No Surprises Act
2020 has gone down as a year that many people would happily forget if they could. After being hit with one of the worst viral pandemics the world has ever seen, it’s hard to believe that anything good actually came out of the last calendar year. While the previous year of U.S. policymaking and legislative decisions was dysfunctional at best, the No Surprises Act came as an unforeseen victory for many.
After years of debating and argument, Congress successfully passed legislation on December 27, 2020, that will make it illegal for healthcare providers to bill patients for more than what the in-network costs would be under a patient’s insurance in most instances.
The bill, which will become effective on January 1, 2022, will apply to all health plans, including employer-based, small-group, and individual coverage plans, and will prohibit the surprise billing to patients receiving out-of-network emergency services, air-ambulance transportation, or out-of-network non-emergency services at in-network facilities. The No Surprises Act was a part of the 2020 year-end spending and the COVID-19 relief package.
What are Surprise Bills?
According to a study published by Health Affairs, one out of every five patients that visit an emergency department or undergo elective surgery receives an out-of-network bill from a clinician whom they could not choose, and more than 70% of ambulance rides are out of network. The new legislation will benefit patients across the country and is predicted to have ‘favorable’ effects on health care premiums and overall costs.
Since most insurance plans are set up in a way in which they aren’t required to pay out-of-network providers for the full amount of their charges, clinicians will typically bill the patient for the difference between the insurance payment and the patient’s charges. These ‘surprise’ bills can account for thousands of unexpected, out-of-pocket costs for many Americans every year.
Surprise billing has been a problem that has been known for years. Between January 3, 2019, and January 3, 2021, more than a dozen proposals addressing surprise billing were brought to Congress, all of which were met with disagreement about how out-of-network servicers should be reimbursed.
How Will the No Surprises Act Work?
Once effective, health plans must treat out-of-network services as if they were in-network; meaning they will not be able to bill a patient for an amount that would exceed what their insurance plan would cover. Once an out-of-network bill is sent, the No Surprises Act requires insurance providers to make an initial payment to the provider within 30 days of the service provided to the patient; however, the act does not specify the exact amount of the initial payment.
Before the No Surprises Act, most state laws and federal proposals imposed a minimum out-of-network payment requirement on most health care plans. This payment is typically made by establishing a “benchmark” of sorts, typically derived from a plan’s average cost, or by a process known as arbitration, a private process by which a third party will choose between payment offers from both sides. The No Surprises Act eliminates the benchmark process in favor of arbitration in the hopes that it will incentivize more reasonable payment offers.
If an out-of-network provider is dissatisfied with the initial payment, the provider can invoke a 30-day negotiation process, in which both parties (plan and provider) make final payment offers to an arbitrator. This process works equally in theory, however, it relies on the arbitrator being unbiased and reasonable.
This process is thought to not only incentivize fair and reasonable payment to out-of-network providers, but also eliminate the burden of payment placed on the patient, which is often a surprise, and can come without warning.
What Does This Mean?
The Office of Congressional Budget estimates that the No Surprises Act will not only reduce payments for clinicians but also lower insurance premiums by up to 1%, which could save taxpayers up to $17 billion over ten years. Saving patients from large, surprise out-of-network bills from emergency services and elective procedures is a major victory in helping make healthcare more affordable.
Removing the ability for providers to send surprise bills to patients also removes their leverage, and in doing so could reduce the overall costs of certain services and specialties such as air ambulance transportation. For now, much of the success of the No Surprises Act rests in the ability to enforce the laws of the arbitration process and ensure that providers cannot use the process to increase prices. While there is much work to be done, the No Surprises Act is a step in the right direction for patients and healthcare providers alike.
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