Requirements Related to Surprise Billing; Part I: Policy Update - McDermott+Consulting

Requirements Related to Surprise Billing; Part I: Policy Update


On July 1, 2021, the US Departments of Health and Human Services (HHS), Treasury and Labor, and the Office of Personnel Management issued an Interim Final Rule with comment (IFR) implementing portions of the No Surprises Act, legislation enacted in December 2020 that bars surprise billing beginning January 1, 2022.

Under the law, payers and providers (including hospitals, facilities, individual practitioners and air ambulance providers) are prohibited from billing patients more than in-network cost-sharing amounts in certain circumstances. The prohibition applies to both emergency care and certain non-emergency situations where patients do not have the ability to choose an in-network provider.

The law establishes a pathway for resolving payer-provider payment disputes using negotiation and arbitration. If entities are unable to come to an agreement, the independent dispute resolution (IDR) process requires each party to submit a final payment offer, and the arbiter will select one of these offers as the final payment amount (commonly referred to as “baseball style” arbitration). In selecting the final payment, arbiters must weigh certain factors and are banned from considering the lower payment rates paid by federal government programs (e.g., Medicare and Medicaid).

The No Surprises Act directs payers to determine the patient’s cost-sharing amount based on all-payer models (if applicable), state law or a new term, the qualifying payment amount (QPA). The QPA is important as it also impacts the IDR process as one factor that the arbiter must consider when selecting between a payer and provider’s offer for reimbursement.

This IFR establishes regulations defining the payment methodology. The regulation proposes the methodology payers must use to determine cost sharing and the QPA, information payers must share with out-of-network providers, the process for submitting and receiving consumer complaints, and the format and details of the notice and consent requirements.

Stakeholders will have 60 days to comment on the IFR once it is published in the Federal Register. The Departments will issue the No Surprises Act regulations in several phases. The second regulation should be published by October 1, 2021, and will establish a payer audit process. The third regulation should be published by December 27, 2021, and will detail the independent resolution dispute process and patient transparency provisions.

Key Takeaways

The IFR:

  • Establishes the methodology for calculating the QPA, including further defining the similar items and services, providers and facilities, and geographic regions that will be used for calculating a median rate, and the methodology for arranging contracted rates to determine a median amount. The IFR adds new methodologies for calculating the QPA for air ambulance and anesthesia services.
  • Broadens the definitions of emergency services and emergency medical conditions and prevents payers from limiting coverage based on the final diagnosis code alone or general policy exclusions.
  • Clarifies that consumers’ cost sharing will be based on an all-payer model agreement amount. If this amount is not available, cost sharing will be determined by existing state law, then by the lessor of the billed charge or the QPA.
  • Requires payers to disclose to nonparticipating providers the QPA for each item or service involved and, upon request, information regarding whether the QPA was based on an underlying fee schedule or derived amount, any alternative service codes or eligible databases, and whether any contracted rates were not set on a fee-for-service basis.
  • Requires payers to act in a timely fashion in issuing an initial payment or notice of denial of payment. The initial payment must reflect what the payer considers to be payment in full. The notice of denial of payment does not include denials due to adverse benefit determinations.
  • Begins to outline the consumer complaint processes for reporting payer and provider violations and notes that these processes may be expanded.
  • Establishes the content, language and timing standards related to notice and consent forms and how these forms must be delivered. The Departments did not expand the exceptions to providing notice and consent.
  • Gives states wide discretion in implementing All-Payer Claims Databases. These databases will be considered categorically eligible to serve as a resource for calculating the QPA.
  • Clarifies that the No Surprises Act is not intended to displace states’ balance billing laws and that the Departments are exploring options for providing more flexibility for state laws to apply.

Key Resources



For more information, contact Kristen O’Brien, Katie Waldo, Eric Zimmerman, Jason Caron (McDermott Will & Emery, Partner), Emily Curran (McDermott Will & Emery, Associate), or Judith Wethall (McDermott Will & Emery, Partner).