Surprise Medical Bills Are No More, But the Battle Is Just Beginning

What CHROs need to know about the No Surprises Act and price transparency.
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A snowstorm blew up one evening in New York City a few years ago. Over the course of a couple of hours, it transitioned from fluffy, white flakes, to driving snow and ice. Darkness came early, just in time for the evening commute when tens of thousands of workers poured from buildings around the city and made their way home by subway, bus and car. I was at the gym after work when my wife called me. She was disoriented, but after a minute she explained, “I think I’ve just been hit by a car.”

Well, I told her to call an ambulance and immediately rushed home. I found her, dazed, in the living room. She’d been struck by a livery cab that ran a red light—then sped away—while she was crossing the street. A metal water bottle in her bag, plus her heavy winter coat, took most of impact. Thankfully, she was fine. A couple of bruises, but nothing more.

She hadn’t called an ambulance when she’d first been hit. Despite being disoriented, she also refused a bystander’s offer to take her to the hospital. If she had done either of those things, she certainly would have been checked for a variety of injuries by a variety of specialists and service providers. And, in a few weeks, there’s a pretty good chance we would have received an unexpected medical bill, potentially seeking thousands of dollars in payments to out-of-network providers at the hospital.

These sorts of surprise medical bills became a scourge for ordinary Americans in recent years. The practice has been particularly pernicious thanks to the fact such surprise bills most often arise in scenarios similar to the one we experienced, when people are seeking emergency care or are, for one reason or another, unaware of exactly what care they are receiving and whether the providers are in- or out-of-network. From air ambulances to stitches provided by contract plastic surgeons at walk-in clinics, surprise medical bills have been common and almost universally despised for years. What has typically happened is that out-of-network providers, after being paid by insurance, would then seek the difference from the patient.

Now, thanks to a rare instance of bipartisan legislation, these sorts of billing practices are illegal under the No Surprises Act, which passed in 2020. “The No Surprises Act is incredibly popular,” says Katie Keith, director of the Health Policy and the Law Initiative at the Georgetown University Law Center’s O’Neill Institute for National and Global Health Law. “Everyone thought these surprise bills that patients were getting were a total scourge.”

In addition to the No Surprises Act, rules coming into effect under the Affordable Care Act now require providers to transparently publish their prices. These two changes, taken together, stand to save patients from the costs and shock of surprise medical bills while also potentially decreasing costs for employers. The medical industry is naturally putting up a fight and there is ongoing, highly contentious litigation over the new rules. Here’s what CHROs need to know about Transparency in Coverage Rule and the No Surprises Act.

Transparency Could Mean Savings

The first thing that CHROs need to keep in mind is that there are two different, but related, changes coming into effect. The first is the rise of the Transparency in Coverage Rule, which came into effect in July. Basically, this rule just requires that health plans must disclose price information to consumers in Machine-Readable Files. HR departments don’t need to be concerned with these on a technical level, but they do need to make sure their plan providers are actually making these data sets publicly accessible and updating them monthly. Additionally, starting January 1, 2023, employees must be able to access an online shopping tool for 500 healthcare services and out-of-pocket information that’s personalized to them. The following year, pricing for every procedure, plus prescription drugs, medical equipment and other medical services must also be published. Failure to comply with these rules, naturally, can result in fines, which, because they accrue at a rate of $100 per affected member, per day, can balloon quickly.

So, beyond simply ensuring their plan providers are complying with this rule, if for no other reason than to avoid fines, what should CHROs be doing? The quick answer is, looking for savings. Price transparency means that employers suddenly have access to a trove of data they can use to steer their employees toward lower cost providers. “These are earthshattering changes in terms of putting data out there for analytics companies and app developers to basically blow this whole market up by taking us from zero transparency to 100 percent transparency,” says Mark Galvin, president and CEO of Talon Analytics, which provides healthcare transparency tech solutions for companies.

While it’s not a good idea to penalize employees for going to a more expensive provider, in many cases, it’s easy to incentivize them to go to one that is lower cost. One way to do this is to implement a shared savings reward program, such as that offered by Talon. Essentially, if the median price for radiologists in a particular area is $1,000, for instance, and there are some that cost $2,000 and others that cost $300 for similar services, employees who choose the $300 option over a more expensive one will receive a portion of that savings below the median in a health savings account, or via another rewards medium. “That ultimately turns into huge savings for the consumers, which includes the employer, which means the benefits cost drops, the premiums drop, the cost out of the company checkbook and their self-funded paying claims drop,” says Galvin.

Long term, such transparency and incentive programs may exert a downwards pressure on prices and even encourage healthcare providers to strike better deals with insurance providers. Even in the short term, Galvin estimates many employers could save between 20 and 30 percent on their benefits costs through transparency and incentives. Those savings can be passed on to employees in terms of better benefits packages or higher compensation, for instance, or be put to good use in other ways in the company.

The Transparency in Coverage Rule is relatively straightforward and offers many opportunities for cost savings. Unfortunately the No Surprises Act is neither as simple nor is the correct course of action for companies as clear.

Big Surprises in the No Surprises Act

At face value, the No Surprises Act seems relatively straightforward, and indeed, one aspect of it is already working just fine today. In simple terms, the Act prohibits out-of-network healthcare providers from balance billing consumers in many scenarios, including for emergency room visits, out-of-network providers working in in-network facilities, and ambulance services.

The consumer protections “as far as that goes, are actually working,” says Garrett Hohimer, vice president of public policy and advocacy at the Business Group on Health. “The participants are getting their costs determined pretty quickly, and their part of it’s closed out, and then it shifts over to any disagreement or ongoing dispute being between the plan and the provider.” However, at this point in the process there is a breakdown which is key for CHROs to understand.

In the event an individual receives care from an out-of-network healthcare provider—such as an anesthesiologist at an otherwise in-network hospital—and there is some dispute over what that healthcare provider should be paid, the matter is sent to arbitration. While the initial intention was for this to be done via baseball arbitration, as outlined in the perplexingly named Interim Final Rule, the process has become muddied after heavy lobbying by the healthcare industry and several lawsuits.

While the intention had been that healthcare providers and plan administrators would deal with pricing disputes by making counter offers, which an arbitrator would then choose between, healthcare providers have been pushing for greater arbitrator flexibility in choosing higher amounts or taking into account things like years of experience or the location of air ambulance pickups. Businesses and insurance companies have countered that arbitrators should favor median prices and that many things such as experience are already priced in. “All this is a fight about which factors and when the arbiters have to consider them,” says Keith.

A new rule issued earlier this year “does not give as much direction to the arbitrator and is more of a framework,” says Hohimer, yet litigation against the No Surprises Act by the Texas Medical Association, which has taken the lead in opposing it, is ongoing.

There’s also been a constitutional challenge in New York, which was dismissed, but which observers believe could reemerge in appeal. “I’m tracking a total of eight lawsuits at the moment,” says Keith. “It jumps out to me as a very aggressive strategy.”

The lawsuits have been brought by a range of healthcare providers, including physician groups, special physician groups, hospitals and, in particular, air ambulance companies. Air ambulance companies in recent years have benefitted from a flood of private equity money betting, in part, on balance billing for profits.

Ongoing litigation means the No Surprises Act’s final functioning is still up in the air. “This part of the law has been hotly contested in the courts,” says Erin Duffy, research scientist at the USC Schaeffer Center for Health Policy and Economics. So, while consumers may be free of surprise medical bills, insurance providers and companies are still waiting for clarity about how disputes with healthcare providers will be resolved, and these unresolved disputes are piling up at an alarming rate.

Not only that, but more cases are going to arbitration than was expected, which puts into question the ability of the system to work efficiently. “They have 46,000 open disputes from a four-month time period, and only 1,200 of them have been decided so far,” says Keith, who estimates that roughly half of those cases may ultimately be deemed ineligible. “To put it in context, there have been 46,000 in four months, but the agencies in their interim final rule had thought they were going to get about 22,000 claims for the year. They’re getting absolutely crushed.”

What Does This Mean for CHROs?

“For CHROs, I think everybody is working with their third-party administrators, their administrative services organization, vendors who provide the network access and adjudicate on the behalf of the self-insured plans,” says Hohimer. “Most benefits folks and total rewards leaders at companies are staying close to those providers to understand how many open disputes they have, how their vendor approaches those disputes, how much discretion they have in continuing those disputes or going ahead and just paying for things.”

At the end of the day, the mechanics of how disputes are resolved depends on the plans and the vendors. If it is functioning efficiently, the arbitration process under the No Surprises Act may “translate to cost savings,” for employers, says Duffy. Where before they may have been paying the bulk of out-of-network costs as a benefit for employees, in arbitration they can be much more aggressive about the maximums they will pay. “It really changes the decision landscape for self-insured employers to where the only monetary benchmark that’s used in the arbitration process is the median contract rate.” Consequently, she adds, “I would expect self-insured employers to tailor their out-of-network payment strategies to be closer to that median in-network rate.”

For CHROs, then, the main consideration will be balancing speed of resolving disputes in arbitration versus costs. Just as important will be the scope and quality of the networks their employees have access to, since No Surprises Act arbitration only applies with out-of-network services and providers. “Most employers, from the plan sponsor’s perspective, would rather avoid disputes generally,” says Hohimer. “Tying up your plan’s administrative expenses in handling disputes is probably not the best use of the plan’s money and the employer’s money.”

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