The past year has seen some much-needed focus on rising healthcare costs and the implementation of federal laws to improve participant protection and fairness. On January 1, certain provisions of the No Surprises Act (NSA) went into effect to protect healthcare plan participants from inflated medical bills from outside providers.
The NSA’s robust safeguards ensure that participants have new rights to fair, consistent and predictable pricing information and advance notice of benefits. Beyond simple compliance, the NSA offers plan sponsors a strategic way to manage healthcare spending and improve the employee healthcare experience.
Related: Hospitals continue to flout price transparency regulations
It is important that employee benefits professionals, particularly those who administer or sponsor self-funded health insurance plans, understand the NSA’s regulations and interim final rules. For insured plans, there is the added complexity of compliance that comes with the combination of new federal regulations and state insurance regulations.
Compliance and impact on health plan sponsors
The NSA is likely to increase the medical costs paid by employer-sponsored plans, which in turn will lead to an increase in the cost of coverage and hence an increase in employee contributions. For example, costs will increase to meet the NSA’s new administrative requirements, including changes to claims processing and a new arbitration process.
An unintended consequence of the new law is that both in-network and out-of-network providers that charge below-average rates today are likely to increase their fees — at least to the in-network median level. Once the median price is known, there is no incentive for an off-network provider to charge a lower amount. And since most in-network providers agree to cap their fees to join a network, most in-network providers will not be satisfied with a reimbursement less than what the plan on out- of network providers who pays a have no such restriction. As a result, if each provider charges at least the published median price, the range of fees charged will be wider.
Most health insurance policies have deductibles. When the plan has adopted a PPO network, plan designs often vary cost sharing at the point-of-purchase (deductibles, co-payments, co-insurance, out-of-pocket caps, covered fees, etc.) so that on-network service providers benefit from higher compensation. The higher remuneration is primarily due to the provider’s contractual agreement to charge less. NSA compliance pays in-network level benefits for certain out-of-network costs – reducing the impact of out-of-network cost sharing. The combined effect will likely increase coverage costs by reducing a plan’s ability to differentiate reimbursements based on network affiliation, which in turn reduces the incentive for providers to join a network and charge less.
Plan provisions need to be updated for the new requirements. The NSA will have its greatest impact on plans that include a network of providers and use a design with separate, often higher, deductibles and coinsurance for providers outside the network. Finally, insured plans must comply with federal laws (ERISA, Tax Code, Public Health Services Act, and other requirements) in addition to state-specific insurance laws. The interaction is likely to increase administrative costs and, in certain situations, coverage costs.
Increasing acceptance of self-funded health plans
According to the Kaiser Family Foundation’s newly released Annual Employer Health Benefits Survey, 64% of insured US workers are enrolled in self-financed health plans. The increasing adoption of self-funded health plans is often in response to significant increases in insurance premiums. Employers who choose self-funded coverage are drawn to unique cost management opportunities compared to the premiums, taxes, mandatory benefits, profit margins and other requirements that are typically part of traditional fully insured plans. We anticipate continued interest in the move to self-insurance prompted by the new challenge of meeting NSA requirements at both the federal and state levels.
Health savings account as a savings strategy
For plan sponsors, the least onerous option for preparing for expenses is a Health Savings Accounts (HSA) strategy. HSA contributions receive the most valuable tax benefits offered by the Internal Revenue Code. According to the Plan Sponsor Council of America’s 2021 HSA survey, which offers an HSA-eligible insurance option, 80% of employers contribute to employees’ HSAs. Experience shows that both employee and employer spend less when they enroll in HSA-eligible coverage – without significantly reducing the value of the coverage.
Reference-Based Pricing (RBP) is another cost-cutting strategy. RBP sets a benchmark fee schedule and payment cap instead of a traditional provider network. Much of the employer-sponsored market has yet to embrace RBP. Many states have implemented RBP processes. It’s now commonplace on Medicaid. It is also consistent with the reimbursement structures used by Medicare and the Veteran’s Administration.
However, there is a new potential risk to RBP that health plan sponsors and participants need to be aware of. The NSA establishes an Independent Dispute Resolution (IDR) procedure. Preliminary final rules require the IDR decision maker to assume that the “qualifying payment amount” on the network for patient cost sharing purposes is “the appropriate off-network rate”. (See sidebar)
Schemes with tight networks or negotiated contracts that use RBP as a mechanism for pricing off-network claims will be affected by this legislation. In both cases, there would be a network tariff according to which the “qualifying payment amount” could be calculated.
Pure RBP plans that do not contract with vendors should be unaffected by the NSA as there are no off-network claims; no median in-network rate is determined either.
NSA can lead to a significant expansion in the prevalence of RBP plans, as RBP often eliminates the negative impact of excessive fees that are otherwise shared between employer and subscriber. However, we recognize that regulators often issue regulations that appear to broaden the scope of the law or conflict with the express language of the law. A lawsuit challenging some of the regulations would be “no surprise”.
Perhaps the most effective way to address this legislation is to pass an RBP-only plan that puts the patient, as a consumer of healthcare, in the driver’s seat.
A successful RBP plan should have the following components:
- Carefully prepared plan documents that reinforce the patient’s rights to dispute bills
- Avoiding contracts with vendors or limiting the use of contracts
- A reasonable price adjustment mechanism
- A robust patient advocacy process that includes legal representation
Improved medical billing features
There are also opportunities for plan sponsors to achieve significant cost savings and fully optimize the benefits and value of their health plan. Innovative medical billing support services deliver powerful data intelligence that enables stronger defenses against billing disputes and greater success in overpayment recovery efforts. State-of-the-art information technology, data-driven software and online data analysis tools can provide a degree of pricing transparency and new insights by leveraging pricing data electronically – enabling fee comparisons that identify fair and reasonable prices.
The right medical billing partner will be an agent of change, one that embraces innovation and champions “what is fair and just” in the marketplace. The right partner also offers value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, and legal representation of participants. This support can provide invaluable guidance in navigating new federal and state health regulations and identifying areas to reduce risk and burden and maximize the value and return on investment of cost savings. Christina Cooper is managing director of aequum LLC and the co-managing director of Koehler Fitzgerald LLC, a law firm of national practice. Christine leads the company’s healthcare practice and is dedicated to supporting and defending plans and patients.
Jack Towarnicky is a member of aequum LLC. As an ERISA/Employee Benefits compliance and planning attorney, Jack has over forty years of experience in human resources and plan sponsor executive positions.