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No Surprises Act - Determining Cost-Sharing and Payment Amounts to Providers

No Surprises Act – Determining Cost-Sharing and Payment Amounts to Providers

July 9, 2021

Background:  Treasury, Labor and Health and Human Services (the Agencies) released an Interim Final Rule (IFR) on the Requirements Related to Surprise Billing: Part I that apply to group health plans and health insurance issuers offering group or individual health insurance coverage.  The IFR implements certain provisions of the No Surprises Act, which was enacted as part of the Consolidated Appropriations Act, 2021 (CAA). 

This article focuses on how to determine the cost-sharing amounts and the payment amounts to providers and facilities for certain types of surprise bills.

The No Surprises Act (NSA) limits cost-sharing on certain types of surprise bills to the network cost-sharing requirements even though services were performed at an out-of-network facility or by an out-of-network provider offering services at an in-network facility. The NSA includes requirements for initial payments for emergency services and for non-emergency services provided by out-of-network providers at certain network facilities.

Effective Date – These rules take effect for plan years beginning on or after January 1, 2022.

Types of Services Subject to the NSA Protections

Emergency Services – Items and services in a hospital emergency department and emergency services in an independent freestanding emergency department.  Emergency services include an appropriate medical screening, including ancillary services routinely available to the emergency department to evaluate emergency medical conditions.  

Non-Emergency Services Performed by OON Providers at In-Network Facilities - Items and services (other than emergency services) furnished to participants by an out-of-network (OON) provider at an in-network facility, unless the OON provider has satisfied some notice and consent criteria with respect to those items and services.

Air Ambulance Services – Services from an OON air ambulance provider.       

Plan Coverage Requirements

If a group health plan provides benefits for services in an emergency department of a hospital or an independent freestanding emergency department, the plan must cover emergency services in the following manner:

>> Without the need for any prior authorization determination, even if the services are provided on an out-of-network basis.

>> Without regard to whether the health care provider furnishing the emergency services is in-network.

>> Without imposing any administrative requirement or limitation on coverage that is more restrictive than those imposed on network providers and facilities.

>> Without imposing cost-sharing requirements that are greater than those imposed if the services were provided in-network.

>> Not later than 30 days after the plan receives the information necessary to decide a claim, the plan must determine whether the services are covered under the plan, and if covered, send an initial payment or notice of payment denial.

Similar rules apply for non-emergency services performed by OON providers at in-network facilities.    

Determination of Cost-Sharing Amounts and Payment Amounts to Providers

For purposes of this IFR, cost sharing means the amount a participant is responsible for paying for a covered item or service under the terms of the group health plan or health insurance coverage.  Cost sharing generally includes copayments, coinsurance, and amounts paid towards deductibles, but does not include amounts paid towards premiums, balance billing by out-of-network providers, or the cost of items or services that are not covered under the plan.

The IFR specifies that cost-sharing amounts for certain services must be calculated based on one of the following amounts: 

>> An amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act;

>> If there is no such applicable All-Payer Model Agreement, an amount determined by a state law;

>> If neither of the first two exist, the amount is the lesser of the billed charge or the plan’s or issuer’s median contracted rate, called the “qualifying payment amount” (QPA).

The IFR establishes that the total amount paid to the provider or facility is based on:

>> An amount determined by an applicable All-Payer Model Agreement under section 1115A of the Social Security Act;

>> If there is no such applicable All-Payer Model Agreement, an amount determined by a state law;

>> If neither of the first two exist, an amount agreed upon by the plan or issuer and the provider or facility; or

>> If none of those three conditions apply, an amount determined by an IDR entity.

Methodology for Calculating Qualifying Payment Amount (QPA)

The No Surprises Act directs the Agencies to create a methodology for determining the QPA.

The Agencies seek comment on all aspects of the methodology established for determining QPA.  The Agencies seek comment on whether there are any considerations or factors that are not sufficiently accounted for in the methodology established in these interim final rules; and the impact of the methodology on cost sharing, payment amounts, and provider network participation; and whether there are areas where commenters believe additional rulemaking or guidance is necessary.   

For an item or service furnished during 2022, the plan must calculate the QPA by increasing the median rate for the same or similar item or service on January 31, 2019 by the combined percentage increase as published by the Department of Treasury to reflect the percentage increase in the CPI-U over 2019, 2020 and 2021. This combined percentage increase will be published by the IRS.  The percentage increase for any year after 2022 will be published by the IRS.  There are special rules for anesthesia services and air ambulance services. 

Median Contracted Rate

The contracted rate is defined as the total amount (including cost sharing) that a group health plan has contractually agreed to pay a participating provider, facility, or provider of air ambulance services. 

The median contracted rate is determined with respect to all group health plans of the plan sponsor or all group or individual health insurance coverage offered by the health insurance issuer in the same insurance market.

The median contracted rate for an item or service is calculated by arranging in order, from least to greatest, the contracted rates of all plans of the plan sponsor for the same or similar item or service that is provided by a provider in the same or similar specialty or facility of the same or similar facility type and provided in the geographic region in which the item or service is furnished, and then selecting the middle number.

The Agencies recognize that some plans enter into special agreements with providers and facilities that are not otherwise contracted to participate in any networks of the plan.  For purposes of the definition of the contracted rate, a single case agreement, or similar arrangement between a plan and a provider does not constitute a contract, and the rate paid under such an agreement should not be counted among the plan’s contracted rates.  The term “contracted rate” refers only to the rate negotiated with providers and facilities that are contracted to participate in any of the networks of the plan.  The Agencies believe this definition aligns with the statutory intent that the QPA reflects market rates under typical contract negotiations.

The IFR rules permit, but do not require, sponsors of self-funded group health plans to allow their TPAs to determine the QPA for the sponsor by calculating the median contracted rate using the contracted rates recognized by all self-funded group health plans administered by the TPA.

Geographic region – For items and services other than air ambulance services, a geographic region is defined as one region for each metropolitan statistical area (MSA) in a state and one region consisting of all other portions of the state.  The delineations for MSAs are described by the US Office of Management and Budget and published by the US Census Bureau.  MSAs are always established along county boundaries, but may include counties from more than one state. 

The IFR establishes alternate geographic regions with respect to air ambulance services.     

The Agencies believe that when a plan or issuer has an underlying fee schedule used to determine cost sharing under non-fee-for-service contracts, it is reasonable for the plan or issuer to use the same methodology to assign a value to the item or service for purposes of determining the QPA.

If there is no underlying fee schedule rate for an item or service, the IFR provides that the plan or issuer must calculate the median contracted rate using a derived amount, which is the price that a plan or issuer assigns an item or service for the purpose of internal accounting. The Agencies believe that using an underlying fee schedule or derived amount will allow plans to convert each of their non-fee-for-service contracts into fee-for-service arrangements for purposes of calculating the median contracted rate.  

Alternative Methodologies for New Plans or Newly Covered Items and Services

A plan is considered to have sufficient information to calculate the median of contracted rates if the plan has at least three contracted rates on January 31, 2019.  

If the plan does not have sufficient information to calculate the median contracted rates, the plan must calculate the QPA by first identifying the rate that is equal to the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in the year immediately preceding the year in which the item or service is furnished (or, in the case of a newly covered item or service, the year immediately preceding such first coverage year), determined by the plan through use of any “eligible database”, and then increasing that rate by the percentage increase in the CPI-U over the preceding year. 

An “eligible database” means:

>> A State all-payer claims database; or

>> Any third-party database which meets the following conditions:

  • The database cannot be affiliated with, or owned or controlled by, any health insurance issuer, or a health care provider, facility, or provider of air ambulance services, or any member of the same controlled group as, or under common control with such entity. 
  • The database must have sufficient information reflecting in-network amounts paid by group health plans or issuers offering group health coverage for services in the applicable geographic region.  The Agencies seek comment on how to define when a database has sufficient information. 
  • The database must have the ability to distinguish amounts paid to participating providers and facilities by commercial payers from other claims data, such as amount billed by OON providers and amounts paid by public payers, including Medicare and Medicaid. 

A plan that uses an eligible database to determine the QPA due to insufficient information is responsible for any costs associated with accessing such database.  The Agencies seek comment on ways to help ensure that plans and issuers are charged only reasonable costs for accessing such databases and that entities providing eligible databases are transparent about their fees and fee structures. 

According to the preamble, the statute envisions that alternative methodologies, such as the use of a third-party database, will be used in only limited circumstances where the plan or issuer cannot rely on its contracted rates as a reflection of the market dynamics in a geographic  region.

QPA Transparency and IDR Process

The Agencies recognize that providers, emergency facilities, and air ambulance providers subject to the surprise billing rules need transparency regarding how the QPA was determined. IDR entities are directed to consider the QPA when selecting an offer submitted by the parties through the IDR process.  To decide whether to initiate the IDR process and what offer to submit, a provider, emergency facility, or provider of air ambulance services must know not only the value of the QPA, but also certain information on how it was calculated. 

The IFR requires that plans and issuers make certain disclosures with each initial payment or notice of denial and provide additional information upon request.

Send Your Comments

SPBA will be preparing comments to the regulation writers on the IFR.  We welcome your thoughts on this section of the IFR. Please send your comments to SPBA’s Director of Federal Affairs Erin Reiter, and SPBA’s President Anne Lennan,  



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