Surprise Billing Update

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

What’s the Latest on the Federally-Developed Arbitration Process and the Federal Portal?

In my last update (see below), I told you about the Texas District Court case that came down on Feb. 23^rd, and how the Texas Court invalidated the “rebuttable presumption” standard.
Analysis: I also told you that on Feb. 28^th, the Federal Departments responded to the Texas ruling, announcing 3 things:
First, that the Departments will issue some form of guidance “conforming” the District Court ruling.
Second, once the conforming guidance is issued, the Departments will THEN “train” and “educate” stakeholders about how any modified Federally-developed arbitration process will work.
And third, the Federal Portal will “go live” AFTER this training and education.

Ummmmm, after more than a month, we still have NOT seen any guidance. HOWEVER, just this past Friday – in the absence of any “conforming guidance” – the Federal Departments told stakeholders that the Federal Portal is scheduled to go live “some time the week of April 11^th” (which is this week). Well, it’s Tuesday and the Federal Portal is still NOT live yet (unless I somehow missed it). I would assume that the Federal Portal will go live at least by Friday of this week, but the way things are going, I can’t be sure.

What Did the Federal Departments Say Last Friday?

Last Friday, the Federal Departments invited stakeholders (e.g., providers, payers, and organizations serving as a Federal arbiter (i.e., Independent Dispute Resolution Entities (IDREs)) to tune into a webinar presentation run by CMS.

Analysis: I don’t think I am speaking out of school when I say that the webinar (which was only about 17 minutes long) did NOT tell us anything we didn’t already know about the Federally-developed arbitration process.

HOWEVER, there are some “tea leaves” that one can read if you really parse through all of the words that CMS said – and did NOT say – during the webinar presentation. BUT, before I get to reading the tea leaves, let me say this:

I am finding that there is a lot of confusion over (1) what Texas ruling said and (2) what the ruling did NOT say.

For example, there are some folks out there who are saying that – on account of the Texas ruling – the Qualifying Payment Amount (i.e., the in-network median rate of a medical item or service furnished in a geographic region) was ELIMINATED as an arbitration factor. Others are saying that the Qualifying Payment Amount is still around, but using the value of the in-network median rate in arbitration is NO LONGER required, meaning an IDRE can IGNORE the Qualifying Payment Amount and ONLY look to the “credible information” submitted by the provider (e.g., the education and training and patient acuity and complexity) when making a final payment determination. And yet another group of folks are saying that an IDRE MUST give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider (e.g., training and education and patient acuity and complexity). SPOILER ALERT: All of these folks are WRONG. First and foremost, the Qualifying Payment Amount was NOT eliminated by the Texas Court. In other words, an IDRE MUST STILL consider the Qualifying Payment Amount as an arbitration factor (CMS confirmed this). To be clear, the Texas ruling merely stands for the proposition that an IDRE is NO LONGER required to PRESUME that the in-network median rate (i.e., Qualifying Payment Amount) should represent the value of the final payment amount. This simply means that the IDRE is NO LONGER “handcuffed” to the PRESUMPTION that the value of the Qualifying Payment Amount (or at least the closest “offer” to the Qualifying Payment Amount) should represent the final payment amount. Importantly though, this ALSO means that there is NOTHING prohibiting an IDRE from STILL PRESUMING that the Qualifying Payment Amount (or at least the closest “offer” to the Qualifying Payment Amount) represents the final payment amount if the IDRE feels this produces the best result. This also means that an IDRE is NOT required to give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider unless the IDRE feels that equal weight is appropriate. Now let’s get to reading those tea leaves…

Tea-Leaves-Reading?

Again, during last Friday’s webinar, the Federal Departments did NOT tell us anything we didn’t already know.

Analysis: HOWEVER, the words that the CMS chose to say – and similarly, the words that CMS chose NOT to say – told us a lot.

Let’s start with what CMS chose NOT to say:

During the entire 17-minute presentation, at NO point – I repeat, NO point – did CMS say that IDREs are PROHIBITED from PRESUMING that the Qualifying Payment Amount should represent the final payment amount.

In addition – and this is SUPER IMPORTANT – at NO point did the Federal Departments say that an IDRE should give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider. What did the Departments choose to say?

The Federal Departments explained what “factors and information” IDREs are required to consider in arbitration. What are the “factors and information” you ask? Answer: (1) The Qualifying Payment Amount and (2) The “credible information” presented by the provider (e.g., training and education and patient acuity and complexity).

So what are the takeaways here?

Contrary to what the provider community – and a number of Members of Congress – are saying, the Federal Departments are NOT buying the argument that Congress intended the IDREs to give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider.

NOR are the Departments of the opinion that the Texas ruling required IDREs to give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider. In addition, while it appears that the Federal Departments have accepted the fact that IDREs are NO LONGER handcuffed to PRESUMING that the Qualifying Payment Amount represents the final payment amount (per the Texas ruling), the Federal Departments ALSO appear to be of the opinion that IDREs are NOT PROHIBITED from making such a PRESUMPTION on their own. Last comments: The Federal Departments also said something SUPER IMPORTANT as a reminder to stakeholders. In short, CMS stated that it is NOT the job of the IDRE to determine if the Qualifying Payment Amount was calculated correctly (incorrectly). CMS went on to say that if, for example, a provider thinks that the Qualifying Payment Amount is WRONG, the provider can file a complaint to the Federal Departments through the Federal Portal. In my opinion, this reminder was specifically directed at the IDREs, effectively telling IDREs that in arbitration, any arguments that the Qualifying Payment Amount was incorrectly calculated are arguments that CANNOT be considered. Instead, the ONLY “factors and information” that can be considered are…wait for it…(1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider. AND, it is up to an IDRE to determine which “factors and information” are most persuasive in determining a final payment amount. That is, an IDRE can choose to PRESUME that the Qualifying Payment Amount represents the final payment amount – OR – an IDRE can choose to give EQUAL WEIGHT to BOTH (1) The Qualifying Payment Amount and (2) The “credible information” presented by a provider. It’s TOTALLY up to the IDRE on which way they want to go here.

So What’s Next?

Again, the Federal Portal will go live some time this week. I would hope that the Federal Departments issue some form of guidance relating to the Federally-developed arbitration process contemporaneous with the go live date. BUT, that is NOT a guarantee.

Analysis: Actually, this “guidance” that we have been waiting for might not come out until the Departments actually issue the FINAL surprise billing regulations. Which the Departments had said previously would be out by May 2022. Which is now only weeks away.

Anything else?

Yes. There is another legal challenge to the “rebuttable presumption” standard in the DC District Court. Oral arguments were heard back in March, and the judge actually said that he is NOT in a hurry to issue a ruling because once the final surprise billing regulations (whenever that is, maybe May?), the judge expects a new round of litigation involving the surprise billing requirements. Soooooooo, what should you do for now? Try to read the tea leaves, and do your best until the final regs are issued.

ACA Update

After All These Years, Will the “Family Glitch” Finally Get Fixed?

Background

Okay, so on April 5^th, the Biden Administration issued proposed regulations that said: If an employee and their dependents are offered a FAMILY PLAN by the employee’s employer – and if the cost of the lowest-cost employer-sponsored FAMILY PLAN exceeds 9.5% of the employee’s household income (actually it’s 9.61% for 2022) – the employee’s dependents WILL BE eligible for a premium subsidy if these dependents purchase an “individual” market FAMILY PLAN through an ACA Exchange.

Analysis: Currently, however, if an employee is offered a SELF-ONLY employer-sponsored plan – and if the cost of the lowest-cost employer-sponsored SELF-ONLY PLAN does NOT exceed 9.61% of the employee’s household income – the employee’s dependents are NOT eligible for a premium subsidy, even if the cost of the lowest-cost employer-sponsored FAMILY PLAN exceeds 9.61% of the employee’s household income. This is the so-called “family glitch.” Where family members of an employee (i.e., the employee’s dependents) are LOCKED OUT of accessing a premium subsidy if the cost of the lowest-cost employer-sponsored SELF-ONLY PLAN is “affordable” (i.e., the cost does NOT exceed 9.61% of the employee’s household income), even though the cost of the lowest-cost employer-sponsored FAMILY PLAN is “unaffordable” (i.e., the cost exceeds 9.61% of the employee’s household income).

History

This issue has lingered for the past 9 years after the Obama Administration’s Treasury Department interpreted the ACA the following way: The only way an employee – AND their dependents – may be eligible for a premium subsidy is if the employee’s cost of the lowest-cost SELF-ONLY PLAN offered by the employee’s employer exceeds 9.5% (now 9.61%) of the employee’s household income.

Analysis: IMPORTANTLY, this interpretation was adopted on purpose. That is, the Obama Administration was concerned that if dependents were able to access a premium subsidy if the cost of the lowest cost employer-sponsored FAMILY PLAN exceeded the magic 9.5% of income (now 9.61%), the government would be spending a lot more $$$ in the form of the premium subsidies. Much higher than what the Congressional Budget Office (CBO) projected when initially scoring the cost of the ACA. Over time, opposition to the Obama Administration’s interpretation grew and grew. And, the realization that millions of low- to middle-income families have been/will be locked out of affordable health coverage did NOT sit well with ACA supporters, consumer groups, and others. This concern finally made its way to Congressional Democratic leaders, and we started to see the introduction of legislative proposals to amend the statute to allow dependents to access a premium subsidy if the cost of an employer-sponsored FAMILY PLAN exceeded 9.5% (now 9.61%) of an employee’s household income. Then, during the 2020 Presidential campaign, then-Candidate Biden said that if elected President, his Administration would fix this “family glitch” through regulations. And so here we are: The Biden Administration is making good on the President’s campaign promise and attempting to fix the “family glitch” through regulations.

How Will This Impact the ACA Exchanges?

With this potential regulatory fix, the ACA Exchanges will have to do ALL of the work.

Analysis: What I mean here is this: Currently, to determine whether an employee is eligible for a premium subsidy, an ACA Exchange is required to “verify” (1) whether the employee is offered an employer plan and (2) whether the cost of the employer-sponsored lowest-cost SELF-ONLY PLAN exceeds 9.61% of the employee’s household income. If and when this regulatory fix is finalized, (1) an Exchange will NOT ONLY be required to determine whether the cost of the employer-sponsored lowest cost SELF-ONLY PLAN exceeds 9.61% of the employee’s household income, BUT (2) the Exchange will ALSO be required to “verify” whether the cost of the lowest cost employer-sponsored FAMILY PLAN exceeds 9.61% of the employee’s household income. In addition to making these 2 determinations, the proposed regulations explain that an Exchange must ALSO determine if the employee and their spouse were each offered an employer plan, and then determine if BOTH the cost of the lowest cost SELF-ONLY PLAN for (1) the employee AND SEPARATELY (2) their spouse exceeded 9.61% of the employee’s/spouse’s household income. The proposed regulations explained it this way:

Whenever a family applies for Exchange coverage and one or more family members has an offer of employer coverage, the Exchange will perform the following “affordability” determinations: One determination for the employee based on the cost of self-only coverage; One determination for the related individuals based on the cost of family coverage; and Additional determinations for any related individuals who have an offer of coverage from another employer. Actually, the Exchanges aren’t the only ones that will be required to do some work on account of this proposed change. Agents and brokers – and especially Web-Broker Entities (i.e., Direct Enrollment and Enhanced Enrollment Entities) – will be required to modify their “affordability tools” that they make available to consumers they are enrolling through the Federal Exchange to make the 3 different “determinations” described above.

How Will This Impact Employers?

Reporting

As you know, employers are required to report to the IRS the cost of the lowest cost employer-sponsored SELF-ONLY PLAN when satisfying the “reporting requirement” for the employer mandate penalty tax. HOWEVER, this “reporting requirement” is NOT only used for purposes of the enforcing employer mandate. Sending the cost of the lowest cost employer-sponsored SELF-ONLY PLAN to the IRS is ALSO used by the agency “double-check” whether an employee who was initially determined to be eligible for a premium subsidy was actually eligible for a premium subsidy in the first place. If the IRS ultimately determines that the employee was NOT eligible for a premium subsidy, the employee must RE-PAY all or a portion of any “excess” premium subsidy payments.

Analysis: Importantly, the employer mandate penalty tax is tied to the lowest cost employer-sponsored SELF-ONLY PLAN, and these proposed regulations do NOT change that. That is, the proposed regulations do NOT say that the employer mandate penalty tax will ALSO be tied to the lowest cost employer-sponsored FAMILY PLAN.

Just as IMPORTANT, these proposed regulations ALSO do NOT require employers to report the cost of the lowest cost employer-sponsored FAMILY PLAN to the IRS. BUT, the big question that I have is this: Will – in time – the IRS require employers to report the cost of the lowest cost employer-sponsored FAMILY PLAN so the IRS can “double-check” whether any dependents of an employee who were initially determined to be eligible for a premium subsidy were actually eligible for a premium subsidy in the first place?? Only time will tell…

Cost

Another impact on employers is this: It is likely that a number of employees who are currently enrolled in a FAMILY PLAN will choose to switch over to a SELF-ONLY PLAN and then allow their dependents to purchase an Exchange plan and access a premium subsidy. In this case, the cost to the employer will decrease, as the employer will now only be contributing amounts toward a SELF-ONLY PLAN (which costs less than a FAMILY PLAN).

Analysis: Treasury and the IRS thinks this will happen too. And, Treasury/IRS assumes that because employers will be contributing less $$$ toward their employees’ health coverage, the employer will either keep this extra $$$ as profits or give this $$$ back to the employee specifically or all employees generally. In all cases, these amounts will now be taxed, thereby generating tax revenue for the government.

HOWEVER, this newly generated revenue will go back out the door in the form of government spending for the premium subsidies, which will increase as more family members are accessing a premium subsidy if and when these regulations are finalized.

And here is yet another impact on employers: As more dependents are attracted to subsidized Exchange coverage, these family members will be leaving the employer’s risk pool. In the event these family members are “bad health risks,” this will actually improve the employer’s risk pool, thereby reducing costs for the employer. However, if these family members are “good health risks,” then the employer’s risk pool will suffer, which would likely increase an employer’s health care spend.

Will Anyone File a Lawsuit Challenging These Regulations?

The Biden Administration fully admits that the Biden Treasury and IRS are “re-interpreting” the statute in a way that differs from the Obama Treasury and IRS.

Analysis: This is important because this “alternative reading” of the statute could be viewed by a court of law as re-writing the statute through regulations. Which is a NO-NO.

Soooooooo, the big question is: Will anyone – like, for example, Republican Attorneys General or other groups – file a lawsuit arguing that the Biden Administration CANNOT re-write the statute by adopting this “alternative reading” of the premium subsidy rules? BTW, this would certainly be a compelling argument for a court of law to consider. After all, when Democratic Attorneys General argued that the Trump Administration “re-wrote” the statute in various regs issued by the previous Administration, these Democratic AGs won in court. However, the problem I see for any challengers to these regs is: Will they have “standing” sue (i.e., will anyone be “injured” by this “re-interpretation” of the statute)? BUT, maybe “standing” won’t be an issue because maybe a court of law – say the Supreme Court – will choose to bypass the “standing” issue and rule on the “merits of the case” to remind the Executive Branch that they CANNOT re-write the statute through regulations. Stay tuned…