A Quick Primer on the No Surprises Act

When it comes to healthcare billing, patients and provider organizations struggle to get on the same page. Approximately 82 percent of healthcare organizations report they struggle to collect payments from patients, yet 86 percent of healthcare organizations still rely primarily on mailing paper medical bills as the first and only method for collecting payments.

Patients live in a mobile-only world and healthcare organizations have struggled to keep up when it comes to collecting self-pay balances.

This is problematic because annual deductibles have shot up 53 percent in the last five years; approximately 40 percent of working adults are in medical debt or have difficulties paying their hospital bills; and the average person in the U.S. spends around $5,000 a year on out-of-pocket health care costs.

The industry needs a better way for patients to pay their bills, and by the same token, there needs to be more accountability in the billing process to prevent unexpected and catastrophic bills, which is why Congress passed the No Surprises Act at the tail end of 2020.

What is the No Surprises Act?

The No Surprises Act is designed to tamper the complexities of patient billing and create more transparency between consumers and medical organizations.

The big takeaway of the new law is that healthcare organizations outsourcing lines of business within a facility, such as emergency medicine, labs, or anesthesiology, for example, must treat these out-of-network services as if they were in-network when calculating patient cost-sharing.

The 5,600-page law is set to go into effect in January 2022 and will apply to all insurance policies both in and outside of the marketplace and almost all employer-provided private healthcare plans.

"Patients live in a mobile-only world and healthcare organizations have struggled to keep up when it comes to collecting self-pay balances."

What does the No Surprises Act do?

The law’s provisions are three-fold:

  1. In-network rates apply to surprise bills. The Act ensures that patients only pay the deductibles and copays stated in their insurance plans, and that their private healthcare plans pay for emergency air ambulance and any costs for out-of-network services performed at in-network hospitals and facilities. This in-network cost sharing will usually be calculated at the median in-network payment amount of the patient’s plan. One big thing the Act leaves out is ground ambulance, a service that’s more likely than not to result in a surprise bill, with approximately 70 percent of ambulance rides leaving patients with a median bill of $450, according to a 2020 study from the University of Michigan.
  2. Puts an end to balance billing. Thirty-three states already have laws with varying limitations in place to protect patients from balance billing, which is when an out-of-network provider bills a patient for costs that weren’t covered by their insurer. For example, let’s say a patient went out-of-network for an x-ray and the imaging center charged them $600 for the scan and their insurance paid $350 and charged the patient $100 for their copay or deductible. If the imaging center ends up sending the patient a bill for the remaining $150, then that would fall under the definition of balance billing. One exception to this applies in specific non-emergency circumstances where the provider delivers written notice detailing a good faith estimate of out-of-network charges at least three days before the appointment and is signed by the patient. However, this caveat doesn’t apply to anesthesiology, laboratories, or radiology services.
  3. Payment disputes will be resolved by the insurer and provider. Healthcare providers and insurers will now have 30 days to figure out who owes what, and if they can’t come to an agreement then an independent dispute resolution process (IDR) steps in. When this happens, both entities will submit a final offer and the IDR has up to another 30 days to decide which billing makes the most sense, taking into account factors such as the severity of the patient’s illness and the insurer’s median in-network price. The losing party will have to pay the administration fees associated with arbitration.

How Surprise Medical Bills Impact Health Systems

Outsourced Departments

When a patient with private insurance goes to their in-network clinic for radiology, anesthesiology, or emergency medicine, there’s a good chance that they’ll be assigned a clinician who isn’t in their network. A 2018 study found one in five emergency room patients were treated by an out-of-network doctor. These kinds of procedures usually result in patients receiving high balance bills. What’s more, is that these bills from out-of-network specialists have increased patient spending by $40 billion annually.

Surprise billing only reinforces patient-provider tensions over costs.

A 2019 study found 60% of patients have attempted to get out-of-pocket cost information from their providers before their appointment but 51 percent struggled to procure accurate rates. Without upfront price transparency and a greater understanding of what the costs of care are, patients will continue to balk at paying higher medical bills as long as they remain in the dark.

Negative patient financial experience

Surprise medical bills aren’t just any old pain point, they’re prompting patients to ditch their providers and seek out different physicians. That same study found that 61 percent of younger patients are likely to switch providers after a disappointing payment experience. Overall patient satisfaction is not just tied to the care and treatment provided by medical professionals but also to how easy it is to understand and pay for the costs of the service.

Lost revenue from patients

Hospitals are dealing with insurmountable unpaid medical bills. Since 2000, the amount of uncompensated care delivered by hospitals totals $702 billion. Nearly three-quarters of a trillion dollars in patient care has turned into bad debt for hospitals. Those debts have only gotten bigger in recent years, with 68 percent of patients billed $500 or less not paying off the full balance in 2016, an 18 percent increase from the previous year. Those trends have only continued in the ensuing years because high-deductible health plan adoption continues to increase.

The Impact on Existing State Laws

There are currently 17 states with existing surprise billing laws and 33 states with balance billing laws that could be impacted by the new federal law.

Similar to HIPAA and the Affordable Care Act, though, the No Surprises Act means states with existing surprise billing or balance billing laws can be more protective than the federal law, as long as those state laws do not prevent the application of the federal law. Chances are good that those states laws won't be dramatically impacted by this new law.

4 Ways to Prepare for the No Surprises Act in 2022

Establish clear communication

Clinics and hospitals will need to strategize ways to convey procedure price structures that will increase consumer confidence and enable patients to feel educated on the math that goes into their medical bills. This is especially true for those specific non-emergency procedures where providers need to provide written notice of out-of-network charges.

Fix patient data systems

Providers need their insurance verification systems to be fully up to speed and accurately reflect up-to-date patient data. This might mean investing in more robust tech systems that can circumvent medical billing record errors. Or it might mean instituting new intake procedures or technology to capture accurate patient information such as mobile phone numbers and credit cards on file.

Create a negotiation strategy and determine an arbitration budget

When there’s a dispute over what the provider owes versus what the insurer is responsible for, facilities will need to come up with a protocol for handling the negotiation process. If 30 days have gone by and there’s still no resolution, then the issue goes to a third-party arbitrator and the losing party foots the bill for the administrative costs. Organizations need a budget to allow for arbitration expenses, which could ultimately impact other fiscal goals. It might also cause further delay in payments from insurance companies and patients.

Build a better patient financial experience

The Act prompts providers to make it easier for patients to understand and pay their bill. Establishing a solid patient-provider rapport requires a billing system that’s straight forward, simple, and transparent. Instead of sitting on hold with a call center or deciphering paper bills, this level of service can be delivered as a mobile experience, where patients can see a basic breakdown of hospital and physician services and their corresponding rates with the click of a link.

Revenue cycle teams, medical billing companies, and financial executives have less than a year to prepare themselves for the No Surprises Act. Healthcare organizations will be expected to overhaul their payment strategies and negotiation protocol to meet the required standards. Creating a clear-cut approach to out-of-network billing means introducing a payment system that’s equally transparent.

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