged to settle payments amongst themselves. However, if the insurer and provider cannot agree upon a payment amount after thirty days, they can submit a “final offer” reflecting the amount they are willing to pay for the out-of-network service. An arbitrator will then decide on a final amount based on a number of factors, including the plan’s in-network rate for the service rendered. The losing party must pay all arbitration fees. Congress expects that the Act will decrease premiums by up to 1%, saving consumers up to $34 billion over ten years.
The Act includes other consumer protections as well, such as requiring health plans to provide a comprehensive explanation of benefits and transitional coverage for patients if their provider is no longer “in-network.” Furthermore, insurance companies must keep updated provider network directories so consumers will know which facilities and providers they can and cannot utilize. Each of these provisions aims to better inform and protect consumers from falling victim to the United States’ complex insurance scheme.
Uninsured Americans will benefit from the Act as well. While every facility and provider is technically out-of-network for those without insurance, the Act requires Health and Human Services to create a bill resolution process between physicians and the uninsured. It is not clear how this process will shake out, but it is a step in the right direction nonetheless.
The Act goes into effect in January 2022, but implementation will begin on July 1, 2021. By then, the federal government must share a methodology for determining the rate for surprise bills and establish a complaints process for consumers to report providers and insurers for balance billing.
There are some questions regarding how some of the bill’s provisions will operate. For example, if too many insurers and providers demand arbitration, this could drive up the price of settlements and render the Act nugatory. And while hefty fines will discourage providers and insurers from cheating the system, the administrative costs of catching balance billers could be high. All of these details will likely be ironed out over the course of the year. As for now, American consumers should sit back and celebrate a tremendous win.