No Surprise Act – The best compliant, strategic approach for employer-sponsored health plan administrators

Background

The Consolidated Appropriations Act, 2021, signed into law at the end of 2020, includes the “No Surprises Act” which prohibits hospitals and doctors from issuing surprise medical bills for certain health care services.

On January 1, certain provisions of the No Surprises Act (NSA) took effect to protect health plan participants from surprise medical bills for emergency services as well as care received from out-of-network providers at an in-network facility. The NSA does not apply to out-of-network providers, except in emergencies.

The NSA includes open negotiation and independent dispute resolution (IDR) procedures for health plans and out-of-network health care facilities and providers to determine applicable payment rates.

Problem

Simple NSA compliance will increase employer-paid medical expenses and add to the cost of coverage. Transparency is expected to add to medical cost inflation by prompting both in-network and out-of-network providers to increase charges.

Impact (plan administrators)

The NSA covers all privately insured people in employer-sponsored and individual and family health plans.

Plan administrators should understand about how this will change the administration of their plan with respect to non-network providers.

Strategy

The best response is through an approach that is both strategic andcompliance oriented. A dual approach will minimize the compliance challenge, reduce the cost of coverage for both the employer and employees, and, at the same time, improve both the perceived and actual value of health coverage.

Solution

Even with greater transparency, significant price variations can still exist across hospitals and providers for standard procedures. To mitigate this, many self-funded health plans have adopted reference-based pricing (RBP) strategies. Designed to moderate excessive hospital costs, RBP establishes a benchmark fee schedule and payment ceiling instead of negotiating fees with a provider network. Plan administrators can benefit from the consistent application across all providers and health networks.

RBP is one of the fastest growing solutions in health benefits cost management. It brings stability to health care prices and point of purchase cost sharing by using Medicare reimbursement rates and other provider cost data to provide an objective cost baseline. This offers disciplined pricing - fair and rational reimbursement for providers.

Risk

The IDR process added by the NSA triggers a new risk for health plans that use RBP with a network of providers or plans that directly contract with providers and facilities.RBP may be subject to the IDR process where plans directly contract with facilities and providers. Self-funded plans should be aware of this risk.

Providers may challenge RBP determinations even where the NSA doesn’t apply – such as for plans where there is no network of providers, where services are provided in a non-network facility, or by a non-network provider in a non-network facility. Where the NSA does apply, out-of-network providers who challenge the RBP determinations shift the risk for charges in excess of RBP from the participant to the plan sponsor.

The most effective way to address this legislation may be to adopt a pure RBP plan which will put the patient in the driver’s seat as a health care consumer. Pure RBP plans should remain unaffected by this rule. That’s because there are no out-of-network claims, nor is there any determination of a median in-network rate. Adopting a pure RBP plan that puts the patient in the driver’s seat as a health care consumer is the most effective way to respond to the legislation.

Just as important, deploying RBP may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage (employer and employee contributions, over time) and employee point of purchase cost sharing (deductibles, copayment, coinsurance).

The value of tech-driven data support
Today, plan sponsors, administrators and participants benefit from data insights through innovative software and tech-driven data analysis solutions. Real-time price information of the true cost of care enables engaged plan administrators and participants to make the most advantageous cost-benefit decisions. A tech-driven approach provides information and tools to better manage health care costs.

White paper offers guidance on No Surprises Act (NSA) for employer-sponsored health plan administrators: risks and opportunities

No Surprises Act: What Every Plan Sponsor Needs to Know serves as a valuable resource for employer-sponsored health plan administrators. It offers benefits professionals guidance regarding the NSA’s provisions and interim final rules – encouraging plan sponsors to respond with an approach that is both strategic and compliance oriented. A dual approach will minimize compliance challenges, reduce cost of coverage for both the employer and employees, and improve both the perceived and actual value of health coverage.

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.