U.S. Federal Agencies Issue Regulations on Surprise Medical Billing

The interim final rules address many of the key features of the No Surprises Act, including payor obligations to cover emergency services, caps on patient cost-sharing amounts for certain services, transparency obligations on payors to disclose information relevant to how they calculated the qualifying payment amount, logistical details relating to the notice and consent process providers must use to permissibly balance bill patients for certain items and services, a process for the Departments to accept and investigate complaints of noncompliance, and disclosure requirements relating to the obligations in the No Surprises Act. Healthcare providers and payors will need to move quickly to operationalize the statute and these implementing regulations.  

These regulations do not implement all aspects of the No Surprises Act. In particular, the Departments stated that they intend to issue regulations later this year regarding the independent dispute resolution (IDR) process for out-of-network reimbursement rates, the patient-provider dispute resolution process, and price comparison tools.

Obligation to Cover Emergency Services

The No Surprises Act requires group health plans and health insurance issuers offering group or individual health insurance coverage (“plans and issuers”) to cover emergency services without prior authorization and, if the provider is out of network, without imposing any limitations on coverage that are more restrictive than the limitations applied to in-network providers. Emergency services are defined as the following services provided at a hospital emergency department or independent freestanding emergency department: a medical screening examination (including ancillary services) and any further treatment necessary to stabilize the patient (regardless of which department of a hospital provides care), plus certain poststabilization care, unless one of the following provisions is met: The treating provider determines that the individual is able to travel without emergency medical transportation to an available in-network provider within a reasonable travel distance, the provider satisfies a statutory notice-and-consent process (discussed further below), or the patient is in a condition to provide informed consent. Providers are directed to consider a variety of “cultural and contextual factors that may affect the informed decision-making.” The Departments seek comment on any other exceptions to plans and issuers having to cover poststabilization care from out-of-network providers of emergency services. 

Determination of Patient Cost-Sharing Amounts

If a plan or issuer covers emergency services, the No Surprises Act mandates that the patient cost-sharing requirement for emergency services provided by out-of-network must be no greater than the cost-sharing requirement that would apply if the emergency services were provided in-network.  

The same cost-sharing restriction applies to nonemergency services provided by an out-of-network provider at an in-network healthcare facility. The No Surprises Act defines healthcare facility as a hospital, a hospital outpatient department, a critical access hospital, an ambulatory surgical center, or any other facilities designated by the Departments. The Departments solicit comments on other types of facilities that should be included, and they “are particularly interested in comments regarding whether urgent care centers or retail clinics should be designated as health care facilities.” 

Plans and issuers must calculate the cost-sharing amount using the “recognized amount,” which is either 

1. the amount determined by an All-Payer Model agreement if one applies; 
2. if there is no All-Payer Model agreement, then the amount determined by a “specified state law”; 
3. if the first two conditions do not apply, then the lesser of the amount billed by the provider or facility or the qualifying payment amount (QPA).

The No Surprises Act defines a “specified state law” as one that “provides for a method for determining the total amount payable.” The Departments interpret this phrase “broadly,” to include not only state laws that include a “mathematical formula” for determining cost-sharing but also state laws that set forth processes for determining these amounts. The regulation further clarifies that any such state law must apply to the plan, issuer, or coverage involved; the out-of-network provider or emergency facility involved; and the item or service involved.  

Calculating the QPA

The No Surprises Act defines the QPA as the median of the contracted rates recognized by a plan or issuer on January 31, 2019, for the same or a similar item or service provided by a provider in the same or similar specialty and in that geographic region. The regulations further specify the methodology for calculating the median contracted rate. Notably, the Departments interpret the statutory phrase “median of the contracted rates” to refer to each contract with a provider or facility, not each payment made under the contract.
A plan or issuer is considered to have sufficient information to calculate the median of contracted rates if the plan or issuer had at least three contracted rates on January 31, 2019. For items or services newly covered after 2019, and for other items and services for which insufficient information is available to calculate the median of contracted rates in 2019, plans and issuers should rely on claims information in an independent database. If plans and issuers use different databases for some items or services, the choice of database cannot directly relate to the reimbursement rate for those items or services.

The Departments recognize that healthcare providers “need transparency regarding how the QPA was determined” and “seek to ensure transparent and meaningful disclosure about the calculation of the QPA while minimizing administrative burdens on plans and issuers.” Plans and issuers must provide the following information in writing to an out-of-network provider or facility with each initial payment or denial of payment when the QPA serves as the recognized amount:

1. the QPA for each item or service involved,
2. a statement certifying that the QPA is the recognized amount and that each QPA was calculated consistent with the methodology outlined in the July 3 interim final rule, and
3. directions for how the provider or facility can initiate a 30-day open negotiation period for purposes of determining the total payment. 

Plans and issuers must provide the following additional information if requested by a provider or facility:

1. information about whether the QPA includes contracted rates that were not set on a fee-for-service basis and whether the QPA was determined using underlying fee schedule rates or a derived amount;
2. any related service code used to determine the QPA for a new service code;
3. if an eligible database was used to determine the QPA, information to identify which database was used to determine the QPA; and
4. whether the plan’s or issuer’s contracted rates include risk-sharing, bonus, penalty, or other incentive-based or retrospective payments or payment adjustments for the items and services involved that were excluded for purposes of calculating the QPA. The Departments seek comment on these disclosure requirements and on whether plans and issuers should be required to disclose any additional information about QPAs to providers and facilities.

Determining Out-of-Network Rates

Plans and issuers must reimburse out-of-network providers of emergency services and out-of-network providers of nonemergency services at in-network facilities according to the following rules:

1. if an All-Payer Model agreement applies, then the amount determined by that agreement;
2. if there is no All-Payer Model agreement, then the amount determined by a specified state law;
3. if the first two conditions do not apply, any amount agreed on by the plan or issuer and provider or facility;
4. if no agreement is reached and the parties enter the IDR process, the amount determined by the IDR entity.

The Departments recognize that QPA transparency plays an important role “in informing the negotiation process” for out-of-network rates, including the decision of whether to initiate IDR. Comments received on the topic of QPA transparency may inform the Departments’ future IDR rulemaking.

Notice and Consent Exception to Balance Billing Prohibition

The No Surprises Act bars healthcare providers from balance billing patients for emergency services provided by out-of-network providers or facilities, except poststabilization services where providers or facilities obtain consent. Out-of-network providers at in-network facilities can also obtain patient consent for balance billing, unless the services fall within the definition of “ancillary services,” including because there is no participating provider who can furnish such item or service at the facility. In addition, the notice and consent exception does not apply to items or services furnished as a result of “unforeseen, urgent medical needs that arise at the time an item or service is furnished” as part of nonemergency services or poststabilization services for which notice and consent were given.  

HHS will issue template notice and consent forms through subregulatory guidance, which providers and facilities are required to use, subject to tailoring the forms with patient-specific information, such as a good faith estimate of the amount the patient will be charged. HHS requires providers and facilities to provide the notice form alongside the consent form but separate from any other documents.  These materials must be provided at least 72 hours before the patient’s appointment if the appointment was made more than 72 hours in advance or, if not, patients must receive the materials on the same day the items or services are furnished but no less than three hours prior to receiving the services. HHS seeks comment on whether the three-hour time requirement should be shorter or longer. To help enforce this requirement, patients must note the time at which they signed the consent form. Patients can revoke their consent at any time prior to the furnishing of items or services by notifying the provider or facility in writing.

Multiple out-of-network providers can provide a single notice to a patient, provided that they specify each provider and a good faith estimate for the items and services each provider will be furnishing. Individuals must have the option to consent to waiving balance billing protections for each provider separately. Out-of-network emergency facilities must include a good faith estimate of the amount that individuals will be charged for the facility’s service as well as the amount charged for the items or services reasonably expected to be furnished by out-of-network providers. HHS seeks comment on potential challenges out-of-network emergency facilities “may have in coordinating the development of a good faith estimate on behalf of both the facility and providers.” HHS also seeks comment on the method for calculating a good faith estimate of charges and anticipates that this will be addressed in future rulemaking.

HHS confirmed that a provider or facility may, subject to other state or federal laws, refuse to treat a patient if he or she does not consent to being balance billed. However, if a provider or facility charges a fee for a cancelled appointment, including in circumstances where a patient cancels an appointment because he or she refuses to consent to balance billing, HHS views the patient in these circumstances as unable to consent freely.

HHS acknowledges that while out-of-network providers and facilities often bill patients directly for services and defer to patients to submit claims to their insurance company, the balance billing prohibition means that out-of-network providers and facilities will need to submit the bill directly to the insurance company to avoid violating the law. HHS seeks comments on the impact of this operational change on providers, facilities, plans, and issuers.

Out-of-network providers and emergency facilities must notify the plan or issuer when a patient has consented to be balance billed and provide to the plan or issuer a signed copy of the notice and consent documents. Plans and issuers may rely on the provider’s or facility’s representations that the notice and consent criteria have been satisfied, unless and until the plan or issuer knows or reasonably should know otherwise.

Complaint Process 

Although the No Surprises Act required the Departments only to establish a process for receiving complaints about plans and issuers violating the application of the QPA requirements, the Departments created a complaint process that covers all of the consumer protection and balance billing requirements described in the interim final rules that apply to plans and issuers. To streamline the ability of members of the public to submit complaints, the Departments will create one system that will accept all complaints about plans and issuers, regardless of which federal agency has enforcement authority.   

The Departments will send complainants a confirmation of receipt no later than 60 business days after the complaint is received. There is no deadline for completing an investigation into a complaint, although the Departments seek comment on whether they should impose one. The Departments will make “reasonable efforts” to notify the complainant of the outcome of the investigation.  

The No Surprises Act also requires the Departments to engage in rulemaking to set forth an audit program to assess plans and issuers’ compliance with requirements for calculating QPAs. The regulations indicate that the Departments will use their existing enforcement procedures (without clarifying which procedures apply) to ensure compliance but set forth little detail about the scope of the audit program. However, in the economic impact analysis, HHS stated that it “expects to conduct no more than 9 audits annually” on payors under its jurisdiction.

HHS also created a parallel complaint process for allegations that providers, facilities, or providers of air ambulance services are failing to comply with their obligations under the No Surprises Act. HHS intends to address enforcement of the requirements of the No Surprises Act applicable to these entities in future rulemaking. The No Surprises Act does authorize HHS to enforce statutory requirements if states fail to substantially enforce, and HHS can impose civil monetary penalties of up to $10,000 per violation.

Disclosure Requirements

Plans and issuers must make publicly available, post on a public website, and include on each explanation of benefits information about protections under the No Surprises Act and other applicable state laws as well as information on how to contact appropriate state and federal agencies to report suspected violations. Providers and facilities must make publicly available, post on a public website, and provide a one-page notice with similar information. HHS is requiring providers and facilities to display the required disclosure information on a sign posted prominently, such as in a central location where individuals check in for appointments or pay bills. HHS seeks comments on other methods of disclosure. The Departments are issuing a model disclosure notice that provider, facilities, plans, and issuers may, but are not required, to use.

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¹ The No Surprises Act was signed into law on December 27, 2020, as part of the Consolidated Appropriations Act of 2020. See Pub. L. 116-260.