Demystifying the No Surprises Act: Federal Agencies Adopt Expansive Interpretation in New Guidance

Updated: Jul 6


The Departments of Health and Human Services (HHS), Treasury, and Labor have released the first of several expected Interim Final Rules (IFR) implementing the No Surprises Act, which was enacted as part of the Consolidated Appropriations Act of December 2020 (Pub. L. 116-260). The IFR provides wide-ranging guidance that will help providers prepare for the implementation of the Act, which becomes effective January 1, 2022. In many areas, the IFR significantly expands the Act’s protections beyond a plain reading of the statute.


Overview of the No Surprises Act

At a high level, the Act prohibits patients from receiving surprise bills from a nonparticipating hospital or provider in two scenarios: (1) for emergency care at an out-of-network facility and (2) from an out-of-network provider at a participating facility. Patients are protected from liability beyond an “in-network” cost-sharing amount, which is calculated in reference to the Qualifying Payment Amount (QPA).


The Act also provides for Independent Dispute Resolution (IDR) of disputes between the payor and provider over the level of payment. The IDR process is binding on all parties and is structured as an “winner-take-all” process, in which the provider and the plan each submit an amount they contend must be paid, and a neutral arbiter is required to pick one or the other. The arbiter is statutorily required to consider a number of factors, such as the parties’ respective “offers,” the QPA, the provider’s level of training and experience, acuity of the case or complexity of the patient’s condition, and the market share of the provider and plan in the region. The arbiter cannot consider usual and customary charges or public payor rates. (Regulations on the IDR process are due later this year.)


The Act directed the Departments to issue guidance no later than July 1, 2021 on how to calculate the QPA, among other things. As expected, the IFR generally defines the QPA as “the median of the contracted rates of the plan or issuer for the item or service in the geographic region.” But it also does much more. Here are a few of the most notable developments for providers:


The Initial Payment to the Provider Must Be Made Within 30 Days of Submission of a “Clean Claim,” And Represents Payment in Full


The Act requires that the patient’s group health plan or insurer make an “initial payment” (or denial of payment) directly to the out-of-network provider within 30 calendar days. It provides no guidance for how the initial payment must be calculated, however.


The IFR now clarifies that the 30 days runs from the provider’s submission of a “clean” claim. (IFR at 106.) The Departments emphasize that plans should not try to “abuse” or “gam[e]” this 30 day standard, and seek comment on whether additional protections are necessary. It also seeks comment on whether claim submission standards can be modified so that a provider can provide information relevant to the application of the Act’s protections.


For self-funded ERISA group health plans, among others, this represents the first time that such plans must comply with a prompt payment standard. Just as significantly, it requires that payment be made directly to the providers, rather than the patient. The IFR helpfully details the interplay between this new payment standard and the claims processing regulations that already apply to most group health plans pursuant to ERISA and the ACA, see 29 C.F.R. § 2560.503-1.


The Departments further emphasize that the “initial” payment does not mean a partial payment or first installment. Rather, it means “payment in full based on the relevant facts and circumstances and as required under the terms of the plan or coverage . . . .”


The Departments seek comment on whether to impose a “minimum” standard for the initial payment amount in future rulemaking, suggesting that doing so “could help to reduce the number of cases that go to the federal IDR process established under the No Surprises Act.” (IFR at 108.) Given that the Act was intentionally designed to avoid provider rate-setting, relying instead on the IDR process to resolve disputes, however, regulation of the “initial payment” standard, if not done properly, may undermine Congress’ intent.


Plans Cannot Routinely Deny Emergency Services


The Departments also specifically call out plans’ wrongful practice of misapplying the “prudent layperson standard” to deny emergency services claims. They emphasize that plans cannot “automatically deny coverage” for such claims based on ICD-10 diagnosis codes “without regard to the individual’s presenting symptoms or any additional review.” Such a practice is “inconsistent with the emergency services requirements of the No Surprises Act and the ACA.”


Post-Stabilization Services Fall Within the Act’s Expanded Definition of “Emergency Services” Except Where There is Informed Consent


Under the Act, “emergency services” are defined broadly. They cover not only the initial screening to evaluate whether an emergency medical condition exists, but also pre-stabilization care “regardless of the department of the hospital” in which such care is furnished. 42 U.S.C. 300gg-131(a)(3)(C).


Post-stabilization services, “after the patient is moved out of the emergency department and admitted to a hospital” are also covered by the Act unless the patient meaningfully consents to continue receiving out-of-network services.

While the Act imports many of the relevant definitions from EMTALA, the scope of “emergency services” covered by the Act thus exceeds that of EMTALA. (The Act also applies to independent freestanding emergency departments, which are generally not subject to EMTALA.)


There are two main requirements for there to be meaningful consent. First, the attending emergency physician or treating provider must determine that the patient “is able to travel using nonmedical transportation or nonemergency medical transportation to an available participating provider or facility located within a reasonable travel distance, taking into consideration the individual’s medical condition.” This underlined language represents a new requirement added by the IFR. The Departments believe that consent cannot be meaningful if there are no participating facilities or providers within a reasonable travel distance. They seek further comment on what might constitute a “reasonable travel distance” or an “unreasonable travel burden.”


Consent likewise cannot be meaningful if the patient, due to their condition, must take medical transportation, such an ambulance.


Second, consent must be properly obtained. Providers must use a standard notice form that will be provided by HHS. Among other things, the form will disclose to the patient that they may be balance billed if they consent. The form must also be provided separately, rather than “embedded” in other consent forms where it might be overlooked.


Principles of informed consent will generally apply. The provider must evaluate the patient’s “state of mind” and “emotional state” at the time of consent. For instance, “[i]f post-stabilization services must be provided quickly after the emergency services are provided, it may be challenging for the individual or their authorized representative to have adequate time to make a clear-minded decision regarding consent.” Consent may also be revoked.


Interestingly, the Departments also leave room for state law to impose stricter requirements for consent than even the Act requires. The IFR even contemplates states might prohibit any consent exception at all, in line with some states’ existing balance billing protections.


The IFR also permits authorized representatives to consent on behalf of the patient, consistent with state law on how such authorization must be given. The Departments believe, however, that providers generally cannot provide the needed consent on behalf of patients.


The Act Extends to Non-Network Physicians Who Provide Services Pursuant to Single Case Agreements with a Facility


The IFR also provides clarity on the second half of Act’s protections – which prohibit surprise bills from nonparticipating providers at “participating health care facilities.” The statutory language defines “facilities” as including hospitals, hospital outpatient departments, critical access hospitals, ambulatory surgery centers (ASCs), and other facility types as may defined by statute. 42 U.S.C. 300gg-111(b)(2)(A)(ii).


Notably, a Single Case Agreement (SCA) rate will count as an agreement between a facility and a provider for purposes of these protections under the Act. If an out-of-network hospital or ASC enters into a SCA with a health plan to perform a patient procedure (despite being generally out of network with the plan), then the Act will prohibit an out of network physician (who is not party to the SCA) from sending a surprise bill after providing services to the patient. (An SCA does not qualify as a valid agreement, however, for purposes of calculating the QPA.)


The Departments Are Interested in Expanding the Act’s Protection to Urgent Care Centers


The Departments seek comment regarding whether the definition of “participating health care facility” should be extended to urgent care centers – even though most urgent care clinics are not licensed as “facilities,” per se, under state law and most do not separately bill. The IFR reasons that “individuals may be using urgent care centers . . . in a similar way to how they use independent freestanding emergency departments, in which case it may be appropriate to designate urgent care centers as health care facilities.”


Clarity on Notices to Consumers


Finally, the IFR requires facilities (including emergency departments) and providers to provide disclosures regarding patient protections against balance billing. The disclosures must be made on a public website and in a one-page notice provided to the consumer. The one-page notice must be written in “clear and understandable” language and explain both the applicable provisions of the Act and “any applicable state requirements.” There must also be a “sign posted prominently” at the healthcare facility or provider.


The IFR also adopts a “Special rule to prevent unnecessary duplication” of notices. If the facility makes the required information available, the provider does not have to do it. And if the facility and provider enter into a written agreement that requires the facility to make the disclosures, only the facility will be liable for a failure to do so.


Conclusion


While much more is covered in the IFR, we believe these issues have the potential to be the most impactful to providers. There is a 60-day comment period. Most of these rules will be adopted as final, however, without further notice and comment.


Please contact Eric Chan at eric@athenelaw.com for questions on how to comply in advance of the January 1, 2022 effective date.

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