Health Care Policy Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

A Surprise Medical Billing Fix Finally Gets Through Congress – Buckle-Up for the Rulemaking Process

The fight over surprise medical billing in Congress is OVER! Let the fight during the rulemaking process BEGIN!!
- Analysis: That’s somewhat of a tongue-and-cheek comment, but it’s sooooooo true. What I mean is this: Although Congress finally passed legislation that will protect patients from surprise bills, NEITHER the medical providers NOR the insurance and employer communities are particularly happy with the specifics of this legislative fix. As a result, significant pressure will be put on the incoming Biden Administration as the soon-to-be Biden HHS, DOL, and Treasury start developing regulations implementing the requirements set forth in the legislation. Before we start talking about these new requirements, it is important to emphasize that the fight over surprise billing was NEVER about whether and how patients should be protected. The fight has always been over HOW MUCH insurers and self-insured plans (i.e., the “payors”) are going to pay medical providers when there are out-of-network charges in certain cases. These “certain cases” include (1) out-of-network emergency situations (e.g., when I rush my neighbor who is having a heart attack to the closest hospital, but that hospital happens to be out-of-network for my neighbor) OR (2) medical care provided by an out-of-network provider at an in-network facility without the patient’s consent (e.g., when an out-of-network anesthesiologist unknowingly provides services during a knee surgery performed by an in-network surgeon at an in-network hospital). This “fight” has centered around whether the payors should only be required to make payments based on some sort of government-defined “benchmark” rate – OR – whether the payors and providers should be required to settle their payment disputes through an arbitration/independent dispute resolution (IDR) process. Payors have long-argued that an arbitration/IDR process adds administrative costs to an already bloated health care system. Payors have also argued that arbitration/IDR favors providers, resulting in more than “reasonable compensation” payments to the providers. Related to this last point, the providers have long-supported arbitration/IDR for resolving out-of-network payment disputes due to the higher payments they typically receive through this process. And, providers have derided resolving payment disputes through the use of a government-defined “benchmark” rate for fear that they would take a pay-cut because this “benchmark” rate would typically be lower than what the arbitration/IDR process might award them. In the end, the providers won the battle, but not necessarily the war. What I mean is, the recently enacted legislation requires payors and providers to resolve their payment disputes through an arbitration/IDR process ONLY. A “win” for the providers. HOWEVER, an arbiter is ONLY allowed to take certain factors into consideration when determining a final payment amount, most notably, the arbiter is required to take into account the median in-network rate in the geographic area for the particular medical item or service. This factor is akin to the type of “benchmark” rate that payors had been advocating for (and the type of “benchmark” rate that providers had been trying to kill). A “win” for the payors. Payors also convinced Congress to prohibit the arbiter from taking into account the provider’s “billed charges,” which – just to put this into perspective for you – is often times hundreds/thousands percent of Medicare prices. Another “win” for payors. The bottom-line is this: The providers got THE BIG “win” here with arbitration/IDR process ONLY, but they are none-too-happy that the arbiter is limited to taking into account the median in-network rate in a geographic area and not allowed to take “billed charges” into account. The payors got SOME “wins,” but they are none-too-happy that Congress agreed to an arbitration/IDR process ONLY. I joked to a Congressional staffer friend who was heavily involved in developing these rules that if no one is happy, it means that Congress got it right. But, there are a lot of people who do not think that joke is funny. Last comment: The legislation kicks A LOT of the detail on how these new requirements will work in operation to the Federal Departments. This means that the Federal Departments (i.e., the soon-to-be Biden HHS, DOL, and Treasury) will have their hands full when it comes to developing implementing regulations. You can bet-your-bottom-dollar that A LOT of dollars are going to be spent on trying to influence the rulemaking process. It already started, despite the incoming Biden Administration not even getting the keys to the castle yet. Again, the providers may have won the battle on surprise billing, but the war is certainly NOT over.

Rules and Requirements Associated With the Surprise Medical Billing Fix

Below, I endeavor to walk through – step-by-step – the rules and requirements associated with determining the payment amount for out-of-network charges in the above described situations. I also add some commentary associated with each rule/requirement I describe. Again, there is a TON of stuff that was included in this legislative fix, and I am not able to cover everything because I don’t want this to be a 20-page update (only 7 pages :]). I will circle back in future updates with additional details.
- RULE: The first rule is a no-brainer: In an out-of-network emergency situation – OR – in a situation where an out-of-network provider performs medical services at an in-network facility, the amount payable by the patient is equal to the health plan’s in-network rate (i.e., NO balance bills for the patient). Note, any payments made by the patient will be counted toward their in-network deductible as well as their out-of-pocket maximum.

MY COMMENT: Providers, payors, policymakers, etc. have ALWAYS agreed that patient’s should NOT pay out-of-network charges that exceed (1) the patient’s health plan’s in-network rate and (2) whatever cost-sharing responsibility the patient has under the plan. For example, if the patient has NOT YET met their in-network deductible, the patient would pay the in-network rate – OR – if the patient already hit their in-network deductible (or hit their deductible by virtue of paying a portion of this claim), the patient would pay any co-pay or co-insurance in excess of their in-network deductible as called for under their health plan. Note, the requirement to count the patient’s payments toward the patient’s out-of-pocket maximums differs from current ACA regulations, which ONLY counts in-network services toward the out-of-pocket maximum limits (i.e., out-of-network charges are currently NOT counted toward the ACA’s out-of-pocket limits). This change makes sense though because if Congress is converting these out-of-network charges to in-network charges for these limited purposes, then you should continue to track the ACA’s current regulations and count these in-network charges (which are really out-of-network) toward the ACA’s out-of-pocket limits.

- RULE: The payment amount of any excess out-of-network charge will be determined (1) by an arbitration/IDR process – OR – (2) if the payor and provider can agree to a negotiated payment amount BEFORE going to arbitration/IDR in the first place.

MY COMMENT: Congress hopes that providers and payors will agree to a negotiated amount BEFORE going to arbitration/IDR (thus negating the arbitration/IDR process altogether). Congress actually nudged the providers and payors in this direction by building in some disincentives to going to arbitration/IDR, which we will discuss more fully below.

- RULE: Not later than 30 days after the bill for the medical services provided to a patient is sent by the provider to the payor, the payor must decide if it wants to (1) make an “initial payment” of the bill or (2) deny the payment in whole. If, during the ensuing 30 days after the payor made an “initial payment” or sent a denial notice, the provider and payor CANNOT come to an agreement on a negotiated payment amount, then the provider or payor has 4 days to decide if they want to go arbitration/IDR.

MY COMMENT: Here is an example of where the rulemaking process is going to have A LOT to say on how this is operationalized. Specifically, the legislation does NOT define what an “initial payment” should be. Soooo, at least at this point, it appears that payors have A LOT of discretion over what amount they will even pay to the provider when the payor receives a bill for an out-of-network charge. Will the Federal Departments define what an “initial payment” should amount to? It appears that making this “initial payment” is NOT mandatory because the legislation indicates that the payor can deny the payment outright and then roll-the-dice with the provider. Will the Federal Departments try to change this rule through a “creative interpretation” of the legislative language and require payors to pay at least something to the provider? After all, if the payor denies the claim outright, it appears that the provider will be left holding-the-bag (i.e., NOT receive any payment at all) until (1) the provider and payor agree to a negotiated amount – OR – (2) an arbiter decides on a final payment at the conclusion of the arbitration/IDR process.

- RULE: If and when the provider and payor opt to go to arbitration/IDR, (1) the payor will submit the amount that it feels it should be required to pay – AND – (2) the provider will submit how much it feels it should get paid. The arbiter will then decide what the final payment amount should be.

MY COMMENT: This is the so-called “baseball style” arbitration where each party comes with their own dollar amount for the payment, and the arbiter will ultimately determine the final payment amount. The arbiter’s decision is 100% binding on both parties, but both parties can continue to negotiate out their own payment amount if they want to.

- RULE: During the arbitration/IDR process, the arbiter is permitted to take into account the following factors when determining a final payment amount: The level of training or experience of the provider; Quality and outcome measures adopted by the provider; Market-share held by the provider OR the payor in the geographic area; Patient acuity and complexity of services provided; Teaching status of the provider; Efforts by the provider to join the payor’s network; Any contracted rates over the prior 4 years. As stated above, the arbiter MUST also take into account the median in-network rate for the medical item or service in the geographic area, and the arbiter CANNOT take into account the provider’s “billed charges.” Here is another important factor: The arbiter CANNOT take into account rates paid by Medicare, Medicaid, CHIP, and TRICARE when determining a final payment amount.

MY COMMENT: Providers do NOT like that the arbiter CANNOT take into account “billed charges.” Providers are also unhappy that the arbiter has to consider the median in-network rate in the geographic area. Providers contend that Congress is requiring payments based on a “benchmark” rate WITHOUT the legislation actually calling for a “benchmark” rate. Payors are a bit confused over the prohibition against taking into account rates paid by Medicare. It is all too common that in cases where there is a payment dispute between a payor and provider that the negotiated payment amount between these two parties is a percentage of Medicare rates (e.g., 180% or 200% of Medicare). Also, arbiters often times determine final payments based on a percentage of Medicare. Sooooo, will the Federal Departments – during the rulemaking process – clarify that a PERCENTAGE of Medicare CANNOT be taking into account? In my opinion, that would be weird. At the end of the day, virtually every payment for a medical item or service is a percentage of Medicare. Why? Because Medicare rates are a known quantity and an easy base-line on which to determine payment amounts, even if those payments are 1,000% of Medicare. Look, I get why this prohibition was added. Conservative Republicans felt that if an arbiter could base any final payment amount on, for example, Medicare rates, this was too akin to price-setting, something that happens under a government-run single-payer system like the type of health care system Democrats are advocating for (their words, not mine). So again, I get it, and I don’t have any issues with the “messaging” here. AND, I am by NO means advocating for the use of Medicare rates and price-setting. BUT, from an operational perspective, how should this prohibition against using Medicare rates work? Payors will certainly be asking/telling the soon-to-be Biden HHS, DOL, and Treasury how this should work.

- RULE: Once the arbiter determines the final payment amount, the loser is required to pay ALL of the costs associated with the arbitration/IDR process.

MY COMMENT: This is intended to discourage payors and providers from going to arbitration/IDR in the first place, because NO ONE wants to pay someone else’s expenses, especially if you LOSE.

- RULE: There is a 90-day “cooling off period,” meaning, if a provider takes a payor to arbitration for a particular medical item or service provided to a particular patient, the provider is prohibited from taking the same payor to arbitration for the same medical item or service provided to OTHER patients who are covered under the payor’s plan. In other words, the provider can ONLY go to arbitration with a payor for 1 medical item or service provided to 1 patient within a 90-day period. The provider CANNOT go to arbitration for the same medical item or service provided to OTHER patients within this 90-day window. The legislation does allow providers to “batch” together out-of-network charges for the same medical item or service covered by the payor, but these charges would generally all have to occur within the same 30-day period, which is not very likely or practical.

MY COMMENT: The 90-day cooling off period is intended to solve the following problem: The insurance and employer communities provided to Congress examples where providers have gone straight to arbitration without negotiating any payment for a balance bill. It was argued that these providers are abusing the system, and they are going to arbitration way too often, which simply increases administrative costs, and often times results in the provider getting paid more than what most would consider “reasonable compensation.” In the end, this argument convinced Congress that something needed to be done to limit the number of times providers could go to arbitration, and this provision was added with the hope that it would encourage providers and payors to negotiate/settle payments amounts for similar out-of-network charges BEFORE going to arbitration/IDR.

- RULE: The legislation directs HHS, the DOL, and Treasury to develop regulations by July 1, 2021 enumerating the “methodologies” payors must use when determining the amount of their in-network rate for an out-of-network charge in the above stated situations.

MY COMMENT: As described above, the legislative language says that this rate is essentially equal to the plan’s in-network rate for the medical item or service. To me, that’s pretty straight-forward. Having said that though, nothing is straight-forward in health care, so we shall see what methodologies for determining the in-network rate are developed during the rulemaking process. The legislation also states that when developing the methodologies for determining the in-network rate, HHS/DOL/Treasury is required to take into account value-based payments, which is good in my view, but it doesn’t make things as straight-forward as I am suggesting. Interestingly, the legislation explains that whatever this in-network rate for these out-of-network charges may be, such rates for medical items and services furnished in 2023 and beyond shall increase each year by the Consumer Price Index (CPI). BTW, CPI increases at a MUCH LOWER rate than premium increases, and lower than medical inflation. Sooooo – at least to me – the amount of the in-network rates that are payable in these out-of-network situations will ratchet down year-over-year, essentially lowering the payment amount for these out-of-network charges. In my opinion, this is a PRO-patient and PRO-payor requirement, and providers ain’t gonna like this because again, this CPI index will REDUCE the amount payable to the providers over time. Maybe I am reading this wrong…Note, there are also rules for new plans and new coverages that come on-line each year, but these rules are waaayyy too complicated for me to go over right now.

- RULE: The legislation also directs HHS, DOL, and Treasury to develop regulations by December 27, 2021 detailing how the arbitration/IDR process will work, including the factors that the arbiter CAN and CANNOT take into account, and also defining things like how an entity can qualify as a “certified IDR entity” (i.e., the arbiter), how providers could and should “batch” similar out-of-network charges together, and how the 90-day cooling off period will work.

MY COMMENT: Again, there is going to be HUGE fights over how HHS/DOL/Treasury develop the arbitration/IDR process, and how the Federal Departments further define the factors that an arbiter CAN and CANNOT take into account, including the base-line for determining the amount of “billed charges” that CANNOT be taken into account and whether a percentage of Medicare CAN be taken into account.

- RULE: Currently, as many as 17 States have enacted their own surprise medical billing fixes. And, the Federal legislation discussed above defers to these State laws. In other words, these State surprise billing laws are NOT pre-empted by this Federal legislation. Rather, these State law requirements supplant the Federal requirements. BUT, for those States that do NOT have surprise billing laws on their books, these new Federal requirements WILL apply.

MY COMMENT: Importantly, State surprise billing laws apply to fully-insured plans – AND – these State laws do NOT apply to self-insured plans (because they are pre-empted by ERISA). BUT, the Federal legislation DOES apply to self-insured plans, which is one of the reasons why the Federal surprise medical billing requirements were enacted. Because, as stated above, self-insured plans – like insurance carriers – are “payors,” and there needed to be Federally-designed UNIFORM requirements that apply to ALL self-insured plans providing health coverage in every State around the country.

Some Transparency-Related Provisions

Although there is TON of stuff in this legislation that I can’t cover in one update, I did want to mention a couple of other items, especially some of the transparency-related provisions:
- Price Comparison Tool: This surprise medical billing legislative fix also requires insurers and self-insured plans to provide plan participants with an electronic price comparison tool. This price comparison tool in intended to disclose the price of medical items and services to participants, which is similar to what the final hospital transparency regulations and also the transparency regulations for individual and group health plans are trying to accomplish. This price comparison tool is also intended to provide participants with information about their cost-sharing liability associated with a particular medical item or service, which is similar to the on-line cost-sharing liability tool created under the transparency regulations for individual and group health plans. These somewhat duplicative transparency requirements will force the incoming Biden Administration to coordinate between this new legislative provision and the Trump Administration’s transparency regulations. To me, this signals that the Trump Administration’s transparency regulations are NOT going anywhere anytime soon. What I mean is, while Congress did NOT codify the Trump Administration’s transparency regulations, Congress did statutorily require insurers and self-insured plans to disclose medical prices and cost-sharing liability to patients through an electronic website. The incoming Biden Administration is going to have to develop regulations implementing this statutory requirement, which by the way, the Trump Administration’s regulations are already implementing for the most part.

- Advanced Explanation of Benefits: Insurers and self-insured plans are also required to provide an Advanced Explanation of Benefits (AEOB) before a scheduled medical procedure. The AEOB must inform the participant: Whether the provider that is performing the medical service is in-network or out-of-network; The amount of the in-network rate for the service; If the provider is out-of-network, a list of in-network providers that can perform the same service; The good faith estimate of the cost of the medical service furnished by the provider scheduled to perform the service; A good faith estimate of any cost-sharing associated with the service; and A good faith estimate of the plan’s deductible that the participant has used to date, if any. The AEOB must also include a disclaimer if the service is subject to medical management limitations and a disclaimer that all of the information in the AEOB is merely an estimate. Interestingly – and importantly – this AEOB is similar to the type of information that the Trump Administration’s transparency regulations are trying to get into the hands of participants. Actually, the legal basis for these transparency regulations is that all of the information that insurers and self-insured plans are required to disclose to participants through, for example, the on-line cost-sharing liability tool is information that must be provided to a participant in a traditional EOB. The Trump HHS argues that all the Department is doing is requiring that this traditional EOB information is provided to participants…wait for it…in ADVANCE. Weelllll, we NOW have a statutory requirement that is ALSO trying to get important coverage and cost-sharing liability into the hands of the participant…wait for it…in ADVANCE. Again, the Biden Administration is going to have to coordinate between this new legislative requirement and the final transparency regulations. All the more reason why I believe the Biden Administration will NOT be tearing down the final transparency regulations for individual and group health plans.
- All-Payer Claims Databases: Lastly, the legislation also includes a provision intended to increase the transparency of health claims data. In particular, the legislation offers Federal grants (1) to States that want to establish an All-Payer Claims Database and (2) to States that already have an All-Payer Claims Database to further improve their Database. As I have explained in prior updates, an All-Payer Claims Database is a database that houses health claims data from insurers and self-insured plans. When all of this data is sent to 1 place, it allows employers, insurance carriers, researchers, and policymakers to identify health care utilization trends (e.g., a spike in diabetes or heart disease). Analyzing the data – and the health care trends – could then allow employers, insurance carriers, and policymakers to take certain steps to better control health care costs. It is important to point out that encouraging the creation of these All-Payer Claims Databases is different from efforts to increase the transparency of medical prices through the Trump Administration’s transparency regulations. Again, these Databases increase the transparency of HEALTH CLAIMS, while the transparency regulations increase the transparency of the PRICES people pay for medical items and services that are charged by hospitals and negotiated down by insurance carriers and self-insured plans. Regardless of whether you think the creation of the Databases will move the needle on lowering health care costs, this is just another example of the continued push for transparency. AND – as I have stated previously – I believe the push for increased transparency will continue in the coming months and years. Note, submitting health claims data to these State All-Payer Claims Databases remains voluntary for self-insured plans. However, for those self-insured plans that choose to voluntarily provide their health claims data to the State, the legislation directs the DOL to develop a uniform, standardized form on which such data can be submitted to the State.

Last Comment: What Will Happen January 5, 2021??

As you know, the all-important run-off elections in Georgia will happen on Tuesday Jan. 5^th, finally determining which party will control the Senate for at least the next 2 years.
- Analysis: News reports indicate that the Georgia Democratic candidates have raised a SIGNIFICANT amount of money in a VERY short period of time (breaking records). Is that a sign that BOTH Democratic candidates will win? It’s unclear. BUT, it is important to remember that the Senate Democrats out-raised Senate Republicans this past election cycle by MILLIONS, resulting Democrats out-spending Republicans by MILLIONS. BUT, Republicans STILL held on to most of their seats on Nov. 3^rd. BUT, if the Democrats are out-raising – and out-spending – Republicans yet again, aren’t the Democrats due? BUT, it’s Georgia, a solid red State. BUT, Georgia went for Biden on Nov. 3^rd. BUT, there was record turn-out on Nov. 3^rd. I – like many of you – think the real wild card here is President Trump. Will President Trump’s continued efforts to contest the Nov. 3^rd election bite the Republicans in the… (pssst, I said it a bunch of times above)? Will slow-walking the latest Stimulus Package cause Georgia voters take it out on the Republican incumbents even though these Republican Senators voted for the Package? BUT, what about the $2,000 stimulus checks?? There I go again…