Several years ago, states began to enact “Surprise Medical Bill” Laws. The New Jersey Surprise Bill Law (SBL) took effect August 30, 2018 and the New York SBL, had been enacted 3 years earlier. Today numerous states have SBL’s, including California, Illinois, Texas, Florida, Ohio, Georgia, and many others. Approximately the same number of states do not have their own SBL. These state laws sought to shield patients from large out-of-network (OON) balance bills, when the patient is treated by an OON medical provider through no choice of the patient. Accordingly, emergency and inadvertent OON treatment are the targets of the legislation. Fair enough. All applaud this purpose. The natural follow-up question, however, is how fair to the medical community is the reimbursement regime, and its concomitant arbitration process, since the OON provider is denied the ability to bill the patient for any balance beyond the allowed amount? To ensure fairness to the medical community the arbitration process should require the carrier to make the medical provider whole, filling in the gap created by protecting the patient from a balance bill.
Though these state laws succeeded in protecting patients in these circumstances, each of these states, and the laws they passed, had only jurisdiction over medical claims involving health plans regulated by that state. Out-of-state plans and federally regulated plans were not covered by these laws. To remedy this, the federal government passed the No Surprises Act (NSA) on January 1, 2022, the federal version of the law became effective. Very few changes to the law surrounding reimbursement for medical treatment have created as much trepidation in the medical community as the Federal No Surprises Act (NSA), which became effective January 1, 2022. Though the state laws caused trepidation when they were passed, none cause as much as the NSA when it became effective. This is probably because most commercial insurance (CI) claims are governed by federal rather than state law, so the state SBL’s were seen as having less impact on revenue. The anxiety also, though, was based on a misconception. Most providers assumed, understandably, that the federal NSA would preempt the state SBL’s, and all Commercial Insurance (CI) claims qualifying as emergent or inadvertent OON claims would be resolved in the federal forum and not the state forum, and the federal reimbursement standard, by all appearances, would be much worse than the state SBL standards. The stress being felt by the medical community was not unwarranted. There was, is, and still could be legitimate cause for concern, but, ultimately, it might not be as bad as anticipated.
This article will explain which law—federal or state–applies to what claims and why. The article will also examine the relative standards of reimbursement under these laws and how the medical community has fared thus far. The article will conclude with an emphasis on what questions your revenue integrity process needs to be asking and why.
Federal Law Versus State Law.
Any medical provider treating a patient on an OON basis through the ER or inadvertently must know at the outset which forum—federal or state–will resolve any payment dispute. This is necessary because the forums vary in their timelines and procedures as well as the reimbursements likely to be awarded.
Generally, the state SBL’s regulate fully insured health plans typically written for small employers in that state. State SBL’s also govern state-employee self-funded health plans. All other self-funded plans, which includes large-employer plans and union plans regulated under ERISA, are typically governed by federal law. Federal-employee plans are also governed by federal law, not state law, so they too would come under the purview of the NSA. Accordingly, if a state, such as New York and New Jersey, already has its own SBL, the NSA does not preempt the laws of those states with respect to their state-regulated health plans.
In addition, the NSA applies to both federally regulated plans and state-regulated plans originating in states which have not yet passed their own SBL’s. This means any OON ER claim or OON inadvertent treatment comes under the federal law whether it is otherwise a state-regulated plan or federally regulated plan from a state with no SBL of its own.
Finally, the federal law applies to claims involving out-of-state plans, where the treatment is in one state and the plan originated in another. An ER claim, for example, involving a fully insured plan written by Blue Cross Blue Shield of Texas would be resolved in the Federal IDR process, because neither New Jersey, where the treatment occurred, nor Texas, where the policy originated and was regulated, would have jurisdiction.
In short, the federal forum covers claims involving federally regulated health plans from states with their own SBL’s, plus all qualifying claims from states without their own SBL, and also claims involving plans from states other than the states where treatment occurred. This makes for a complicated upfront analysis, but it is one that is critical to master because choosing the wrong forum can result in untimeliness. To assist with this, many providers investigate whether a plan is state-regulated or federally regulated before even billing the claim so that they are aware of the forum for dispute resolution immediately at receipt of the EOB or payment. The New Jersey SBL and the federal NSA both come with 30-day deadlines for objecting to a payment—New Jersey measured in calendar days and the NSA measured in business days–so if you commence an action in the wrong forum, you will likely be shut out of the arbitration process when you get to the correct forum. Knowing the proper forum when the EOB or payment is received goes a long way toward ensuring timeliness.
The Differences in Reimbursement Standards
Once you know the treatment is governed by an SBL or the NSA, and you recognize it is an underpayment resolvable under the relevant SBL or NSA, the final question is how will my practice or facility be reimbursed?
Typically, the states with SBL’s can be divided between what I like to call “medical-provider-friendly states” and “medical-provider-unfriendly” states. For purposes of this discussion, let’s shorten that to friendly and unfriendly. Several states, such as Maryland, Colorado, Michigan and Indiana, are what I call unfriendly SBL states. This means the standards of reimbursement used by the decision-making entity rely too heavily on Medicare rates and median in-network rates. These states almost indubitably are unfriendly to the medical community when it comes to SBL reimbursement. Other states, such as New York, New Jersey, Florida, Texas, Missouri, Ohio and several others, call for reimbursement that is “reasonable” or “commercially reasonable” or straight-up “usual and customary rates,” what we know as UCR. These are the friendly jurisdictions, where the reimbursement standard is not tied to Medicare or in-network rates.
The NSA is a sort of hybrid between the two. This is not surprising in light of the way legislation is passed at the federal level. There is an old saying in legal circles, “The two things you never want to see made are sausage and legislation,” and the NSA is a perfect example of why. For years the debate raged as to whether the reimbursement standard should be UCR-based or Medicare-based. Back and forth Congress debated, with the medical community lobbyists on one side and the insurance industry lobbyists on the other, until just after Christmas on December 27, 2020, the law was passed. The result for reimbursement (drumroll please): reimbursement is based on neither Medicare nor UCR but in reality can be based on either. Let me explain.
Broadly speaking, the reimbursement standard in the law is “reasonableness.” This is the same language used in many of the state SBL’s that are regarded as friendly and is the mainstay of any UCR analysis. But the federal law expressly prohibits “usual and customary charges” from the calculus. Medicare is also expressly excluded from consideration. These were obvious accommodations to each side of the debate by the parties orchestrating this messy compromise. So, where does that leave us in the federal process? We know what cannot be considered—so what can be considered?
Well, several factors–some mysterious, some vague, some questionable–can be considered. First, there is the Qualified Payment Amount or QPA, which supposed to represent the median in-network rate of the particular carrier in the geographic region where the treatment occurred. Well, many in-network rates, especially at the low end, are based on Medicare rates, so indirectly Medicare is being considered.
An additional factor is the training, experience, and quality of the practitioner or facility rendering the services. Presumably this means more reputable practitioners and facilities could be entitled to greater reimbursement, which seems reasonable.
The market share of the provider is also a factor, though how that might factor into such an analysis is unclear. Nor is it obvious why it should. Would smaller facilities be entitled to greater reimbursement or larger facilities? And if so, why?
The acuity of the patient is a factor, which is perfectly sensible, but one would think this would be in large part captured by the CPT codes billed, the modifiers, and the units charged.
The teaching status of the facility is a factor, which I assume seeks to capture additional expenses incurred by the facility as an educational institution, which seems eminently fair.
Finally, “[d]emonstrations of good faith efforts . . . to enter into network agreements” and any “contracted rates” between the parties within the previous 4 years can be considered. This would suggest that single-payor agreements and payments pursuant to “settlement” agreements could be considered, as well as payment data as long as it was not a function of charge data.
Thus far, the law has been interpreted in some very surprising ways.
The Surprises in the No Surprises Act
The federal regulators responsible for implementing the NSA interpret the law in ways that are extremely challenging to the medical community. Those interpretations have included:
- Affording the median in-network rate, the factor most favorable to the insurance industry, preferential treatment over other factors arbitrators are supposed to consider. This was twice vacated by a federal District Court in Texas.
- Requiring arbitrations to be on a per-CPT-code basis, rather than a per-claim basis. This means that in the normal course an entire claim cannot be arbitrated, only single specific codes can be arbitrated. This issue is pending before the same district court in Texas.
- The filing costs and arbitrator fees dramatically increased from 2022 to 2023, making many arbitrations cost-prohibitive. The fees are so high that it is almost as if the regulators are intentionally seeking to discourage dispute resolution.
- The delays alone in resolving payment disputes have cause hundreds of billions of dollars in damage to the medical community. Though the law became effective 1/1/22, the portal was not set up until 4/1/22; because the regulations regarding preferential treatment for the median in-network rate were thrown out by the courts twice, as of 12/31/22, only 4% of filed disputes were resolved.
All of this has served to place the medical community in a situation where they have lived with 15 months of underpayments and no resolution of the disputes, leaving the medical community being dramatically short-changed by the insurance industry, which took full advantage of the new law by dramatically dropping reimbursements.
There is cause for some optimism, however.
First, the federal District Court in Texas has already twice ruled in favor of the medical community regarding preferential treatment of the median in-network rate, and this same court is addressing the issues of the per-code requirement and the filing cost increase.
Second, the success rate for the medical industry will likely increase in light of the removal of the in-network rate’s preference.
Third, the regulators and lawmakers must be aware that if they do not reimburse appropriately for emergency medical treatment, they jeopardize the entire national medical emergency industry. Hospital personnel already have indicated to me that they are finding difficulty getting some specialties to perform ER call for the reason that the reimbursements are not worth it. This is very dangerous.
How all of this will ultimately be interpreted remains uncertain and the limited results thus far suggest it will be some time until any clear outcomes could be predicted. Results are mixed to say the least, with reimbursement ranging from very poor to very favorable. What is clear is that the vagaries in the legislation provide ample ammunition to both sides of the reimbursement issue. Only a large universe of arbitrator decisions will bring a semblance of predictability, and even that predictability will depend largely on which arbitrators hear the dispute.