No surprises act & price transparency rule: impact & strategy
During 2021, 28 Million Americans exhausted their savings due to medical debt. This issue spans generations, and is no longer a concern isolated to the older, sicker populations: 42% of Millennials struggle with medical debt while seeing their health decline faster than the previous generation as they age. At the same time treatment costs for Millennials are projected to be as much as 33% higher1.
Those millennials are experiencing U.S. healthcare during a time where employment-based coverage and high deductible plans have fostered their need to know the economical outcomes of care.
The perspective of today’s patients has changed. New patient mentality and public policy have created an environment where digital innovations and care connected journeys are no longer luxury attributes but minimal requirements for care.
Schedule a meeting with our experts to discuss best practices on how both payers and providers can adjust their strategy to comply with this policy update.
Two pieces of heavily contested legislation, go into effect starting next year that directly speak to the consumers need for digitalization and where the broken economics of healthcare can only be resolved through the adoption of data integration reform.
One out of five medical claims and one out of every six hospitalizations in the U.S. includes a surprise bill; they are the primary cause of medical debt2. Surprise bills occur when a patient receives an unexpected bill for care services from a provider who is not part of their health plan’s network. Often, these patients did not know they were receiving care from an out-of-network provider because they can occur when they have little say in where they receive care, such as an emergency care event. Another common way to incur a surprise bill is at in-network hospitals or other facilities receive care from an ancillary provider who are not in-network.
The patient is often responsible for the cost burden of surprise bills. A health plan that generally doesn’t cover out-of-network care, such as an HMO, might deny the entirety of a surprise bill, or plans may pay a portion of the bill but leave the patient liable for balance billing.
Thus, the long disputed No Surprises Act, or No Surprise Billing (NSB), which addresses the expanding costs of care, was signed into law on December 27, 2020.
This legislature includes many requirements, including the Price Transparency Rule. If the NSB is the equivalent of the removal of a tumor, the Price Transparency Rule would be the chemo to cure the cancerous U.S. healthcare body. Going into effect July 1, 2022, the Price Transparency Rule requires that both hospitals and insurers must reveal long-confidential pricing data, including the rates that insurers pay for services.
The Transparency Rule also includes mandates for underlying negotiated rates paid to healthcare providers, historical information on charges from and payments to out-of-network providers, and negotiated rates and historical prices for covered prescription drugs.
The one-two punch of No Surprises Act and the Price Transparency Rule will serve as the catalyst for payment reform in U.S. healthcare and work to usher the industry into the age of consumerism. In this white paper, we’ll look at how both payers and providers can adjust their strategy to comply with both the act’s mandates.
A closer look at the act
The Consolidated Appropriations Act COVID-19 relief bill became law on December 27, 2020. It is a comprehensive, $1.4 trillion legislative package that includes COVID-19 related relief for physicians and provides funding for healthcare-related government operations through the end of the fiscal year 2021.
The new law includes the “No Surprises Act” (the Act), which allows for price transparency, provider directories, and patient financial protections that impact health plans, physicians, facilities, and other non-MD/DO licensed health care professionals effective January 1, 20223.
Specifically, the law applies to out-of-network providers and facilities delivering emergency care and out-of-network providers delivering emergency and non-emergency care at in-network facilities. The law also protects patients from surprise bills from out-of-network air ambulance services.
The No Surprises Act contains key protections to hold consumers harmless from the cost of unanticipated out-of-network medical bills, essentially removing the member from the equation and no longer allowing them to be balanced billed for those services.
The law establishes significant penalties for violation of balance billing prohibitions, requires a consumer complaints process, and grants appeal rights to consumers whose health plans do not appropriately recognize and cover surprise medical bills. It also creates an independent dispute resolution process for determining payment for claims that would otherwise result in surprise bills. These Independent Dispute Resolution Entities (IDRE) are certified to ensure the timely and efficient provision of determinations.
The application: what type of Insurance is included in the acts and what supersedes it, state or federal?
One of the complexities around the NSB implementation is that many states have laws enacted today to protect the consumer from balance bills. However, those existing laws only cover state governed plans which makes up about 18% of the insured. Meaning that roughly 80% of members now have broader protections4. For all Providers, Payers or Vendors operating in multiple states managing requirements can be difficult.
As the NSB is written, payers and providers must first apply existing State laws, so long as they meet the mandates of the Federal Act. States may enforce federal requirements against health plans they regulate (including non-group health plans and fully insured employer-sponsored plans). Federal law enforcement may be required if states are failing to substantially enforce requirements.
For states without an applicable law on the books, the Federal law will apply the Qualified Payment Amount (QPA) to all out-of-network claims. The QPA is generally the median of the contracted rates of the plan or issuer for the item or service in the geographic region.
Out-of-network providers wishing to bill patients will need to obtain a notification of consent, asking patients to wave their balance bill protections. However, some states have strict applications of consent which is governed by the Ethics of Physicians Oath and careful consideration is required.
For the Price Transparency Rule, starting July 1, 2022, each hospital operating in the United States will be required to provide clear, accessible pricing information online about the items and services they provide in two ways:
1. As a comprehensive machine-readable file with all items and services
2. In a display of shoppable services in a consumer-friendly format5
How do the CMS requirements help the patient to a shoppable market given it does not represent what patients are going to owe with allowable and cost shares? CMS agrees that meeting the mandates of the legislation does not provide a shoppable market. The Price Transparency Rule does drive to the goal of enabling of data analysis and fostering private-sector innovation to boost consumer shopping behaviors. In essences, allows secondary vendors to help create a consumer centric market.
The seven requirements of the act
Emergency department setting
The state must have protection in place for emergency services provided by nonnetwork providers at both in-network and out-of-network facilities. If there is a caveat, this will be noted in a footnote.
Non-emergency care in network hospital
The state must have protection in place for nonemergency care provided in a network facility.
Hold harmless protection
The state requirement must state that a consumer is held not liable financially for the any portion of the bill beyond in-network level cost-sharing.
The state requirement must state that a provider is prohibited from sending any balance bill to the patient for any amount beyond in-network level cost-sharing.
State-specific method for payment
In general, a state has either a payment standard or a dispute resolution process (unless the approach differs by setting, as in Florida). States with a payment standard also may have a voluntary dispute resolution process to deal with a failure of the payment standard. States with a dispute resolution process may have more general guidance on a payment standard for use by plans or by the arbitrator.
The state must provide a formula that the insurer must apply when determining how much to pay an out-of-network provider and the provider has to accept this amount.
The state must require binding arbitration between the insurer and provider to determine an amount. Any direction by the state on how the arbitrator must decide the dollar value is added as a footnote.
The strategy for payers and providers
The new legislation that offers consumer protections for the member on balance bill events will also force a new relationship among payers and providers that have historically relied on out-of-network billing. Providers will need to adopt new billing practices to meet federal laws, including guidelines for denials and arbitration. Payers will need to prepare for Price Transparency and counter-arbitration events. Having awareness and sound implementation strategies will be critical, as well as preventative measures around violations. As noted by PwC’s Health Research Institute (HRI) providers and payers will need to consider their operational readiness for the law, consumer outreach efforts, and negotiation strategy.
For the No Surprises Act, and its sister legislation the Price Transparency Rule, an effective strategy to prepare for the Act includes a seven-prong approach:
First, it will be crucial for payers and providers to partner with trusted advisors and policy subject matter experts (SMEs). This service support will comprehensively address the fluidity of the requirements while crafting a program design that supports the agile needs of the customer. When comparing vendors: buyer beware, as some vendors in this space will position products to appear as if they are consumer-friendly and meet the mandates of the law, or worse, skirt around mandates. The importance of trusted consultants and industry experts for vendor and product accountability is key for effective guidance and implementation.
Second, data analytics will help healthcare organizations address risk assessments for rate negotiations, real-time rate sheet application, and suggested pricing models.
Third, facility and staff assessment for readiness and education will be critical to understand how to discuss prices and patient financial responsibility as well as consent. Addressing gaps at the start of a care billing event will prove less costly than arbitration down the line.
Fourth, providers and payers will need to support the member in various ways, including call center automation for high--risk events, member intervention and outreach. Communications and member support should be well-informed; providers should also be linking cost data with other important information sources, such as relevant and publicly reported quality or patient safety scores which helps patients to identify high-value services instead of just lower cost healthcare.
Fifth, having a real-time pricing strategy & better Revenue Cycle Management tools will become critical to aggregate revenue cycle management and payer claims service together to eliminate the historical data conflict between payers and providers. This levels the playing field, allowing all parties to work from the same sourced information at the same time as opposed to benefiting one party against the other party. Not only does this strategy make economic sense, but it also helps resolve the traditional barriers that creates the friction between payers and providers.
Sixth, a solution that includes arbitration prevention and support resources can provide an arbitration framework, particularly while the industry is in process of adoption.
Lastly, contract management and digitation will be critical in order to serve all areas of focus. The management and assessment of contracts have long proven to be cumbersome for most payers, but more importantly payers and providers need to understand that the coveting of rates sheets, contracts, and relationships is at an end.
A recent poll demonstrated that three-quarters of patients look at price transparency ahead of accessing care6. Meaning that digital transformation is not only critical to the quality of care the patients receive, but it is critical to their economic decisions around care … and if they get care at all.
One of the largest issues is that debt can cause people to neglect medical issues. Nearly one in three Americans say that they have delayed getting care because they were worried about the cost7.
U.S. health is shifting to consumerism. Customers expect to understand prices, so they make informed care decisions.
These laws will be a catalyst for payment reform and significantly reduce specialist revenue capture while forcing Providers and Payers to operate differently. Health systems and providers have to focus on how to attract patients. Being dismissive of the need-to-know mindset is not a winning strategy.
Organizations that commit to using digital innovations to embrace the intent of the legislation will capture market share by improving the consumer experience.
Healthcare organizations will obtain value because these mandates will loosen the third-party payment problems by giving payers a reason to restructure their products to incentivize consumers to seek out the best prices. At the same time heavy administration costs around revenue management gaps and payment integrity programs lessens when the industry leverages same source price determinations. The $140B that currently sits in medical debt collections8 would be better served by addressing other areas of health such as equality in access, and social determination of care.
While the adoption of this legislation will require adjustments, it also provides a great opportunity for all stakeholders within the healthcare community: one where payers, providers, vendors, and patients all work together to reinvest in patient care.
4. State Balance-Billing Protections | Commonwealth Fund M. Kona, et al, Center on Health Insurance Reforms, Health Policy Institute, Georgetown University: https://www.commonwealthfund.org/publications/maps-and-interactives/2021/feb/state-balance-billing-protections
6. 3 Hospital Price Transparency Strategies for Compliance, Patients, By Jacqueline LaPointe, Xtelligent Healthcare Media: https://revcycleintelligence.com/news/3-hospital-price-transparency-strategies-for-compliance-patients
8. https://www.nytimes.com/2021/07/20/upshot/medical-debt-americans-medicaid.html#:~:text=americans%2Dmedicaid.html-,Americans’%20Medical%20Debts%20Are%20Big - ger%20Than%20Was%20Known%2C%20Totaling%20%24140,where%20Medicaid%20wasn’t%20expanded.
Vice President and Market Leader, EXL Health