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On August 19, 2022, the DOL, HHS and IRS (the departments) released final rules (the final rules) related to the surprise billing requirements of the No Surprises Act (NSA) of the Consolidated Appropriations Act, 2021 (CAA). The final rules modify certain requirements under the July 2021 and October 2021 interim final rules, which implemented the NSA provisions and federal independent dispute resolution (IDR) process, respectively. (Please see our prior articles on the July 2021 and October 2021 interim final rules.) The final rules also address portions of the October 2021 interim final rules related to payment determinations under the federal IDR process that were vacated by a Texas district court earlier this year. Several highlights of the changes under the final rules are outlined below.

The NSA provisions of the CAA apply to both insured and self-funded group health plans and became effective for plan years beginning on or after January 1, 2022. Amongst other items, NSA provisions protect participants from surprise bills for certain unexpected out-of-network (OON) items and services, including emergency services, air ambulance services and OON services received at in-network facilities. Absent an applicable All-Payer Model Agreement or state surprise billing law (generally only applicable to insured plans), participant cost-sharing for covered services is based upon the lesser of the OON billed charge or qualifying payment amount (QPA), which is the median contracted rate for the item or service in the geographic region. Plans and insurers must then address the remainder of the bill with the OON healthcare provider, facility or air ambulance provider (the provider).

Under the July 2021 interim final rules, the plan or insurer must send the provider an initial payment or notice of payment denial that includes the QPA if the QPA serves as the amount upon which participant cost-sharing is based. In response to public comments and to ensure providers have the necessary information to engage in meaningful payment negotiations, the final rules require an additional disclosure if the plan or insurer has “downcoded” the provider’s billed claim. The final rules officially define the term “downcode,” which occurs when the plan or insurer changes the service code or modifier submitted by the provider for the OON item or service to another deemed more appropriate and results in a lower reimbursement. Under the final rules, if a QPA is based on a downcoded service code, the plan or insurer must provide a statement that the service code or modifier billed by the provider was downcoded, an explanation of why the claim was downcoded, including a description of which service codes or modifiers were altered, added or removed, if any, and the amount that would have been the QPA had the service code or modifier not been downcoded.

The July 2021 interim final rules also require that a plan or insurer’s initial payment or notice of denial provide contact information, including a telephone number and email address, in the event the provider wishes to initiate a 30-day open negotiation period to determine the total payment. If the provider (or the plan or insurer) chooses to initiate the open negotiation period, the October 2021 interim final rules specify that the party must use the standard notice of initiation of open negotiation issued by the departments. This notice may be sent electronically if the party sending the notice has a good faith belief that the electronic method is readily accessible to the other party, and a paper copy is provided free of charge upon request. Accordingly, the departments emphasize that a plan or insurer cannot require providers to use their own online portal to initiate the negotiation period and must accept the standard notice of initiation of open negotiation from a provider.

A party may initiate the federal IDR process within four days after the end of an unsuccessful 30-day open negotiation period. The departments note that these timeframes are measured in business days and that plans and insurers should reflect this in statements to providers. Under the October 2021 interim final rules, the certified IDR entity (i.e., the arbitrator in the IDR process) may consider various factors when determining the proper OON payment amount to resolve disputes between providers and plans or insurers. However, the rules required that the certified IDR entity select the offer closest to the QPA, unless the certified IDR entity determined that any additional credible information submitted by the parties demonstrated that the QPA was materially different from the appropriate OON rate.

The Texas district court vacated this requirement in rulings in February and July 2022 due to inconsistency with the CAA, 2021 statutory language. (See our article on the Texas court decision in the March 3, 2022, edition of Compliance Corner.) As a result, the final rules remove the provisions of the October 2021 interim final rules that the district court vacated. Instead, the final rules specify that certified IDR entities should select the offer that best represents the value of the OON item or service under dispute after considering the QPA and then all permissible additional information submitted by the parties. Such additional information may include, for example, the level of training, experience, and quality and outcomes measurements of the provider, or the complexity of providing the service to the participant. In all cases, the certified IDR entities must evaluate whether the submitted information relates to the payment amount offered by either party and whether the additional information is credible. Under the final rules, the certified IDR entity must also assess whether the information is already accounted for by the QPA or by any of the other submitted information (to avoid double-counting). The final rules include five examples that illustrate how a certified IDR entity would evaluate submitted information to determine which party’s offer best represents the value of the disputed item or service.

The final rules also modify provisions of the October 2021 interim final rules requiring certified IDR entities to explain their payment determinations and underlying rationale in a written decision submitted to the parties and the departments. The final rules require that the written decision explain the information upon which the certified IDR entity based its decision that the selected offer is the OON rate that best represents the value of the item or service. The explanation must include the weight given to the QPA and any additional credible information regarding the relevant factors. The departments believe these requirements will ensure that certified IDR entities carefully evaluate all credible information, promote transparency and help the parties better understand the outcome of a payment determination. Additionally, if the certified IDR entity relies on additional information or circumstances when selecting an offer, the final rules require that the written decision must include an explanation of why the certified IDR entity concluded the information was not already reflected in the QPA. This requirement may provide the departments with information to inform future policymaking related to the QPA methodology.

Employers that sponsor group health plans should be aware of the release of the final rules and consult with their insurer or service provider for further information. The July and October 2021 interim final rules became effective for plan years beginning on or after January 1, 2022. The final rules, which modify certain provisions of the interim final rules, are scheduled to take effect on October 25, 2022.

Final Rule »
Fact Sheet »

On August 19, 2022, the DOL, HHS and IRS (the departments) released 23 FAQs that address various aspects of the surprise billing requirements under the No Surprises Act (NSA), which was part of the Consolidated Appropriations Act, 2021. The NSA provisions apply to health insurers and group health plans effective for plan years beginning on or after January 1, 2022.

The NSA provides patient protections against surprise medical bills for out-of-network (OON) emergency services, air ambulance services and certain OON nonemergency services provided at in-network (INN) facilities. The departments issued interim final rules in July 2021 to implement the NSA. Under the NSA and its implementing provisions, balance billing for covered items and services is generally prohibited and patient cost-sharing is limited. In the absence of an applicable All-Payer Model Agreement or state surprise billing law (which generally apply only to insured plans), patient cost-sharing is based on the lesser of the OON billed charge or the qualifying payment amount (QPA), which is the median contracted rate for the item or service in the geographic region.

The remainder of the OON bill must be resolved between the plan or insurer and healthcare provider or facility; the NSA establishes a new system for this purpose. Under this system, if the OON provider disagrees with the plan or insurer’s initial payment amount, the parties can engage in a 30-day open negotiation period. If the negotiations fail, either party can pursue the federal independent dispute resolution (IDR) process, in which the arbitrator selects either the amount proposed by the provider or the plan/insurer as the final OON payment amount. The departments issued interim final rules on the federal IDR process in October 2021. As modified by final rules issued on August 19, 2022, the IDR entity must consider the QPA and additional information submitted by the parties when making the final payment determination. Specific disclosure requirements are imposed upon plans, insurers and providers regarding the patient protections and payment dispute process.

Accordingly, the FAQs supplement the guidance under the prior interim final rules as modified by the recent final rules. Generally, the FAQs reinforce the other guidance and clarify the application in certain situations. Specifically, the FAQs address the NSA’s application to no-network plans, air ambulance services and behavioral health facilities. The FAQs also cover NSA disclosures, the methodology for calculating QPAs and the federal IDR process. The final few questions explain requirements under the Transparency in Coverage (TiC) final rule.

Applicability to No-Network and Closed Network Plans
The first five FAQs discuss the NSA provisions with respect to no-network plans, such as a plan that applies referenced-based pricing and pays a set amount for a covered item or service. FAQs 1 and 2 explain that the NSA would apply if the plan covered emergency services and air ambulance services because the protections are not limited to receipt of these services from in-network (INN) providers and facilities. However, the provisions that prohibit balance billing for nonemergency services received at INN facilities would never be triggered if a plan did not have a network of participating facilities. FAQ 3 notes that a no-network plan may need to use an eligible database to determine the QPA for NSA-covered items and services if there is insufficient information to calculate a median contracted rate due to the lack of participating providers. FAQ 4 explains that if a provider and no-network plan enter the federal IDR process to resolve a payment dispute for NSA-covered items and services, the final payment amount could vary from the referenced-based price. FAQ 5 describes how maximum out-of-pocket requirements apply to items and services subject to the NSA for a no-network plan.

FAQ 6 confirms that even if a plan generally does not provide OON coverage, the NSA protections for emergency services, air ambulance services and nonemergency services by OON providers at INN facilities would still apply if these services were otherwise covered under the plan.

Applicability to Air Ambulance Services
FAQs 7 – 9 address the applicability of the NSA provisions to air ambulance services. FAQ 7 clarifies that a plan is not required to cover nonemergency air ambulance services if such services are not otherwise covered under the plan terms. FAQ 8 confirms that the NSA protections apply to air ambulance services from an OON provider when the pickup point is outside of US jurisdiction. FAQ 9 acknowledges that, for purposes of calculating the QPA, the existing guidance does not provide for geographic regions outside of the US, although the departments intend to address this issue in future rulemaking. In the interim, plans are expected to use a reasonable method to determine the QPA, such as one based on the geographic region of the border point of US entry following patient pickup.

Applicability to Emergency Services Furnished in a Behavioral Health Crisis Facility
FAQ 10 clarifies that mental health conditions and substance use disorders that meet the NSA definition of an “emergency medical condition” are subject to the NSA protections. Accordingly, emergency services provided in response to a behavioral health crisis at a hospital emergency department or freestanding emergency facility are protected, regardless of whether the license issued to the facility uses the term “emergency services.”

General Disclosure for Protections Against Balance Billing
FAQs 11 and 12 address disclosure requirements regarding NSA protections. Generally, plans and insurers must make publicly available, post on a public website of the plan or insurer, and include on each explanation of benefits for a covered item or service, information regarding the NSA requirements and prohibitions, applicable state laws regarding surprise billing and the appropriate state and federal authorities for reporting potential NSA protections. The departments issued a model disclosure notice that may be used to satisfy these disclosure requirements, please see Appendix III to the FAQs and the information in the next section, “Standard Notice and Consent Form and Model Disclosure Notice Regarding Patient Protections Against Balance Billing”.

If a group health plan does not have a website, FAQ 11 explains that the plan may satisfy the public website posting requirements by entering into a written agreement under which a plan’s insurer or third-party administrator (TPA), as applicable, posts the information on its public website where information is normally made available to participants, beneficiaries and enrollees, on the plan’s behalf. The departments note this guidance applies in instances in which the plan sponsor may maintain a public website, but the group health plan sponsored by the employer does not. However, if the insurer or TPA fails to post the required information, the plan violates the disclosure requirements. Related FAQ 12 verifies that plans and insurers are only required to provide information on state surprise billing laws applicable to enrollees in the coverage.

Standard Notice and Consent Form and Model Disclosure Notice Regarding Patient Protections Against Balance Billing
FAQ 13 pertains to the standard notice and consent form that a healthcare provider must use when providing notice and seeking consent from individuals to waive the NSA protections, which is only permitted in certain limited situations. The FAQ also addresses the model notice plans can use to disclose patient protections against surprise billing. The departments revised the initial versions of the standard form and model notice provided for these disclosure purposes. The FAQ clarifies that providers may use either the initial or revised version of the standard notice and consent form for items and services furnished during calendar year 2022. However, providers may use only the revised version for items and services furnished on or after January 1, 2023. Similarly, plans and insurers may use either model notice for plan years beginning on or after January 1, 2022, and before January 1, 2023. For plan years beginning on or after January 1, 2023, only the revised model notice may be used. The various versions of the notices are accessible from the appendices to the FAQs. The revised version of the “Model Disclosure Notice Regarding Patient Protections Against Surprise Billing” applicable to group health plans is accessible from Appendix III at:
Model Disclosure Notice Regarding Patient Protections Against Surprise Billing (cms.gov)

Methodology for Calculating QPAs
FAQs 14 and 15 involve the methodology for calculating the QPA. FAQ 14 explains that if a plan or insurer has contracted rates that vary based on provider specialty for a service code, the median contracted rate (and consequently the QPA) must be calculated separately for each provider specialty, as applicable. This guidance recognizes that providers may only negotiate the rates in a fee schedule for services that they bill. For example, an anesthesiologist’s contract may include rates for anesthesia services that are a result of negotiations with the plan or insurer and that are materially different from the contracted rates the plan or insurer has for the same anesthesia services with other providers in specialties that do not bill for those services. FAQ 15 confirms that if a self-insured group health plan offers multiple benefit package options administered by different TPAs, the plan may allow each TPA to calculate a QPA separately for those benefit package options administered by the TPA.

Requirements for Initial Payments, Notices of Payment Denials, Related Disclosures and Initiation of the Open Negotiation Period and Federal IDR Process
FAQs 16 – 21 address the federal IDR process. FAQ 16 reinforces that plan and insurers must send an initial payment or notice of payment denial within 30 calendar days of the plan’s receipt of an OON provider’s “clean claim” for NSA-covered services, meaning a claim with the necessary information to make a payment determination. FAQ 17 confirms that providers have 30 business days from the day they receive an initial payment or a notice of payment denial to initiate open negotiations with the plan or insurer regarding the billed item or service. This timeframe to initiate open negotiations applies regardless of whether the plan or insurer timely sends the initial payment or notice of payment denial. For this purpose, FAQ 18 explains that the initial payment should be an amount that the plan or insurer reasonably intends to be payment in full based on the relevant facts and circumstances and as required under the terms of the plan or coverage. A notice of payment denial means a written notice from the plan or insurer that states that payment for the item or service will not be made by the plan or coverage and explains the reason for denial (e.g., subject to a deductible not yet satisfied). This notice is distinct from an adverse benefit determination, which is subject to the plan’s claims and appeals process.

FAQ 19 reviews the information plans, and insurers must provide with an initial payment or notice of payment denial when the QPA is used for participant cost-sharing purposes. This information must include the QPA for each item or service, an explanation of any provider billed service codes that were downcoded (i.e., replaced with codes deemed more appropriate but with lower reimbursement rates) and the applicable QPA(s) absent the downcoding, and the contact information, including a telephone and email address, if the provider wishes to initiate a 30-business-day open negotiation period to determine the total payment amount. Question 20 confirms that a provider can still open the negotiation period within 30 business days after receiving the initial payment or notice of payment denial, regardless of whether the plan has satisfied the applicable disclosure requirements. FAQ 21 reinforces that plans and insurers cannot require an OON provider to submit claims through an online portal to initiate the open negotiation process, but instead must accept the standard open negotiation form for this purpose.

Transparency in Coverage Requirements
Finally, FAQs 22 and 23 cover requirements under the TiC final rule. FAQ 22 addresses the requirement that plans publicly post machine readable files reflecting the plans INN rates and historical allowed amounts for covered items and services. The FAQ explains that if a group health plan does not have its own public website, the plan is not required to create one for this purpose but may satisfy the requirements by entering into a written agreement under which a service provider (such as a TPA) posts the machine-readable files on its public website on behalf of the plan. However, the plan must post a link to the historical allowed amount file hosted by the service provider on the plan’s own website, if the plan maintains a public website. If the TPA fails to post the files in accordance with the written agreement, the plan violates the disclosure requirements. FAQ 23 focuses on the TiC participant self-service tool requirement, which is effective for 500 items and services for plan years beginning on or after January 1, 2023. The FAQ provides the website for accessing the initial list of items and services, which will be updated quarterly.

Employers that sponsor group health plans may find the new FAQs helpful in understanding and satisfying the NSA and TiC requirements.

FAQs »

On August 19, 2022, the Departments of Health and Human Services (HHS), Labor, and the Treasury (the departments) provided a status update on the federal Independent Dispute Resolution (IDR) portal. The departments launched the portal on April 15, 2022, to resolve payment disputes between insurers/plans and providers for certain out-of-network (OON) charges. The portal was discussed in the April 28, 2022, edition of Compliance Corner. The No Surprises Act requires that the departments publish certain information about the federal IDR process for each calendar quarter.

Due to delays in implementation attributed to litigation, the departments have no data to report for the first quarter of 2022. However, they report that for a period beginning on April 15 and ending on August 11, 2022, disputing parties initiated over 46,000 disputes through the portal. Of the disputes initiated during that time, certified IDR entities rendered a payment determination in over 1,200 disputes.

The departments also report that many of these disputes were challenged based on eligibility. They note that non-initiating parties challenged over 21,000 disputes’ eligibility for the dispute resolution process. The departments believe that IDR entities determined that over 7,000 disputes were ineligible for the federal IDR process as a result of these disputes, although the departments point out that the large number of these disputes does not necessarily mean that these disputes are ineligible, only that a party has challenged the eligibility of a dispute and that additional review by the certified IDR entities is necessary to determine eligibility.

The departments also discuss the sources of delay in the IDR process. They point out that the challenges over eligibility were a primary cause of delays in resolving those disputes. However, the departments point out that reviews of these challenges could be processed more quickly when both parties provide all the information required for federal IDR initiation, including the disclosures (in particular, disclosures of the qualifying payment amount and necessary contact information) required of plans and issuers when they make an initial payment or provide a notice of denial of payment and a complete submission by the initiating party. With the expectation that an increased understanding of these requirements will facilitate a faster process, the departments provide a checklist of the information that providers and plans are required to disclose with the initial payment or notice of denial of payment.

Employers, particularly those with self-insured plans, should be aware of the existence of the portal and the process by which an IDR dispute is initiated.

Federal Independent Dispute Resolution Process Status Update »

The DOL recently announced it will hold a virtual public hearing regarding a proposed amendment to the prohibited transaction exemption filing and processing procedures. The DOL is also reopening the comment period for the proposed amendment.

ERISA and the Code generally prohibit a plan fiduciary from causing the plan to engage in a variety of transactions with certain related parties (including sponsoring employers, affiliates and service providers) unless a statutory or administrative exemption applies. However, the DOL and IRS have the authority to grant individual or class administrative exemptions from the prohibited transaction rules under certain conditions.

The DOL is also responsible for maintaining procedures for granting exemptions, including the application and documentation requirements. On March 9, 2022, the DOL proposed rules to update the application process for prohibited transaction exemptions. The proposed rule clarified the types of information and documentation required to complete an application to the DOL and expanded opportunities for applicants to submit information electronically. Please see our prior article for further details on the proposed rule.

The public hearing will be held on September 15, 2022, and (if necessary) September 16, 2022, via WebEx, beginning at 9:00 a.m. EDT. The comment period for the proposed amendment will be reopened on September 15, 2022. Employers who sponsor ERISA plans, and particularly those considering filing an application for a prohibited transaction exemption, should be aware of the hearing and additional comment period on the proposed rule.

Announcement »

Following the expiration of any federal FMLA or state protected leave, an employee may stay on health benefits for as long as the eligibility terms of the plan allow. The Summary Plan Description, any employee handbooks or other communication describing benefit eligibility during leaves of absence should be consistent with the plan terms and approved by the carrier (stop-loss carrier if self-insured). In addition to ERISA’s fiduciary requirement to follow the terms of the plan, if a group unilaterally allows an employee to stay on the plan for longer than the carrier allows, then they risk having to self-insure claims incurred during the extended period.

A solid leave policy can support consistent and predictable benefits administration during extended employee absences. However, deciding an employee’s benefit eligibility while on leave as a one-off or promising more than what’s allowed in the plan document further risks setting a precedent or inadvertent discrimination, even if intended as generosity. For example, the ADA could be implicated if an employer has an informal practice of allowing only nondisabled employees on sabbaticals to remain on the plan longer than disabled employees on medical leave.

Applicable large employers (ALEs) also need to consider the employer mandate. If an ALE uses the look-back measurement method to determine health plan eligibility, an employee who earned full-time status in the most recent measurement period would remain eligible throughout the stability period regardless of the number of hours worked. The chosen measurement method should be incorporated into the health plan’s eligibility terms consistent with the SPD, employee handbook and other benefits communications. Note that when employment ends during a stability period, the individual is no longer an active employee under the terms of the health plan or for employer mandate penalty purposes.

A COBRA qualifying event occurs when benefits (but not necessarily employment) are terminated consistent with the plan’s eligibility requirements and any employer leave policy. That is, a reduction in hours (extended leave of absence) has caused a loss of coverage.

The right to continue those coverages during leave for other, non-health benefits (e.g., disability, life) is similarly governed by the eligibility terms of each respective plan document. Employers should review their disability and life plans and carrier contracts to determine whether they hold any administrative responsibilities for providing conversion notices or paperwork when coverage terminates.

Administering benefits during leaves can be complicated. There are different state and federal laws at play depending on a given employee’s reason for leave and work location. Employers should work with their legal counsel and HR experts to set up solid leave policies and ensure compliance with all applicable laws. Employment termination for those who do not return from FMLA or state protected leave is a separate issue for which employers should consult with employment law counsel.