The No Surprises Act Becomes Law

Does this bipartisan effort demonstrate that lawmakers in Washington are more willing to work together than previously thought to improve health care? What are the implications for payers, providers, and patients? Our experts weigh in.

As of the first of the year, the No Surprises Act is now law. It offers protection from surprise medical bills for insured individuals who receive emergency or nonemergency care. More specifically the bill covers the following:

Surprise billing is banned for most emergency care, and cost-sharing for these services must always be based on in-network rates. The law applies to air ambulances but not ground ambulances.

For nonemergency care received at an in-network hospital, surprise bills are banned from certain out-of-network providers, and cost-sharing will be generally determined by in-network rates.

The new law also calls for implementation of a process to determine payment amount for out-of-network bills. The first step involves negotiations between payers and providers. If that fails, an independent arbitrator intervenes, using in-network benchmarks and adjustments per the Consumer Price Index (CPI) to make a final decision.

Providers and facilities must provide patients with easy-to-understand notices that explain billing protections and who to contact in the event of potential violations.

In some instances, providers can seek to have the no surprises right waived by patients via prior written consent, though there are restrictions. Waivers cannot be sought for: (1) emergency services; (2) for unforeseen urgent medical care needed in nonemergency settings; (3) for ancillary or other services, including those provided by anesthesiologists, pathologists, radiologists, neonatologists, assistant surgeons, hospitalists, intensivists, and phlebotomists; or (4) in instances where there is no in-network provider at a facility to provide a given
service.

Controversy is already brewing regarding the law. It has been reported that Blue Cross Blue Shield (BCBS) of North Carolina sent a letter to anesthesiology and emergency medicine providers stating it will terminate network contracts with them unless the providers accept an immediate 10% to 30% rate reduction. The payer cited the new law in their reasoning, noting that previously negotiated rates were inflated. Demanding a lower rate will likely drive the ultimate in-network benchmark used by arbitrators lower. Insurers maintain that the new lower rates are reasonable. Groups representing providers say the move is an attempt to push providers out of networks in the name of payer profit.

We consulted a panel of experts to weigh in on implications for payers, providers, and patients; the importance of clear, transparent communication with patients and why that may be challenging; and how insurance premiums might be affected. We also touch on the simmering payer-provider controversy. Finally, it would be difficult to ignore the bipartisan support the bill received as it made its way into law. Was this collaboration a rare Washington, DC, occurrence, or a blueprint for implementation of other health care initiatives? Our panelists who dive into these questions include:

• Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
• David Marcus, director of employee benefits, National Railway Labor Conference, Washington, DC
• Gary Owens, MD, president of Gary Owens Associates, Ocean View, DE
• William Rogers, MD, chief medical officer, Applied Policy, Washington, DC
• Norm Smith, principal payer market research consultant, Philadelphia, PA
• Daniel Sontupe, associate partner and managing director, The Bloc Value Builders, New York, NY
• F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC

What are the implications of the No Surprises Act for payers?   

Dr Rogers: I do not think there are huge implications for payers. If an insurance plan allows the member to receive care out of network, then the payer will pay the same amount as if it is in network and the member will pay the difference. In instances where the plan does not pay out of network, the insurance company will wash their hands of it. It’s really the members and providers who are impacted—the members positively in the form of less costly bills, and the providers negatively because they can no longer bill exorbitant amounts.

With that said, payers may now find it easier to contract with independent providers. Up until now, there has been a disincentive for providers to participate with insurers. Once providers no longer have an opportunity to bill in this way, they may as well sign on with a payer. The hospital will be more satisfied with this, as will patients. It will simplify the business model because billing and collecting can be done directly with the payer.

Dr Owens: There has been little reason for these types of providers to consider network participation as long as they could get their billed charges. But until we have a better sense of the volume of these claims and how they get resolved, I think it is premature to project what the impact will be on payers. It could be that many of the billing issues will be resolved before resolution is required. If so, it is logical to assume that payers and providers will settle for an amount that is less than the billed charges. And even in situations where the dispute resolution process is used, the arbitrator must consider in-network rates, which again would favor lower payments.

One thing we know is that it is a labor-intensive process that will result in an added administrative load for payers and providers.

Dr Hsu: I think the volume of surprise bills is relatively small and as such will not have a huge impact on payers. I agree that by using in-network benchmarks in the dispute resolution process, over time better predictability of cost will be achieved.

Mr Smith: The impact on payers will be small, since the bills covered in the new law are for treatments outside of what the insurer covers.

Mr Marcus: I think the net effect will be slightly positive to neutral for payers. The concept of basing the arbitration on billed charges was highly flawed and inflationary as well as creating a strong incentive for providers not to contract. While the law is a large improvement, there are features that will probably require additional time and thought. These include ambulance services (due to limited competition and a dearth of managed care contracts) and CPI adjustments that are more than market driven contractual rate increases.

Mr Sontupe: This is an opportunity to provide transparent information to patients. There has long needed to be a simpler way to explain to patients that just because a hospital is in network does not mean all the providers are. I see this as an opportunity for payers to work with providers to make sure information about services is provided in an easy-to-understand way. If done correctly, over the long term, such transparency will give way to better in-network utilization and lower overall costs. This could ultimately lead to lower premiums.

You are touching on something that could be beneficial for patients, depending on how it is implemented. Under the new law, an advanced explanation of benefits must be provided to the patient prior to scheduled care or upon request. Also, elective out-of-network providers can seek advance written consent from patients that then allow these providers to send balance bills. It seems that the key is to provide patients with simple, transparent information so they can make informed decisions. But is it possible to deliver that across the diverse patient spectrum?

Mr Sontupe: That is probably the most difficult part. Many patients are not health-literate enough to be fully engaged in their health care. As an example, consider prescription medicine adherence rates, which are not great. And it is much easier to understand taking one pill daily than it is to understand hospital care costs.

Dr Hsu: Transparency and full disclosure are essential. But they have to go hand-in-hand with education. If not, patients will simply be confused.

Dr Owens: I agree it may end up being difficult for patients to understand. For example, if they are presented with an out-of-network estimate, will they cancel the procedure and find a facility where providers are in network? It seems unlikely—especially for a patient who is more concerned about getting the procedure done and getting better.

It sounds as if there will be instances where patients will agree to the out-of-network estimate for the sake of expediency. So, the bill that eventually arrives will not technically be a surprise, but it could still be substantial.

Dr Vogenberg: Given how the market operates currently and impacts patients’ out-of-pocket costs, it will remain difficult to fully assuage out-of-network billing. The insurer-provider relationship is complex, and consumers can be naïve at the point of seeking and receiving care.

Mr Smith: Determining the actual price of a procedure will be very hard, such that a corridor of prices may be created for each procedure. This will add to the potential confusion. Also, I think there is an increased chance for “indication creep.” Some patients may have more serious conditions than initially estimated, meaning there might be an argument for charging more.

Mr Marcus: As a practical matter, it seems unlikely that waiver of the No Surprises Act will be common. Consumers can only waive protections if certain requirements are met. For example, the waiver must be provided within a certain period of time before the services are provided, it must include a cost-estimate, and it must identify alternative in-network options. Further, no waiver is available if there are no in-network providers available at a facility, the services are related to unforeseen or urgent issues, or the provider is not the type that is typically selected by a patient, such as an anesthesiologist.

The Congressional Budget Office estimates that the No Surprises Act would reduce commercial insurance premiums by 0.5% to 1%. Do you think that is realistic?

Dr Owens: Even if savings are generated, medical inflation will continue, driven by aging demographics and new technology. Gains will be more than offset by the continued growth of medical costs.

Dr Vogenberg: It is unlikely that much rate relief will occur, certainly in the first year. Beyond that, the actual impact cannot yet be accurately determined.

Mr Smith: Developing premium models in the age of COVID-19 are likely to not be very useful. I think the impact will be negligible.

Dr Hsu: I think the premium reduction estimates are too high. They will be negligible at best.

Mr Sontupe: I really do not see anything driving insurance premiums down. But hopefully the law will result in fewer patients being surprised by bills they did not expect.

Dr Rogers: That it where the real benefit is—savings for the consumer. I am having trouble seeing huge impact on premiums. If insurance companies end up contracting with providers who used to be out-of-network, they may end up paying a little more, but nothing significant in my view.

Mr Marcus: I agree. The effect on premiums will be negligible in the near term. There is some financial exposure in the longer term because of the CPI methodologies specified in the law as well as the nuances of niche providers such as air ambulances.

What do you make of the situation in North Carolina where BCBS is asking for an immediate rate cut from certain providers?

Mr Marcus: It is not unreasonable that this will occur on a limited scale—in specific geographic locales that are problematic for access and insurers feel that they have overcompensated to provide an adequate network. It seems like a tactic that will cause more problems than what it’s worth. And admittedly, if it occurs on a widespread scale there will be access issues and a strain on the system.

Dr Hsu: It is a strong-arm tactic that will not decrease the overall cost of care. And, yes, lack of access can become an issue, particularly in rural other areas where access is already poor.

Mr Rogers: The new law is an imperfect solution to an intolerable problem. I don’t expect the law will have much of an effect on health insurance company profits. Insurers pay per their fee schedule and the patient is responsible for the balance.

The only entities I have no sympathy for are the contact management groups (CMGs). Having spent a few years as a regional director for a midsized CMG that has now been acquired by a national company I reflect on those years with a real sense of shame. The way physician services are paid for in the United States is irrational and inefficient. Rural medicine and medicine in impoverished areas of the country particularly suffer. If the law forces Wall Street to look elsewhere for lucre, no tears will be shed (see sidebar).

Regardless of its impact, the No Surprises Act is something of a miracle that emerged from a historically partisan legislative collective. It was passed with bipartisan support during the Trump administration, fine-tuned during the Biden administration, and is now implemented as law. Was this a rare occurrence, or can it be used as a blueprint for other health initiatives?

Mr Marcus: The former—a rarity. This bill was aimed at consumer relief and I just don’t see the same level of interest on other issues on either side of the aisle.

Dr Rogers: It’s law because patients understand the impact of surprise billing and have strong feelings about it. They have experienced it themselves or know someone who has.

Dr Owens: It’s low hanging fruit that both sides of the aisle could agree upon. More controversial issues such as universal coverage or broader access to government-funded health care programs will not likely gain such support in our hyper-partisan political environment.

Mr Smith: The work of Senators [Maggie] Hassan [D-NH] and [Bill] Cassidy [R-LA] on the No Surprises Act should be hailed as solid, bipartisan cooperation. But let’s not forget that it took 2 full years to become law, and that the process of developing a list of arbiters will also take time.

Dr Vogenberg: It will take years to plug the information gaps in payer-provider relationships, and to improve consumer awareness and engagement. It is a blueprint of sorts but certainly far from perfect.

Dr Hsu: Of course, it can serve as a blueprint for bipartisan cooperation—the question is, will it be?

Mr Sontupe: The No Surprises Act is a step in the right direction. Transparency is important. But the law does not ensure that patients get better, aligned care. It simply states that the patient and the insurer know who will bill and what they will bill. There is no alignment to ensure everyone is working towards the same goal. The health care house needs to be torn down to the studs and rebuilt. It needs to be focused on outcomes, quality, and appropriate care. All incentives must be aligned around a quality outcome and the costs to achieve that outcome should be transparent. ν

By William Rogers, MD, emergency medicine physician, chief medical officer, Applied Policy, Washington, DC

I have spent 15 of my more than 40 years as an emergency physician managing emergency departments, which gives me a bird’s eye view of how surprise billing evolved.

It used to be that physicians would come together to form a group and staff an emergency department with a connection to the community and a goal to deliver quality care. They were less skilled in billing, accounts receivable, staff recruitment, and other non-patient care responsibilities. Over time these groups consolidated to eliminate business redundancies, but clinicians still maintained control.

However, the larger these groups became, the more they were dominated by business people. Eventually, private equity entered the fray. At that point, clinicians were no longer in control, and were seen as nothing more than units of production—and quite interchangeable. It became a bottom-line oriented business in which surprise bills were able to flourish. Indeed, the business model depended on such out-of-network billing. It ended up being a financial blow for many patients, who had no idea these kinds of bills would be coming. In such an environment, clinicians no longer felt any real obligation to the hospital or the community. It became a soul-sapping experience for them.

With the No Surprises Act now law, the tide might be turning. It will hopefully become a kick in the gut for private equity firms, and a real plus for patients and even emergency medicine providers. With the business model disrupted, the equity firms may have little choice but to look elsewhere for their opportunity to generate huge profits.