No Surprises Act Sparks Questions and Industry Concerns

While Awaiting Further Guidance PART 1


Author’s Note:
Due to space constraints, this article is being split into Part 1 and Part 2. This is Part 1.
Part 2 will be printed in an upcoming issue of California Broker, and will include updates from recently released rules and guidance.

We’ve all been there, or know someone close to us that has, or for health agents, you’ve seen this from the clients we all serve. You need healthcare, you see a doctor or go to an emergency room. You may even be hospitalized. If it’s an emergency, you go to the nearest emergency room, which may or may not be part of your health plan’s network. Even if the ER is part of the network, you are seen by an ER doctor, who it turns out is not part of the network. Or you have surgery, and although the surgery center may be a network facility, the surgeon or assistant surgeon, or more commonly, the anesthesiologist or radiologist, is not. You go about your life, you pay your copays or coinsurance, and think everything will be fine because, after all, you have insurance!

One day, you come home from work, check your mail, and there is an envelope with a medical provider’s address on it. You open it, thinking it’s only a confirmation of the insurance payment, or a copy of the plan’s EOB or something. And then, as you’re staring at the black and white in front of you, the text becomes blurred, you start to feel tunnel-vision coming on, because you’re staring at a bill from the provider that says you owe $800+ dollars, even though your most recent EOB that you received says that the bill was paid by your health plan. After the initial shock, you think it’s a mistake, so you wait until the next day and call your health plan, and you discover that the health plan has paid everything it was supposed to pay, so the provider has “balanced billed” you the difference between the billed charge and the amount paid by your health plan.

Imagine now (or recall from personal experience if it’s happened to you)
a similar situation after you were hospitalized for a major surgery. There was only one hospital near you, or perhaps they had to move you to a hospital that specializes in the type of care you need. You thought you did all of the right things. You had the surgery or procedure pre-authorized, and again, you thought everything would be fine after you pay your copays or coinsurance, because once again, you have insurance!

And then it arrives in the mail…that “surprise” bill that says that you owe $47,500 for your recent hospitalization or surgery expenses. This time, it’s not just tunnel-vision; it is panic. Your body is drenched in sweat and you are visibly starting to shake, because you don’t have $47,500 right now (or ever!) to pay for this! As someone who in my past ran a third party administrator and have seen many, many balance bills, I will tell you that I’ve seen balance bills of over $125,000 for hospitals and over $75,000 for air ambulance charges. And I’ve heard of them billing for far more than even this!

Some people actually ended 2020 and began 2021 in a positive financial position, because they were able to keep their jobs during the pandemic. Because you were stuck at home, you didn’t spend much, so your bank account balance is higher than normal. But for many, it’s been a tough financial 18+ months. COVID-19 has impacted our lives in so many ways, including, in many cases, our income. We may feel lucky that we didn’t lose our jobs. But basic expenses, like the cost of buying a home, the cost of fuel for your vehicle, and the cost of groceries we need have all increased. And our pay has decreased or stayed the same. Or perhaps you were laid off, and you’re now just starting to get back on your feet, but it seems like everything you do or need to buy is now more expensive. Your savings account has decreased, or perhaps been depleted.

Whatever your financial position may look like right now, none of us wants a surprise medical bill. The good news on that front is that recent federal actions, it is hoped, will stop these sorts of provider practices from happening in the future.

For some time, many in the health insurance industry have asked for two important pieces of legislation:

1. Transparency in health care costs and control of providers that “balance bill” their patients after insurance payments and
2. normal plan copayments and coinsurance have been paid.

This is an amount in excess of the expected or “usual and customary” or “reasonable” amount. This “Surprise Billing” practice is so common that it has become almost the norm. It’s definitely one of the most important issues in the healthcare industry in the minds of consumers, and therefore, the legislators. Recent legislationon both of these items will soon bein effect. New legislation, as we all know, often brings confusion and misunderstanding.

I will attempt now to break these rules down for you in understandable terms.

On July 1, 2021, federal departments — HHS, DOL and Treasury, as well as the Office of Personnel Management (OPM) — released an interim final rule (IFR) with a comment period on the No Surprises Act. This is part of the Consolidated Appropriations Act (CAA), and it goes into effect on January 1, 2022. This rule is entitled “Requirements Related to Surprise Billing: Part 1.” This was followed by Frequently Asked Questions (FAQs) in late August, which dove into many provisions of the No Surprises Act and Transparency in Coverage rules.

Most health plans, whether they are group plans, individual plans, a Marketplace plan or Medicare plans, offer a network of providers and facilities (your PPO or EPO network – or “in-network” providers) that agree to accept payment at an established, contracted rate. Non-network providers generally charge higher amounts as there is no contract rate pre-established for that service or stay.

In many cases, the out-of-network provider may balance-bill the patient for the difference between the billed charge and the amount that the health plan or insurance has paid, unless it’s prohibited by state law. Balance bills can happen in both emergency and non-emergency care.

In the case of an emergency, as briefly described above, the patient usually goes to the nearest emergency room. In many cases, although the ER is a network-contracted facility, many of the providers that work inside of that facility may not be part of those networks. Often emergency rooms are staffed by independent contractors or doctors not belonging to many networks; they are often non-negotiated third parties, providing services such as anesthesiology, pathology, radiology, rehabilitative care, physical therapy, or neonatology. In many cases, the patient has no control over the physician or other provider inside those facilities. When I was managing a TPA some years ago, we called these “forced providers.” It’s unfortunate, but common, and even more so because most consumers do not routinely ask their providers inside of an emergency room or hospital if they are contracted. The result is often a balance bill.

We also see this commonly in the event that you need an air ambulance. You generally do not have the ability to select an air ambulance from a network provider directory. Air ambulance companies have notoriously over-charged in many circumstances.

It’s important to note that in most cases, surprise bills usually do not count toward your deductibles or out-of-pocket maximums, which many people do not understand.

According to CMS: 

  • A recent study found that payments made to providers by people who got a surprise bill for emergency care were more than 10 times higher than those made by other individuals for the same care.
  • 9% of individuals who got surprise bills paid more than $400 to providers, which may result in financial distress for consumers, given recent findings that show 40% of Americans struggle to find $400 to pay for an unexpected bill.
  • Studies have shown that in the period from 2010-2016, more than 39% of emergency department visits to in-network hospitals resulted in an out-of-network bill, increasing to 42.8% in 2016. During the same time, the average amount of a surprise medical bill also increased from $220 to $628.
  • Although some states have enacted laws to reduce or eliminate balance billing, these efforts have created a patchwork of consumer protections. Even in a state that has enacted protections, they typically only apply to individuals enrolled in insured health insurance coverage, as federal law generally preempts state laws that regulate self-insured group health plans sponsored by private employers. In addition, states have limited power to address surprise bills that involve an out-of-state provider.

It is important to understand that the provisions of the No Surprises Act relate back to former ACA requirements, such as the requirement of plans to reimburse emergency services at a rate at least the amount that would have been paid in-network, regardless of whether or not there was a network in place. The ACA did not, however, prevent the out-of-network emergency room from any sort of balance billing.

The interim final rules (IFR) generally apply to group health plans and health insurance issuers offering group or individual coverage, including grandfathered health plans, effective January 1, 2022. The No Surprises Act does not apply to retiree-only plans, excepted benefits, short-term limited-duration plans, Health Reimbursement Accounts (HRAs), flexible spending accounts (FSAs) or health savings accounts (HSAs).

What is the intention of the No Surprises Act?

The No Surprises Act was passed in December, 2020, as part of the Consolidated Appropriations Act of 2021. The intention of the law is to protect consumers from the types of balance-billing or surprise billing practices described above. The No Surprises Act focuses on billing practices in certain non-network situations by limiting the amount of the bill to the amount that would have been payable under an in-network arrangement.

This piece of legislation was bipartisan, which is not exactly common in Washington, D.C. in recent years. That tells you that everyone seems to agree on the intent: To protect consumers from these horrendous and detestable provider practices. However, I do want to mention up front that although this legislation, as it stands now, protects consumers from these practices in non-network situations, it may not fully protect self-funded health plans when they use financing methods such as reference-based pricing, which I will address later in this article.

Summary of The No Surprises Act’s Interim Final Rules (IFR)

Protections addressed in the No Surprises Act apply primarily to emergency services, non-emergency services delivered by out-of-network providers at an in-network facility, and out-of-network air ambulance services.

If a plan or health insurance coverage provides for any benefits for emergency services, this rule requires emergency services to be covered without any prior authorization, regardless of whether the provider is an in-network or out-of-network emergency facility. In addition, plans must cover emergency services regardless of other terms or conditions of the plan or health coverage, other than exclusions due to coordination of benefits or any waiting period.

The interim final rule limits cost sharing for out-of-network services to be limited to the amount paid in-network, and requires such cost sharing to count toward any in-network deductibles and out-of-pocket maximums. Most importantly, it prohibits balance billing.

The IFR states that these limitations apply to out-of-network emergency services, air ambulance services furnished by out-of-network providers, and certain non-emergency services furnished by out-of-network providers at certain in-network facilities, including hospitals and ambulatory surgical centers.

Specific provisions of the No Surprises Act limit out-of-network services to billing amounts without cost-sharing requirements that are greater than those applied in-network, and limits cost-sharing as if the total amount billed for services are equal to the “recognized amount.” Commonly, in an out-of-network scenario, this has been limited to the Usual, Customary & Reasonable (UCR) amount. Under the No Surprises Act IFR, the amount must be calculated based on one of the following amounts:

  • An amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act.
  • If there is no such applicable All-Payer Model Agreement, an amount determined under a specific state law.
  • If neither of the above apply, the lesser amount of either the billed charge or the “qualifying payment amount,” (or QPA), which is generally the plan or issuer’s median contracted rate. (We now have a new industry acronym – QPA – for qualifying payment amount, just in case you are confused).

    According to the IFR, the All-Payer Model Agreement is an agreement between the Centers for Medicare & Medicaid Services (CMS) and a state to test and operate systems of the all-payer payment reform for the medical care of residents of the state under the authority of Section 1115 A of the Social Security Act. It may be voluntary or mandatory for a given payer.

    Emergency services also include any post-stabilization services, unless all of the following conditions are met:

  • The treating provider determines the patient is able to travel using non-medical transportation to an available provider or facility
  • The provider or facility provides notice and obtains consent
  • The patient is in a condition to receive the information and provide informed consent
  • The provider or facility satisfies any additional requirements or prohibitions under state law.

Employer/Plan Sponsor Concerns
Employers are just now starting to realize that all of the provisions of the No Surprises Act will impact them. I asked our attorney, Marilyn Monahan of Monahan Law Offices, what she thinks are the most important/impactful sections that affect employers and their insured participants. Marilyn responded as follows:
      a. The restrictions on surprise billing for out-of-network emergency and non-emergency services will be good news to many participants who have experienced—or who are worried about experiencing—surprise medical bills. During open enrollment, employers should consider the most effective way to explain these new rules, so that participants understand when and how they apply.
       b. The new restrictions on ancillary services provided in conjunction with a non-emergency visit to an in-network facility (such as anesthesiology, pathology, radiology, and diagnostics) will also be good news, since the definition of ‘ancillary services’ encompasses a broad range of services that have often been the basis for surprise bills in the past.

Many plans and claims administrative practices will automatically deny an emergency claim, for example, based on a predetermined list of final diagnosis codes without regards to the actual symptoms being presented to them at the time of care. It is often only following claim denial that a plan or claims administrator will review all of the facts, and generally upon a formal (but sometimes informal) appeal.

     c. Employers with self-funded plans should review their plan documents to ensure that the terms are consistent with the IFR. These employers should also communicate with their TPA to ensure that the TPA will be prepared to administer benefits according to the new rules as of the applicable effective date and make any amendments to their services agreement that may be necessary. In fact, a detailed conversation with the TPA about the implementation process for the many provisions in the CAA that impact health and welfare plans is essential.

Administrative Concerns and Confusion Over the No Surprises Act
The No Surprises Act throws confusion into the claims payment industry by requiring that coverage be provided without limiting what constitutes an emergency medical condition, solely on the basis of diagnosis codes, such as the ICD-10 codes, which are common in claims adjudication use.

Many plans and claims administrative practices will automatically deny an emergency claim, for example, based on a predetermined list of final diagnosis codes without regards to the actual symptoms being presented to them at the time of care. It is often only following claim denial that a plan or claims administrator will review all of the facts, and generally upon a formal (but sometimes informal) appeal.

If you review the term “emergency medical condition,” it refers to a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, who possesses
an average knowledge of health and medicine, could reasonably expect to either:
     1) place their health in serious jeopardy
     2) seriously impair bodily functions
     3) cause serious dysfunction to a bodily organ or part.
In general, it requires a plan to consider anything a prudent layperson should consider, given all documentation and all symptoms, without relying solely on an ICD-10 code. This includes mental health and substance abuse disorders.

Plans must ultimately determine whether the standard was met by reviewing presenting symptoms, without imposing any type of time limit between onset and presentation for emergency care.

I asked Marilyn what she thinks plan sponsors and administrators need to focus on to apply this prudent layperson standard in an emergency situation.

Marilyn responded: “If the plan documents apply a different standard to claims for emergency services, amendments will have to be made. The TPA’s claims procedure manual and processes must also be updated. The TPA should also consider this guidance from the preamble: ‘the determination of whether the prudent layperson standard has been met must be based on all pertinent documentation and be focused on the presenting symptoms (and not solely on the final diagnosis).’ Based on this reminder, the revised claims procedures should also include, as necessary, updated record keeping requirements that will enable the plan to prove that it has satisfied the new legal standard in each case. The emphasis placed on the prudent layperson standard in the preamble to the regulations implies that this issue may be a priority for the Departments. (86 Fed. Reg. 36872, 36879-36880.)”

In relation to the administrative and legal process for plans, including plan documents and plan communications, Marilyn continued: “The Surprise Billing IFR — along with the other provisions of the CAA applicable to health and welfare plans — place many new obligations on plans and issuers:

  • Employers with fully insured plans should communicate with their carriers to ensure the carriers intent to comply on time.
  • Employers with self-funded plans have more work to do.

The changes created by the CAA will probably require changes to plan documents, ID cards, provider directories, and more. They may also require changes to the terms of TPA contracts and claims processing manuals.

Employers should be prepared to discuss with their TPA who will be responsible for implementing each relevant section of the CAA, and the timeframe for implementation. Employers should also consider whether any changes need to be made to the written contract with the TPA, including adjustments in cost, scope of services, indemnification, and other key clauses.”

Some plans and administrators may be concerned that if you can’t control costs by using strict ICD-10 codes, what can plans and administrators do to control the cost of health care, particularly in a self-funded health plan? Plans may have to find alternate ways of reducing or maintaining costs, such as higher
ER copays or coinsurance, raising deductibles, or having additional deductibles for ER services. Other ways of keeping ER costs down in a health plan is to educate your employees on more cost-effective steps prior to walking into an emergency room. This would include things like using Urgent Care Centers instead of high-cost emergency rooms, or for many services that are not life-threatening, implementing new or encouraging plan participants to use telehealth options.

Qualifying Payment Amount – QPA – Applications to Self-Funded Health Plans
The definition of a qualifying payment amount and applications to the marketplace are a bit confusing — particularly in the self-funded market. The QPA is defined as the median of the in-network (or contracted) rate in a geographic area, and applies in other portions of the law, including the base-line factor that an arbiter may consider when they determine the final amount to be paid under the new federally-established independent dispute resolution process (IDR – yes, another new acronym).

Another important self-funded consideration is that ERISA must always preempt state surprise billing laws when applied to self-funded plans. The IFR allows the option for self-funded plans to voluntarily opt-in to a state law.

Under the No Surprises Act, when a self-funded plan and an out-of-network provider cannot agree on a rate, they must go through an independent dispute resolution process.

  • The IFR stated that a median contract rate should be determined by taking into account every group health plan offered by the self-insured plan sponsor.
  • The IFR allows for administrative simplicity for self-funded plans to permit the TPA who processes their claims to determine the QPA for the plan sponsor by calculating the median contract rate based on all of the plans that it processes and administers claims for.
  • The IFR states that the contracted rates between providers and the network provider for the health plan would be treated as the self-insured plan’s contracted rates for purposes of calculating the QPA.

Third Party Administrators will find the No Surprises Act quite complicated, and frankly, quite expensive to administer. TPAs will need to set up their claims payment systems to administer the QPA. Most self-funded health plan sponsors will rely on their TPAs to assist them with all of the No Surprises Act requirements. It will likely be the norm for TPAs to assist self-insured plans with the Model Notice that is required. Ultimately, the No Surprises Act will be costly to administer for TPAs. They will need to determine the QPA, which will not be easy and will not be cheap in most cases. In addition, changes will need to be made in understanding the implications of the ER services determination. Extra steps will need to be taken up front to examine more documentation and understand symptoms, rather than initially denying a claim up front. All of that will cost more — in claims adjudication training, in system adjustments, and more. Not to mention the QPA’s independent dispute resolution process.

What this means to self-funded employers is that they should expect their claims fees to increase due to the No Surprises Act. The independent dispute resolution will be discussed next month in Part 2 of this article.

The geographic regions used to determine the contracted rates will follow the metropolitan statistical areas (MSA) used by both Medicare and the U.S. Census. The IFR includes the “rule of three” expansion, meaning that if
a plan cannot identify three rates to determine a median rate within an MSA, then the plan is permitted to increase the size of the MSA to include the state as a single region.

The IFR issued clear guidelines for steps to be taken in order to determine the appropriate rate, using primarily databases. This piece ties in directly with the Transparency rules, which were in part also addressed in the IFRs. One important provision that was included in the IFR addressed self-insurance industry concerns related to the possibility of conflicts of interest while using databases. The IFR states that the organization maintaining the database cannot be affiliated with, controlled by, or owned by any health insurance issuer, provider or healthcare facility.

Although the IFR did not address all self-funded concerns, the rules did for the most part, follow comments made from industry associations such as the Self-Insurance Institute of America (I am a member of this association). Overall, the self-funded industry seems pleased with the initial set of rules, and are anxiously awaiting additional guidance.

From an administrative perspec-tive, many of the requirements were not addressed in Part 1, but we’re hoping those will follow soon in expected
fall rules and guidance. We are also expecting more guidance on the arbitration/IDR process to be released in September.

We will continue this article in Part 2, which will include updates from additional rules, which are expected to be released in the coming days or weeks!

Author’s Note: I’d like to thank Marilyn Monahan, Ryan Day and Larry Thompson for their assistance with this article. I’d also like to thank NAHU for the informative webinar in July, which started me on the path to fully research this topic.

DOROTHY COCIU is the VP of Communications for the California Association of Health Underwriters (CAHU) and the president of Advanced Benefit Consulting & Insurance Services, Inc., Anaheim, Calif. She also hosts the Benefits Executive Roundtable Podcast series on many important educational topics. Dorothy’s educational articles, classes and other important information can be found at
She can be reached at
Classes can also be found on her educational platform, the Empowered Education Center, at