No more surprises! Navigating compliance with medical billing legislation

It is important for benefits professionals, especially those who administer or sponsor self-funded plans, to understand the NSA’s provisions.

The NSA will have its greatest impact on plans that incorporate a provider network, and use a design with separate, often higher deductibles and coinsurance for out-of-network providers.

This past year saw some much-needed focus on rising health care costs and the implementation of federal legislation designed to enhance participant protection and fairness. On January 1st, certain provisions of the No Surprises Act (NSA) took effect to protect health plan participants from excessive medical bills from out-of-network providers.

The NSA’s robust protections ensure participants have new rights regarding fair, consistent and predictable price information as well as advance explanations of benefits. Beyond simple compliance, the NSA offers plan sponsors a strategic opportunity to manage health care spend and to improve the employee health care benefit experience.

Related: Hospitals continue to flout price transparency requirement rules

It is important for employee benefits professionals, especially those who administer or sponsor self-funded health plans, to understand the NSA’s provisions and interim final rules. For insured plans, there is the additional compliance complexity that results from having to navigate the combination of the new federal rules and state insurance regulations.

Compliance and impact on health plan sponsors

NSA is likely to increase medical costs paid by employer-sponsored plans, which will, in turn, trigger increases in in the cost of coverage, and in turn, increases in employee contributions. For example, costs will increase in order to meet the new administration requirements of NSA, including, for example, changes in claims processing, and a new arbitration process.

One unintended consequence of the new law is that both in-network and out-of-network providers who today charge below-median rates are expected to increase their charges – at least to in-network median levels. Once the median rate is known, there is no incentive for an out-of-network provider to bill for a lesser amount. And, because most in-network providers agree to limit their charges in order to join a network, most in-network providers won’t be satisfied with a reimbursement that is less than what the plan pays to out-of-network providers who have no such limitation. As a result, the range of billed charges will be higher once every provider charges at least the publicized median rate.

Most health plans have deductibles. Where the plan has adopted a PPO network, plan designs often vary point-of-purchase cost-sharing (deductibles, copayments, coinsurance, out-of-pocket expense maximums, covered charges, etc.) so providers of in-network services receive a higher level of reimbursement. The higher level of reimbursement is primarily justified by the provider’s contractual agreement to charge less. NSA compliance will pay benefits at in-network levels for certain out-of-network expenses – lessening the impact of out-of-network cost sharing. The combined effect will likely increase the cost of coverage by reducing a plan’s ability to differentiate reimbursements based on network affiliation, which will, in turn, reduce the incentive for providers to join a network and to charge less.

Plan provisions must be updated for the new requirements. The NSA will have its greatest impact on plans that incorporate a provider network, and use a design with separate, often higher deductibles and coinsurance for out-of-network providers. Finally, insured plans must comply with federal law (ERISA, the tax code, the Public Health Services Act and other requirements) in addition to state-specific insurance laws. The interplay will likely raise the cost of administration, and in certain situations, raise the cost of coverage.

Benefit strategies

Growing adoption of self-funded health plans

According to the newly published Kaiser Family Foundation Annual Employer Health Benefits Survey, 64% of covered U.S. workers are enrolled in health plans that are self-funded. The growing adoption of self-funded health plans is often a response to significant increases in insurance premiums. Employers that choose self-funded coverage are attracted to unique cost-management opportunities when compared to the premiums, taxes, mandated benefits, profit margins and other requirements that are typically part of traditional, fully insured plans. We expect to see continued interest in converting to self-insurance, prompted by the new challenge of complying with both federal and state NSA requirements.

Health savings accounts as a savings strategy

For plan sponsors, the least burdensome option to prepare for out-of-pocket costs uses a Health Savings Accounts (HSA) strategy. HSA contributions receive the most valuable benefits tax preference offered by the Internal Revenue Code. According to the Plan Sponsor Council of America’s 2021 HSA Survey, where an HSA-capable coverage option is offered, 80% of employers contribute to employees’ HSAs. Experience shows that both the employee and the employer will spend less when enrolled in HSA-capable coverage – without experiencing a significant reduction in the value of coverage.

Reference-based pricing

Reference-based pricing (RBP) is another strategy designed to moderate costs. RBP establishes a benchmark fee schedule and payment ceiling in lieu of a traditional provider network. Much of the employer-sponsored marketplace has yet to embrace RBP. Many states have adopted RBP processes. It is now commonplace in Medicaid. It is also consistent with reimbursement structures used by Medicare and the Veteran’s Administration.

There is, however, a new potential risk to RBP that health plan sponsors and participants need to be aware of. NSA creates an independent dispute resolution (IDR) process. Interim final rules require the IDR decisionmaker to presume that the in-network, “qualifying payment amount” for patient cost-sharing purposes is “the appropriate out-of-network rate.” (See Sidebar)

Plans with narrow networks or negotiated contracts that utilize RBP as the mechanism to price out-of-network claims will be affected by this legislation. In both instances, there would exist a network rate pursuant to which the “qualifying payment amount” could be calculated.

Pure RBP plans that do not contract with providers should remain unaffected by NSA because there aren’t any out-of-network claims; nor is there any determination of a median in-network rate.

NSA may prompt a significant expansion in the prevalence of RBP plans since RBP often eliminates the negative effects of excessive charges otherwise shared by the employer and the participant. We are mindful, however, that often regulatory agencies adopt regulations that seemingly extend the reach of legislation or conflict with the legislation’s express language. Litigation challenging some of the regulations would be “no surprise.”

The most effective way to address this legislation may be to adopt a pure RBP plan that puts the patient in the driver’s seat as a health care consumer.

A successful RBP plan should have the following components:

Improved medical billing capabilities

There also exists opportunities for plan sponsors to leverage significant cost savings and fully optimize the advantages and value of their health plan. Innovative medical billing support services provide powerful data intelligence, making for a stronger defense against balance billing disputes and greater success in efforts to recover overpayments. State-of-the-art information technology, data-driven software and online data analytic tools can provide a degree of price transparency and provide new insights by harnessing price data electronically – allowing fee comparisons that identify fair and reasonable prices.

The right medical billing partner will be an agent of change, one that embraces innovation and advocates for “what is fair and just” in the marketplace. The right partner will also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as legal representation of participants. This support can provide invaluable guidance to navigate new federal and state health care regulations and identify areas to lower risk and exposure and maximize value and returns on cost savings. Christine Cooper is the CEO of aequum LLC and the co-managing member of Koehler  Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.

Jack Towarnicky is a member of aequum LLC. As an ERISA/Employee Benefits compliance and planning attorney, Jack has over forty years of experience in human resources and plan sponsor leadership roles.

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