What the No Surprises Act Means for Patients, Providers, and Payers

A version of this article was published in the August 2021 edition of Healthcare News.

At the closing of 2020, former President Donald Trump signed a $1.4 trillion year-end spending deal known as the No Surprises Act as part of the Consolidated Appropriations Act of 2021 to address surprise medical billing at the federal level. The law goes into effect on January 1, 2022.

On July 1, 2021, the Department of Health and Human Services (HHS), Department of the Treasury (collectively, the Departments), along with the Office of Personnel Management (OPM) released an interim final rule with comment period (IFC), titled Requirements Related to Surprise Billing; Part I.

This IFC implements many of the No Surprises Act’s requirements for group health plans, health insurance issuers, carriers under the Federal Employees Health Benefits (FEHB) Program, health care providers and facilities, and air ambulance service providers.

The regulations issued will take effect for health care providers and facilities on January 1, 2022. For group health plans, health insurance issuers, and FEHB Program carriers, the provisions will take effect for plan, policy, or contract years beginning on or after January 1, 2022.

The Congressional Budget Office estimates that the No Surprises Act will result in direct savings for consumers through reduction of commercial insurance premiums by 0.5% to 1%, while simultaneously lowering payments to some providers.

An overview of the act and how it could impact your organization follows.

What is a Surprise Medical Bill?

A surprise medical bill, more commonly known as out-of-network billing, occurs when a patient receives a bill for the difference between the out-of-network provider’s fee and the amount covered by the patient’s health insurance—after co-pays and deductible.

Because the provider and the health plan haven’t agreed upon payment through a contract, the provider then bills the patient for the outstanding balance.


Health care costs in the United States have been rising for decades and are expected to keep increasing.

In a 2020 poll conducted by Kaiser Family Foundation, one-third of insured adults ages 18-64 reported they received an unexpected medical bill in the past two years after they, or a family member, received care from a doctor, hospital, or lab that they thought was covered—but their health plan didn’t cover the bill at all or covered less than expected.

16% of insured adults aged 18-64 reported they received a surprise bill related to care received from an out-of-network provider.

In that same poll, almost 67% of adults surveyed said they worried about unexpected medical bills, more than the number worried about affording other health care or household expenses. 

Surprise bills are on the top of the list of affordability concerns for many. Not all health plans are built the same, and not all patient benefits are identical, so some health plans pay for out-of-network services while others don’t—except in an emergency.

Depending on the patient’s plan benefit design, the patient may face a higher coinsurance payment or be responsible for the out-of-network provider’s entire bill.

What Type of Protection Does the No Surprises Act Offer?

Essentially, this new law prohibits out-of-network providers from billing patients more than in-network cost-sharing amounts, which is based on the recognized amount.

The recognized amount is defined as either:

  • The amount specified by state law, which applies to plans regulated by state law
  • A qualifying amount or an amount approved by the state for those that have an all-payer model agreement

Specifically, the act extends protection to the following types of services:

  • All out-of-network emergency facility and professional services
  • Post-stabilization care at out-of-network facilities until a patient can be safely transferred to an in-network facility
  • Air ambulance transports, whether emergency or nonemergency in nature
  • Out-of-network nonemergency services delivered at or ordered from an in-network facility unless the provider follows the notice and consent process

A violation of the No Surprises Act may result in a state enforcement action or federal civil monetary penalties of up to $10,000 per violation.

The types of providers and payers that will be impacted by this transformation are more far-reaching than one may expect, including:

  • Emergency room physicians
  • Providers that a patient typically doesn’t select such as hospitalist, radiologist, anesthesiologist, pathologist, or neonatologist
  • Air ambulance companies
  • Most out-of-network providers
  • Group health plans and group and individual health insurance coverage offered by health insurance issuers, including insured and self-insured plans

Notice and Consent Process

The No Surprises Act does allow for select exceptions to surprise medical bill protections, but only if a patient knowingly and voluntarily agrees to use an out-of-network provider for nonemergency services.

When nonemergency services are provided by a nonparticipating provider at a participating facility or at a nonparticipating emergency facility, providers may not bill beyond the allowed cost-sharing amount—which is based on the recognized amount—unless the patient is provided written notice and consent waiver 72 hours in advance of appointment.

There are caveats to the consent waiver process. It doesn’t apply if either:

  • There isn’t an in-network provider available in the facility
  • The care is for unexpected or urgent services
  • The provider is an ancillary provider that a patient typically doesn’t select such as a hospitalist, radiologist, anesthesiologist, pathologist, neonatologist, or assistant surgeons

This list of providers is subject to change in future rulemaking.

Patients must be provided documents, including:

  • A good-faith estimate of the costs of services
  • A list of in-network providers at the facility
  • Information on medical care management such as pre-authorization or pre-certification

Payment Determination and Arbitration for Out-of-Network Medical Bills

The act requires that health plans make an initial payment to the provider or transmit a notice of denial within 30 days of the date of bill submission, but doesn’t prescribe the reimbursement amount.

Should the provider disagree with the payment or the notice of denial by the health plan, a 30-day negotiation period may begin.

In principle, should the provider and the health plan not resolve the payment dispute within 30 days of the open negotiation period, an Independent Dispute Resolution (IDR) process can be triggered.

The parties can either mutually agree on a payment amount during the 30-day IDR process or initiate so-called final offer arbitration if no resolution is reached. In this situation, both sides make a final payment offer and the arbitrator must choose one of the submitted offer that lean on more reasonableness.

In determining reasonableness, the act instructs arbitrators to consider several variables:

  • The qualifying payment amount in 2022 is the insurer’s median in-network contracted rates for similar services in that geographic region as of 2019, inflated by the Consumer Price Index for All Urban Consumers (CPI-U). In 2023, the CPI-U is added to the 2022 qualifying amount.
  • Demonstrations of good faith efforts, or lack thereof, to reach a network agreement and any contracted rates between the two parties during the previous four years
  • Market shares of both parties
  • Patient acuity
  • The level of training, experience, and quality of the clinician, or the teaching status, case mix, and scope of services offered by the facility

The party whose offer wasn’t selected by the arbiter pays the cost of the IDR. An important point to call out is the provider’s usual and customary or billed charges or the rates paid by federal health care programs, such as Medicare or Medicaid, isn’t considered here.

5 Considerations for Providers & Payers

1. Review Your Revenue Cycle Process for a Clean Bill of Financial Health

Creating clean claims, reducing the incidence of denied claims and minimizing bad debt starts with strong revenue cycle management.

40% of denials originate from registration errors at pre-service, one of three critical segments of the revenue cycle. The importance of the pre-service processes can’t be overstated.

This function is responsible to:

  • Capture accurate and complete demographic and insurance data
  • Complete insurance verification
  • Understand health plan requirements
  • Complete medical necessity screening
  • Obtain all required authorizations
  • Communicate accurate cost estimates for patients

As such, providers and payers should review their data systems.

Increasing training and continuing education of front-end staff is crucial to ensure:

  • Accurate insurance plan identification
  • Eligibility verification
  • Use of price transparency tools
  • Respectful patient interactions that are clear, easy-to-understand, consistent, and complete

2. Provide Advanced Explanation of Benefits (EOB)

Health plans and providers are required to provide a timely Advanced EOB notification in plain language. This Advanced EOB must include the following components:

  • Whether the provider or facility is participating and, if participating, the contracted rate. If the provider or facility is out-of-network, the description must reference how the patient can find information on participating physicians at the facility.
  • The good-faith estimate from the provider based on codes
  • A good-faith estimate of the amount the plan is responsible for paying based on the estimate
  • A good-faith estimate of cost-sharing based on the provider’s estimate
  • A good-faith estimate of the amount met by the patient towards out-of-pocket maximum and deductible
  • A disclaimer that coverage is subject to medical management requirements, if applicable
  • A disclaimer that the information is only an estimate and may be subject to change
  • Any other information or disclaimer the plan deems appropriate

3. Establish a Process to Keep Provider Directories Up to Date

By 2022, providers and payers must have a thought-out process to ensure timely provision of directory information to a plan.

Procedures should be in place to remove providers who are unable to attest to network status.

Erroneous provider directories will result in inaccurate estimates of in-network rates, which translate to a plan’s inability to impose a cost-sharing amount greater than in-network rates.

4. Review Contracts and Expand Out-of-Network Mitigation Strategies

Arbitration for surprise bills will create new administrative costs that come from fees expended in each arbitration case, and the staff time and resources devoted to managing the process. 

Now is the time to review not just out-of-network provider status, but also in-network contracts. In addition to being prudent to consider reaching in-network participation agreements with prevalent insurance companies to reduce financial risk from arbitration negotiations, there will be mounting pressures on lowering in-network rates.

The culminating impact would be lower reimbursement, influencing long-term sustainability.

Clear communication with patients is key to meet the law’s stipulation that patients consent to paying for certain out-of-network services for more than the in-network cost-sharing due per their insurance plan.

Payers must better anticipate out-of-network situations, identify the potential financial impact, and create a consumer education strategy to build clarity around prices and strengthen knowledge about plan benefits.

Price transparency today will serve to inform strategies on responding to the No Surprises Act in 2022. Providers and payers can leverage publicly reported pricing information to ascertain rate offers during the open negotiation period and the final pursuit of arbitration.

5. Keep Cost Containment and Lean Operational Efficiency Top of Mind

With balance billing being a matter of history by 2022, providers who used to practice balance billing are expected to experience a loss in revenue and decrease in cash, creating lower operating margins.

Operational performance reviews using Lean processes to eliminate unnecessary waste, improve throughput, and reduce total costs is a key strategy to mitigate the loss in revenues.

Looking Forward

Additionally, the act imposes other guardrails that will become more clarified as we approach 2022.

We’re Here to Help

For strategies and opportunities navigating the No Surprises Act, including financial implications, contract management and negotiations, revenue cycle operational readiness, contact your Moss Adams professional.

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