The Consolidated Appropriations Act, 2021 (the “CAA”), was signed into law on December 27, 2020, which is most widely discussed in the context of $900 billion stimulus package, but also contains several group health plan focused consumer protection provisions. The No Surprises Act (the “Act”), enacted as part of the CAA, increases the disclosure and transparency obligations for group health plans and insurers to provide information to participants regarding the cost of coverage in order to avoid surprises. The Act amends Title XXVII of the Public Health Service Act, the Employee Retirement Income Security Act of 1974 (“ERISA”), and the Internal Revenue Code. As indicated below, plan sponsors are encouraged to start the process of negotiating with third party administrators and insurers to ensure that their practices will align with the Act as of the effective date. The Act’s provisions are generally effective for plan years beginning on or after January 1, 2022.
No Surprises in Emergency Services
Group health plans that provide emergency benefits coverage must cover the emergency services without the need for any prior authorization determination. The foregoing applies regardless of whether the services are provided by a provider or emergency facility. Further, limitations and restrictions cannot be imposed on the use of services provided by a non-participating provider or emergency facility (including ancillary services) unless the same restrictions and limitations would apply to an in-network provider or emergency facility. In addition, there can be no cost-sharing that is greater than the requirements that would apply if the emergency services were provided by a participating provider or a participating emergency facility without the participant’s consent. As a result, participants will not be required to pay more for emergency services from non-participating providers and facilities in the absence of advance notice. Accordingly, “surprise billing” is prohibited. In many cases, participants will be solely responsible for payment of the in-network costs regardless of the provider’s status. As a consequence, the group health plan may be paying the difference between the in-network and non-participating costs resulting in an overall increase in plan expenses because balance billing is now also prohibited.
Cost Transparency & Price Comparison
The Act requires that group health plans include the following information on any physical or electronic plan or insurance identification card issued to participants, beneficiaries, or enrollees under the plan: (i) any deductible applicable to the plan or coverage; (ii) any out-of-pocket maximum limitation applicable to the plan or coverage; and (iii) a telephone number and Internet website address through which an individual may seek consumer assistance information. Further, group health plans are required to provide price comparison guidance by telephone and via website which allows a covered employee or dependent to compare the individual’s cost-sharing responsibility for an item or service by plan year, provider and geographic region.
Availability of Provider Directory
Beginning January 1, 2022, group health plans must establish a database and disclose on its website, each provider and facility with which it has a contractual relationship for furnishing items or services, including contact information for each provider and facility. A verification process must be implemented that verifies and updates the database at least every 90 days and removes providers or facilities that are unable to be verified. A response protocol is also required to be established which requires that participants receive responses to telephone calls within one day after requesting information on whether a provider or facility has a contractual relationship with the plan or insurer for furnishing items or services. In the event a participant receives services from a non-participating provider or facility in reliance on incorrect database information, the participant is required only to pay the participating (in-network) cost. Again, the plan is ultimately responsible for paying the cost differential resulting in the increase in plan costs.
Independent Dispute Resolution (IDR) for Out of Network Pricing
Under the Act, plans and nonparticipating providers may initiate open negotiations if the parties cannot agree on pricing for an item or service. The group health plan or provider may initiate open negotiations within 30 days beginning on the date the provider receives an initial payment or a notice of denial of payment from the plan, in an effort to determine an agreed payment amount. If the plan and provider cannot agree to a payment amount during the 30-day open negotiations period, either party may invoke the IDR process by providing notice to the Department of Health and Human Services (HHS). Thereafter, a certified IDR entity will be appointed to determine the payment amount for the service. The Act requires that HHS, the Department of Labor (DOL), and the IRS issue regulations to govern this process within one year of enactment of the law.
Advance Explanation of Benefits
The Act increases health plan price transparency by requiring that plans provide an advance Explanation of Benefits (EOB) for scheduled services at least three (3) days in advance of the service to provide participants with transparency regarding treatment, anticipated costs and the provider’s network status, including the following information.
- Whether or not the provider or facility is a participating provider and—(i) in the case of a participating provider, the contracted rate under the plan; and (ii) in the case of a nonparticipating provider, a description of how such individual may obtain information on participating providers.
- A good faith estimate from the provider or facility (if applicable).
- A good faith estimate of the amount the plan is responsible for paying for items and services included in the estimate described above.
- A good faith estimate of the amount of any cost-sharing for which the participant, beneficiary, or enrollee would be responsible for such item or service (as of the date of such notification).
- A good faith estimate of the amount that the participant, beneficiary, or enrollee has incurred toward meeting the limit of the financial responsibility (including with respect to deductibles and out-of-pocket maximums) under the plan or coverage (as of the date of such notification).
- In the case an item or service subject to a medical management technique under the plan (including concurrent review, prior authorization, and step-therapy or fail-first protocols), a disclaimer that coverage for such item or service is subject to medical management.
- A disclaimer that the information provided in the notification is only an estimate based on the items and services reasonably expected, at the time of scheduling (or requesting) the item or service, to be furnished and is subject to change.
- Any other information or disclaimer that the plan determines to be appropriate consistent with information and disclaimers described above.
The new advance EOB requirement, with the content required under the Act, is a significant change to current plan administration.
- Plan sponsors are encouraged to immediately address how anticipated additional costs will be absorbed. The Act’s prohibition on surprise billing practices and essentially cost guarantees will undoubtedly increase plan costs.
- Plan sponsors should initiate discussions with their third party providers, including insurers for insured plans, regarding the allocation of responsibility for the disclosure requirements.
- In many cases, vendor agreements may require renegotiation. We recommend that the foregoing include indemnification of the plan and plan sponsor in the event a third party provider will assume responsibility for compliance with the burdensome requirements mandated by the Act.
- Plan documents and summary plan descriptions will need to be reviewed and updated to reflect the new coverage and disclosure requirements.
The Act mandates that the IRS, HHS and the DOL audit compliance. Further, the ERISA plaintiff’s bar has become increasingly sophisticated and perceives noncompliance with the new requirements as a litigation opportunity. Accordingly, it is imperative that plan sponsors begin taking the necessary steps now to ensure compliance as of the Act’s effective date.
We are available to assist you with every step in the compliance process.