While the “No Surprises Act” settlement process between insurers and providers seems by and large to be working as intended to protect patients, evidence is mounting that some parts of the settlement process are badly broken — “in a shambles,” one expert said.
No Surprises, passed in 2021, was a bipartisan measure, designed to protect patients from excessive bills. It was passed in 2021, and implemented in 2022.
Now, in 2024, it seems to be succeeding in its primary goal, protecting patients from surprise balance bills — but it seems possible that some patients might be harmed, proving once again that the healthcare system has a way of circumventing regulation to the benefit of industry, and to the detriment of patients or consumers (or as we like to call them, “people”).
Jack Hoadley, research professor emeritus at the McCourt School of Public Policy, Georgetown University, said it is clear that the original goal — protecting patients — “has been working and continues to work.” But the negotiating process mandated by the law between insurers and providers continues to be overloaded and “not happening in the way it was designed,” he said in a phone interview. He and his colleagues at Georgetown have been analyzing the act and its consequences, for example in this paper showing how providers have been favored in the process.
How it works
Three main types of surprise bills are covered by the act: Any out-of-network emergency service; out-of-network services at in-network facility (you get a hip replacement in network, but the in-network hospital assigns you an out-of-network anesthesiologist); and any out-of-network air ambulance service.
What happened before No Surprises: These bills were sent, the insurer paid what it wanted to pay, and a “balance bill” for extra charges landed on the patient. The main point of No Surprises was to remove this from patient responsibility and put the provider and insurer into a conversation leading to a settlement. (To see who gets paid what in healthcare, read our post on the topic.)
Brian O’Hara, senior attorney for provider relations at the Phia Group, a Boston area health cost containments consultant, said the No Surprises settlement process has been chaotic. “The dispute resolution process is just absolutely in shambles right now,” he said in a Zoom interview.
Phia takes these cases on behalf of self-insured employers, who are on the hook for paying the providers in disputed cases.
How it works: Initially, the insurer offers a payment in a No Surprises case. Then the provider can challenge the amount. What ensues is a one-month period of negotiation, and if either side is not satisfied, then they can challenge the settlement and send it into Independent Dispute Resolution. The challenges come only from the providers, O’Hara said — it would not make sense for the insurer to challenge its own payment.
To go into I.D.R., he said, the provider needs to register with the I.D.R. portal and enter a notification email to the insurer to start the process, which is binding. Then, theoretically, the I.D.R. referee works off of two figures: A proposed different figure from the provider, and possibly another from the insurer but usually the original offer.
The referee then chooses one price or the other, in what is called “baseball style arbitration,” with no opportunity to split the difference or choose some other sum.
High requests
Patients have by and large been protected, O’Hara said. But the settlement talks have left some insurers fuming over the chaotic nature of the process, and their ultimate payments.
The payment requests from the providers, he said, have been very high in many cases.
“What we’re seeing is almost a weaponization of the I.D.R. process,” O’Hara said. The primary problems, he said, are with free-standing out-of-network emergency rooms that have sprung up, often in Texas, as well as some big staffing agencies owned by private equity companies, and some big hospitals, particularly the huge H.C.A. chain.
“They’re not really negotiating in good faith,” in many cases, he said.
A key number, he said, is the Qualifying Payment Amount (QPA), which is generally defined as the insurer’s median contracted rate for a specific service or item. Insurers will define these payments using existing databases, and make that their offer in the 30-day negotiation. But, he said, some providers will reject that and offer a 10 percent discount off their billed charges — the “Chargemaster rate,” which is generally acknowledged to be inflated and fanciful.
“What we usually get is ‘we’ll give you a 10% discount or go on I.D.R.,’ and there’s never any kind of context as to how they arrived at their number,” he said. “I.D.R. rates have been extremely provider-friendly. As of fairly recently, we’re now starting to get I.D.R. determinations that are actually higher than billed charges, significantly sometimes.
“I’ve seen one recently as much as three times higher than billed charges, and there’s no information as to how or why the provider arrived at that number.”
Broken process
He also said the process for starting an I.D.R. is broken. The provider, to start a challenge, goes to the federal I.D.R. portal and enters the email address for the insurer, which then starts the process to send out an email soliciting final offers. The email has a unique link to be able to select an I.D.R. entity. But often, O’Hara said, the email addresses are wrong — so the insurer doesn’t know a challenge is being made and a response is required.
“If a provider decides to put in the wrong email address, then it goes out into the ether, and then the plan ends up getting defaulted. This happens all the time,” he said.
“You think, ‘Well, this should be a pretty easy fix, right? You email the I.D.R.E. and you say, ‘hey, you know, we got this determination. They didn’t use the right contact information. We need to reopen this.’ But it’s insane how difficult it is to get up to get something reopened or dismissed that is plainly brought in bad faith.
“You can email [the Centers for Medicare and Medicaid Services]. They have an email address, where you’re supposed to be able to find relief. You’ll send an email to that, and it will be eight months to a year before you get a response, if you do get a response.
“Most I.D.R.E.’s is don’t respond to emails. The few that do will often just reply and say, ‘Sorry, there’s already been a determination made. There’s nothing we can do.'”
6 separate disputes
Another problem: Some providers will take a bill for an episode of care with six Current Procedural Terminology codes, the billing codes that the system runs on, and try to maximize their income.
“I had a case with a provider in New Jersey,” he said. “The negotiation wasn’t going anywhere. The explanation of benefits that was sent clearly listed the Phia email address as the contact for No Surprises Act purposes. The provider knew that we were handling it because we negotiated it with them.
“There were six different C.P.T. codes. They initiated six separate disputes with four different I.D.R. entities on the same claim, and they used a fake email address to initiate them. They ended up getting a bunch of default determinations. We didn’t find out about them until the provider came to the plans looking for payment. It took me, I think, seven months to track down the I.D.R. entities, and I was ultimately able to get five of the six dismissed. But it probably took me, like, 20 hours worth of work total, just for those six disputes. It’s a really broken process.”
Most settle
Hoadley pointed out that the surprise bill problem is a tiny fraction of the health-care marketplace. While the volume of I.D.R. claims is much higher than what was anticipated, he said, “it’s still probably less than 10 percent of out-of-network claims.”
Most No Surprises claims do go through without I.D.R., he said. “The insurer makes the payment and the provider accepts it. They may not like it, but they think it’s not worth the I.D.R. — they don’t want to go through the additional hassle and cost,” he said.
“A lot of claims are getting paid at something close to the in-network rate.”
One of the problems presented by an attempt to see the big picture of No Surprises, he said, is that the providers and the payers are, as has long been true, telling their side and accusing the other of malfeasance. “Each side is telling the story in a different way” he said. Determining what is empirically true is hard because “it’s anecdotes and more anecdotes.”
“We talk to folks on all sides — the plan side and the provider side — to get our best sense of what is going on.”
Plans getting ‘decimated’
What difference does a problematic process make, if the patient is protected? That’s the primary purpose of No Surprises, after all.
“These plans are getting decimated by these just insane determinations for amounts of money well above their allowable, well above billed charges. Sometimes it’s nuts,” O’Hara said.
“For the self-funded industry, these things can be devastating. It’s not money that’s being paid out of some gigantic fund that Blue Cross has. This is being paid by teachers’ unions, police officers, gas station attendants.
“We have a gas station that is one of our plans. Literally, gas station attendants’ money is being taken from their account and put into the account of of private equity, basically,” he said, because the private-equity-backed provider groups are among the primary collectors of big sums.
Self-funded plans typically have stop-loss insurance to protect themselves against giant claims, he said. “But most stop-loss plans aren’t going to cover these determinations unless the plan has very good stop-loss coverage.”
Are the big insurers paying out big claims, as Phia has? I asked Hoadley. He said it’s not clear.
‘Catastrophic’
The end result can indeed harm the patient, O’Hara said.
“It can be catastrophic for plans. We actually have one plan that is going to a fully funded plan next year, because they they can’t withstand these determinations,” he said. The self-funded plans typically choose self-funding because they can save money by cutting out some of the administrative and commission and other fees that fully-funded plans must pay, to a big entity like Blue Cross or UnitedHealthcare. But now they’re switching back.
“It’ll probably mean that they’ll pay a higher premium. It’ll probably mean that they’ll have a higher deductible. Whatever’s covered will probably be less. There’s a price to be paid when you go from self-insured to fully insured, right? Because now you have to account for profit for Aetna or Cigna or Blue Cross, as well as the risk that they’re taking on.
“The individual is being protected in the sense that no one person is going to be balance-billed a significant amount, but the net effect is that if plans are having to pay significant additional funds, then everyone’s premiums are going to go up. People are either going to switch from self-funding to fully funded, or they’re going to significantly increase deductibles, co-pays, premiums, so people are going to end up paying for it.”
Most hospitals are not acting in this manner, he said: “It’s really only like a small percentage of providers, both hospitals and provider networks or physician networks that are initiating these disputes.”
He declined to name the physician networks that are most aggressive in this regard. But the Brookings Institution, in an analysis published in Health Affairs, named names, pointing to provider networks backed by private equity as the chief money-winners. “TeamHealth, a PE-backed provider organization, accounted for 54% of dispute lines,” the authors wrote. “Other PE-backed provider organizations that accounted for dispute lines are SCP Health (28% of dispute lines), Envision (5%), American Physician Partners (3%), and Sound Physicians (3%).”
One particularly problematic area is neuro-monitoring, O’Hara said, which takes place often during surgery by a series of measurements to ensure that the neurological system is performing well.
“There’s a lot of neuro-monitoring claims that come in because neuro-monitoring providers purposely stay out of network to leverage surprise billing laws,” he said. “We’ll see these neuro-monitoring providers that are getting 10 times more than the actual surgeon because they dispute every code.”
Self-insured employers
O’Hara said that Phia’s business representing the small, self-insured employers puts them close to the consequences of an I.D.R. process. Not only are these employers contemplating switching back to fully insured, he said, there are other downstream effects.
“Every time you make one of these determinations for an insane amount of money, somebody is not hiring an employee that they could have hired, or they’re laying someone off, or a benefit that they were planning on implementing, they’re not going to be able to do anymore,” he said. “Or they’re shutting down the company, in the most extreme case.”
Are the big insurers like Blue Cross and UnitedHealth seeing the same patterns? “I don’t know what their process is, but they’re definitely much better situated to withstand a large determination than a self funded plan,” he said.
“Most plans are in a position where they are able to pay claims with some level of predictability. But if you throw this wrench into it, where this independent entity can just award an infinite amount of money, there’s no predictability. How do you account for that? How do you predict that? How do you plan for employees’ needs?
“Let’s say there was a spinal surgery, and the the surgeon asked for neuro monitoring, and the neuro monitoring provider is going to bill $40,000 and then ask for $80,000 at I.D.R., and all of a sudden you have an $80,000 bill to pay, plus I.D.R. fees. You can’t plan for that.”
How many requests does Phia see a month? Maybe 500 to 750, depending. Everyone on his team has maybe 100 to 200 cases, he said.
Phia has raised this with C.M.S., he said, hoping to explain how the process looks from their perspective.
More money
Meanwhile, he said, some billing companies have noticed the opportunity to make money and “they’re striking while the iron is hot, and sending open negotiations on everything — sending everything to I.D.R. They might lose one here or there. But the wins more than pay for whatever losses they get.”
And of course, fees are involved, O’Hara said. There is a C.M.S. administrative fee fee ($115 per dispute) and an I.D.R. entity fee, which varies by entity and type of claim (see table here). The C.M.S. fee pays costs associated with administering No Surprises, while the I.D.R.E. fee is payment for the respective entity’s services. Both parties pay fees upfront. Whichever party prevails has their I.D.R.E. fees refunded, but the C.M.S. administrative fee is non-refundable.
“So, for example, let’s say a provider initiates a single Dispute and selects Federal Hearings and Appeals Services (FHAS) as the I.D.R. entity,” he wrote in an email. “Both the provider and health plan will pay $510 up front ($115 administrative fee plus F.H.A.S.’s fee of $395). Hypothetically, let’s say the health plan prevails. In this case, F.H.A.S. will return $395 to the health plan, but retains the fee from the provider.”
The volume of I.D.R. cases has been enormous, according to experts.
“Originally, the government estimated there would be about 17,000 cases a year. But in 2023, almost 680,000 were filed, according to data released in June,” T. Christian Miller wrote for ProPublica in June. “The result is an enormous backlog that has slowed payments to doctors, hospitals and medical groups. Decisions are supposed to take 30 days. Since 2022, however, more than half of the cases remain unresolved. Some have lasted more than nine months….
“Overall, providers have seen nearly a 40% decrease in reimbursements since the law took effect in 2022, according to a recent survey by the emergency physicians trade group. At least one doctors’ group, Envision Healthcare, mentioned the No Surprises Act as one of the reasons it filed for bankruptcy. (The company has since emerged from court oversight.)”
The emergency-room doctors, of course, were often the ones sending the huge balance bills.
Miller also wrote that providers complained that insurers were either delaying or simply not sending settlements.
Enforcement
There have been some reports of late insurer payments, and Hoadley said the law requires payment inside of 30 days. But the backlogs have resulted in some delays, and the process is convoluted, he said.
C.M.S. does not have visibility into all parts of the process to keep track of what’s happening and whether there are persistent violations, he said. C.M.S. works on a complaint system, and “if you look at complaints it’s still low.”
On the other hand, he said, if you ask a provider if they file a complaint every time the 30 days is exceeded, “the implication is no,” he said. “They don’t think the complaints do any good.”
The regulation and enforcement spotlights a different problem, he noted. Self-insured plans are governed by the Department of Labor, while A.C.A. plans are governed by state regulators. “Enforcement is a single case at a time,” he said. “It’s expensive, and it’s complex.”
Unsettling trends
The Brookings researchers found some other unsettling trends. In assessing data, they found: “We analyzed public I.D.R. data from 2023 for the most common disputed professional service: evaluation and management of a moderate to severe emergency medicine visit.
“Providers won 86% of cases, with mean decisions 2.7 times the Q.P.A. Private equity-backed providers won more often and higher monetary awards than other providers. The mean Q.P.A. was 2.4 times Medicare payments. Disputes were dominated by a small group of health plans and providers, so payments may not reflect the overall market for emergency services.”
They added that “private equity (P.E.)-backed physician staffing companies [were] winning 90% of their disputes vs just 39% for other emergency physician groups, generating an average I.D.R. payment 63% higher relative to the Q.P.A. than non-P.E. groups.”
The settlement process has also been beset by repeated court challenges to the law itself, to the methodology of the I.D.R., the means of determining the Q.P.A. and other things.
More unhappiness
The unhappiness about the I.D.R. process extends across the system. A trio of radiologists wrote a piece recently for Health Affairs about it, saying they do not submit all “underpaid claims” to the process. “The charges that providers deem most egregiously underpaid — where it is cost-effective for the provider to submit them — make it to I.D.R. For example, in Radiology Partners’ affiliated practices, fewer than a third of what we consider to be underpaid claims have been sent to arbitration. Thus, the volume of dispute submissions is not a random sample of all charges but a subset of underpaid claims,” wrote the authors, Richard E. Heller, Ashutosh Rao and Malea Reising from Radiology Partners and Comer Children’s Hospital at the University of Chicago
“Navigating the N.S.A.’s I.D.R. process is complex, expensive, and time-consuming. A national provider survey revealed that it takes several months to obtain an I.D.R. decision and even longer to be paid by the insurer. There is a non-refundable $115 administrative fee paid by both the initiating and non-initiating parties, in addition to an arbiter’s fee ranging from $375–$1,170, paid by the non-prevailing party. Since I.D.R. fees are paid up front, and the arbiter’s fee is not returned to the prevailing party until a decision is reached, there is a constraint on cash flow, which may disproportionately impact smaller organizations.
“While batching of multiple charges in a single dispute submission was included in the statute to make I.D.R. accessible and efficient, narrow batching restrictions detailed in rulemaking limit access for many hospital-based providers (especially in radiology) and for smaller practices that struggle to create a batch large enough to offset the required I.D.R. fees. …
They also blamed the insurers as a whole for making the process unusable. “While past analysis of I.D.R. has generally focused on provider organizations that submit disputes, we believe it is the insurers who are driving up the volume of I.D.R. submissions by pushing providers out of network, not appropriately reimbursing for care, and frequently not engaging in open negotiations. For providers, I.D.R. is an expensive and time-consuming last resort that is not uniformly accessible.”
