No Surprises Act: Why benefit pros should rethink strategies

Given recent increased litigation and its impact on the regulatory environment, benefits consultants and plan sponsors should rethink their past decisions to simply comply with the No Surprises Act (NSA).

Given recent increased litigation and its impact on the regulatory environment, benefits consultants and plan sponsors should rethink their past decisions to simply comply with the No Surprises Act (NSA).  

It’s time to rethink our initial approaches to compliance, which have added to the cost of coverage in advance of almost perennial plan sponsor annual enrollment activity such as: 

It’s time instead for brokers and advisors to challenge third-party administrators (TPAs) of self-insured plans to tease out the NSA claims experience by identifying claims where the qualified payment amount (QPA) was applied, where expenses were processed in-network versus out of network, and where it triggered a challenge using the independent dispute resolution (IDR) process. 

Today’s preferred provider organization (PPO) networks are comparable to a river that is a mile wide, with price discounts that are less than an inch deep. It’s also time for brokers and advisors to identify changes in the provider network and determine to what extent has the NSA prompted provider consolidation. That is, who shifted from out-of-network (OON) to in-network? Further, in plans that use the typical PPO design of higher OON cost sharing, has network expansion reduced the cost-sharing differential used to justify lower point of purchase cost sharing for network providers? We believe such analysis will show, sooner or later, greater network participation, consolidation of providers, resulting in ever-increasing disputes in fee negotiations between provider networks and insurers.

The NSA targets balance billing by out-of-network providers, therefore services by those providers now qualify to be treated as if in-network. So, the NSA should prompt brokers and advisors to focus plan sponsors on those cost management solutions capable of lowering in-network expenses, avoiding network provider/insurer contract disputes. Even more valuable are such solutions that concurrently avoid the NSA altogether. 

Today, the best alternative that solves all three issues is the adoption of claims administrators and medical billing providers who excel at delivering savings via a combination of “pure” reference-based pricing (RBP) plan designs coupled with participant representation services. 

An effective way for employer-sponsored health plans to avoid most of the requirements and challenges of the NSA and the IDR process is to adopt a “pure” RBP plan design coupled with tech-driven data support. Whenever a plan does not contract with providers for specific services, they should remain unaffected by NSA because there are not any in-network nor out-of-network claims; nor is there any determination of a median in-network rate.  There is no Qualified Payment Amount (QPA) – a NSA required reimbursement rate that is usually substantially higher than the RBP maximum covered charge.

It is not too late to adopt and deploy that solution in 2024.

Background

Consulting firms expect significant rate increases for health plan renewals in 2024. This is becoming evident by the analysis of current medical cost trends. For example, PwC’s Health Research Institute projects a 7.0% year on year medical cost trend in 2024 for both Individual and Group markets – higher than what was projected in 2022 and 2023, which was 5.5% and 6.0%, respectively.

Source: PwC Health Research Institute medical cost trends, 2009-2024

Without action by benefit professionals and plan sponsors to change coverage or administration, HRI’s expected medical cost trend will drive health plan premium rate increases where 3 – 4% come from price inflation coupled with 2% – 3% increases in medical services utilization. 

On average, and averages can be deceiving, health spending for each American has increased more than 7% per year over the past five decades. Combined, those increases reflect a variety of underlying trends including, but not limited to, provider consolidation, aging of the working population and members of their households, as well as new treatments (especially specialty drugs). 

The newest factor in the ever-increasing cost of health coverage includes changes resulting from the No Surprises Act (NSA) legislation. While we are not aware of any study that specifically identifies the NSA’s contribution to the increase in the cost of coverage, when you squeeze the balloon in one place, it pops out elsewhere. 

What’s past

Before the passage of the NSA, and perhaps resulting from plan design changes, expanded networks, or even state NSA-like requirements that apply to insured plans, the overall prevalence of professional claims that were out-of-network (OON) decreased from 6% to 4.7% from 2012 to 2020. Similarly, the share of payments that were OON  also declined over this period from 9.2% in 2012 to 6.8% in 2020. 

Keep in mind that nearly 50% of Americans are covered under Medicare and Medicaid, where fees are “negotiated” and balance billing is minimized or non-existent. As a result, the average annual increase in point-of-purchase cost sharing (deductibles, copayments, etc.) for Medicare beneficiaries has been less than 4% per year for the past four decades.

Current outlook

Congress jumped into the fray with the NSA and Federal policymakers have spoken – following the well-worn path taken by twenty-eight states in how they regulate medical insurance. The result is often one that directly limits individual spend while prompting indirect reallocation among others in the covered population. 

NSA applies to self-insured plans and has likely succeeded in providing protection and lowering out-of-pocket spend by participants in 2022 and 2023. In an analysis based on survey data collected by AHIP/BCBSA, it was estimated that in the first nine months following the NSA taking effect, more than nine million claims were NSA eligible (about .5% of all commercial claims). 

The NSA requires that claims by OON providers be processed as if they were in-network providers charging the Qualified Payment Amount (QPA). Traditionally, PPO plan designs incorporate higher OON point of purchase cost sharing (higher deductibles, copayments, coinsurance and out of pocket maximums) as a means of incenting participants to use in-network providers. NSA provisions treat out of network expenses as in-network raises spend by the plan and lowers point of purchase cost sharing by participants. 

Extrapolating the survey data from the initial nine months of experience could suggest as many as 24 million claims will be directly affected by the NSA in the first two years after implementation – likely affecting 2024 renewals.

How will plan sponsors respond to the added cost? As the costs are not likely to be isolated, industry professionals expect the response will be the same as in the past – adjustments to coverage, provider networks, cost sharing (contributions) and perhaps eligibility.   

While that’s a lot of claims, most never made it past the initial step. AHIP reports that nine-in-ten payment dispute claims between health care providers and health insurance providers were resolved without resorting to the IDR process — 88% of initial payment offers were accepted by providers without entering an open negotiation period.

So, while only 1 in 10 claims have resulted in formal NSA payment disputes, the costs are significant – costs that will ultimately be passed along to the plan sponsor and participants.  AHIP reports that two large health insurance providers reported spending, on average, more than $3 million on staff hired specifically to process IDR disputes. Those costs were in addition to the costs for project management, negotiators, reporting, finance, and additional support positions needed to complete all steps required during the IDR process. 

Importantly, industry experts expect to see much greater than projected use of the IDR process because government reports show that providers prevailed in a super-majority (71%) of independent dispute resolution (IDR) challenges to date.

Concurrently, providers have also been successful in the courts – adding another dollop to current and future expenses that will ultimately be borne by plan sponsors and participants. 

What’s next

Many industry professionals expect providers will respond using a two-track strategy: 

While the primary intended effect of the NSA is to reduce the number of surprise bills and the associated adverse financial consequences for consumers, the federal government projects changes in the health care market including: 

Value of a medical billing partner

Most plan sponsors took a “compliance only” approach in amending their plan for the NSA. The best response to the NSA is both strategic and compliance oriented. 

While plan sponsors have amended their health plans to comply with the NSA, many took a “compliance only” approach and failed to reconsider their coverage strategy. The best response is both strategic and compliance oriented to meet NSA requirements while also supporting the ’health and wealth’ of participants. Cost-management strategies include effectively designed acquisition cost-based pharmacy pricing, HSA-capable coverage, and reference-based pricing coupled with participant protections against balance billing. 

Plan sponsors are benefiting from strategic actions that deliver a competitive financial advantage – such as medical billing partnerships that provide them with insight and data-driven solutions. Harnessing technology to understand the vast amount of data can identify potential areas of escalating health costs and identify opportunities to control medical spending. 

Innovative medical billing services utilize powerful data-driven software and online data analytic tools that can provide a degree of price transparency and new insights by harnessing price data electronically – allowing fee comparisons that identify fair and reasonable prices. This type of support had not been readily available to the self-insured community – which is growing rapidly and now includes 65% or more of health plan participants among US companies of all sizes.

The right medical billing partner can facilitate strategic designs and processes – acting as an agent of change, embracing technology innovation and advocating for “what is fair and just.” The right partner will also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as participant legal representation.

Most importantly, the right medical billing partner advocates for “what is fair and just” and leverage provisions enabled by new federal and state legislations to lower costs, achieve savings and maximize a plan’s value and success.

Christine Cooper is the CEO of aequum LLC and a co-managing member of Koehler Fitzgerald LLC, a law firm with a national practice. Jack Towarnicky, member of aequum LLC, is an ERISA/Employee Benefits compliance and planning attorney.

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