Employers, Insurers Get Upper Hand in Surprise Billing Rule

Employer groups are happy with the first rule implementing a law aimed at protecting patients from large “surprise” bills from emergencies and hospital procedures. It appears to keep payment rates lower than what medical providers were calling for.

The interim final rule (RIN 0938-AU63) released July 1 by four agencies lays out how payments from health plans to providers will be determined in emergencies as well as for care at facilities that are in patients’ insurance networks from clinicians who aren’t. It implements part of the No Surprises Act passed as part of appropriations legislation (H.R. 133) in December 2020.

The rule has been closely watched by the two main opposing sides in the battle over so-called surprise bills. Employers and health insurers have pushed for keeping rates paid to providers down, while doctors and hospitals argue that insurers shouldn’t be given the upper hand in setting their rates.

Defining Payment Amount

The rule defines how the qualifying payment amount will be determined, which is the basis on which a patient’s share of the bill is calculated. It’s based on a health plan’s historic median contract rate for similar services in a geographic area, and it must be considered by arbitrators if health plans and providers can’t agree how much a doctor or hospital should be paid.

The No Surprises Act bars health providers from billing patients more than would be paid for in-network services in emergencies or other circumstances when out-of-network clinicians are used.

“What the departments seem to be doing was try to ensure that the patient would have low costs,” James Gelfand, senior vice president for health-care policy at the ERISA Industry Committee (ERIC), said in an interview. ERIC represents large employers that provide health and other benefits to employees.

“If there is something where the different groups are having different responses, it’s because of the way they did that,” Gelfand said of how the agencies’ defined the qualifying payment amount. “And the way I would describe they did it is they erred on the side of trying to keep costs down.”

As an example, the qualifying payment amount under the rule would be set based on provider contracts rather than every single provider, Gelfand said. That will likely keep payments down. Setting the rates based on each provider would have raised the average rates because large equity-owned health-care companies have many doctors receiving higher rates, he said.

In addition, the interim final rule specifies that emergency room rates won’t be averaged with freestanding emergency rooms, which are more expensive, Gelfand said. Rates for teaching hospitals, which typically charge higher rates, won’t be calculated separately from non-teaching hospitals, he said. Calculating median rates using those methods will help reduce rates, he said.

Emergency Services

The rule favors hospitals in the way it requires insurers to cover emergency services, Michael Kolber, a partner with health-care consulting firm Manatt Health, said in an interview.

“There’s been some effort by some payers to sort of crack down on non-emergency use of emergency departments,” Kolber said.

“They say explicitly here that plans are not allowed to automatically deny claims based on the diagnosis code,” he said, referring to the agencies that issued the rule.

If the diagnoses ultimately prove to be for something that isn’t an emergency, health plans may be denying the claim or paying at a lower rate, Kolber said. “This says it really needs to be a prudent layperson’s analysis of the presenting symptoms, not what the ultimate diagnosis says,” he said of the interim final rule.

A rule to be issued later this year will determine how the independent dispute resolution (IDR) process will work in the event of disagreements. “It’s really the heart of the matter in terms of payer-provider disputes,” Kolber said.

Dispute Rules Still to Come

“This interim final rule spends a lot of time trying to calculate costs,” Christopher Sheeron, founder and president of Action for Health, a nonprofit patient advocacy group, said in an email. “In their next set of regulations, therefore, the agencies must ensure that a fair IDR is constructed. The IDR is the most important component of the entire law.”

The rule also attempts to ensure that patients who choose out-of-network providers, for which they can be billed for out-of-pocket charges such as coinsurance at higher than in-network rates, have ample time to consider their decision.

If a patient schedules an appointment at least 72 hours beforehand, the provider or facility must provide notice of the implications for higher rates at least 72 hours before the appointment, the rule says. If the appointment is scheduled in less time, the provider or facility must provide the information on the day of the appointment.

The agencies requested comments on whether urgent care centers should be covered, in particular the protections against billing by an out-of-network provider at an in-network facility, Eric Chan, a partner with San Francisco-based Athene Law LLP, said in an email.

“This would be a major expansion of the Act’s protections,” Chan said.