Independent Dispute Resolution Process under the No Surprises Act (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

On September 30, 2021, the Departments of Treasury, Labor, and Health and Human Services issued an interim final rule that describes how payment disputes will be resolved under the No Surprises Act (NSA).

This federal dispute resolution process will apply only when state law does not set the amount that must be paid to out-of-network provider for a particular service. The NSA defers to All-Payer model agreements and state laws that set reimbursement rates in these situations.

For fully insured group health plans, the health insurer will be responsible for resolving billing disputes with providers.  For self-insured group health plans, the Plan Sponsor will likely be involved in the decision whether to engage in the federal dispute resolution process.

NSA Background Information

For plan years beginning on or after January 1, 2022, payers (including health insurers and self-insured group health plans) are prohibited from imposing a greater cost-sharing requirement for specific out-of-network services than would be imposed if the services were provided in-network, and providers are prohibited from balance billing for these services.  The specific services covered by NSA are:

  • emergency services by out-of-network providers/facilities
  • certain non-emergency services by out-of-network providers at in-network facilities
  • air ambulance services by out-of-network providers

Plan participants will only be responsible for in-network cost sharing amounts, so balance billing disputes will be settled between payers and out-of-network providers. NSA provides for independent dispute resolution (IDR) to resolve these differences.

Payment for NSA Claims

When a claim subject to NSA is submitted to the payer, an initial payment will be made to the provider in accordance with plan terms.  If the provider is not satisfied with the initial payment amount, they may dispute it by sending an Open Negotiation Notice to the payer.  This will start an open negotiation period of up to 30 business days during which the two parties will attempt to agree on a final payment amount.  If there is no agreement during the open negotiation period,  either party may initiate the IDR process (this will generally be the provider).  Initiating the IDR process does not prohibit the parties from agreeing on a payment amount after the open negotiation period has ended and before the final payment amount has been determined through IDR.

IDR Process

A certified IDR entity will oversee the process and make the final payment decision.  Applications for certified IDR entities opened on September 30th.  To be approved, an organization must demonstrate expertise in arbitration and claims administration; managed care; billing and coding; medical; and legal (including healthcare law).

The party that initiates IDR will select a certified IDR entity and provide notice to the Department of Health and Human Services via an online portal, in addition to sending written notice to the other party within four days after the end of the open negotiation period.  Receipt of the written notice starts the certified IDR entity selection process which lasts for up to three business days.  The responding party may agree to the proposed IDR entity or object and propose a different IDR entity.  If the parties cannot agree, they must notify federal officials with a Failure to Select Notice within four business days. Federal officials will then select a certified IDR entity at random within six business days of initiation of the IDR process.

The IDR process requires that the IDR entity choose either the offer submitted by the provider or the offer submitted by the payer.  Each party will submit their offer within 10 days after the IDR entity is selected.  The offers must include a dollar amount and percentage of the qualified payment amount (QPA).  The QPA is the median of the contracted rates recognized by the payer on January 31, 2019 for the same or similar item or by a provider in the same or similar specialty and in the geographic region where the service is furnished, increased for inflation.  The QPA is also the basis that will determine participant cost-sharing in many cases.

The regulation states that the IDR entity must select the offer that is closest to the QPA unless credible information is submitted to demonstrates that the QPA is materially different from the appropriate out-of-network rate.  Such credible information may include factors such as experience of the provider, the type of hospital, or the complexity of the treatment.  Medicare reimbursement rates and usual and customary out-of-network rates cannot be considered by the IDR entity.  If the offers are equally distant from the QPA in opposite directions, the IDR entity will select the offer that best represents the “value” of the services provided.

Regardless of the outcome of the IDR process and the final payment amount, participant cost-sharing will not be impacted, and the decision will generally not be subject to judicial review.

The presumptive use of the QPA as the final payment amount may reduce the incentive for certain providers to remain out-of-network and use the IDR process to obtain higher reimbursements (since patients can no longer be balance billed).  It will also support a policy objective of implementing an IDR process that encourages predictable outcomes and reduces the use of IDR by all parties.

IDR Fees

Both parties must pay the IDR fee (between $200 and $500 for 2022) upfront and the funds will be held in trust or escrow.  Once the payment dispute is resolved, the winning party will receive a refund and the losing party will incur the full cost of the IDR process.