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Surprise! Surprise! No Surprises Act Favors Providers And Is Driving Up Costs

Since the No Surprises Act (NSA) was passed in late 2020, I have argued that the baseball-style arbitration process is heavily stacked against health plans and favors providers.  The law went into effect on January 1, 2022, with some portions still forestalled by the federal government.  But the main components  that stop surprise billing to patients and the process to settle what is paid by plans to providers has been in force now for about 2 years. 

The implementation of the arbitration has been rocky.  The number of cases is demonstrably above what was expected.  That said, more and more data is now available that shows how well providers are doing from the process.

In commercial coverage, the main component of the law disallows providers from billing patients for out-of-network services beyond plan outlined in-network cost-sharing for emergency situations, post-emergency stabilization, and non-emergency in-network facility-based procedures where non-network services may be provided. Medicare and Medicaid already have protections in law for the most part. Prior to this, out-of-network providers were free to bill these patients as plans deemed the provider out-of-network and not covered (unless there was an out-of-network benefit and even then patients could have faced balance billing).  The new rules have patients pay defined plan cost-sharing and plans and providers negotiate what amount will be paid.  If they cannot agree, an arbitrator decides what the plan will pay the provider.

The Biden administration sought to direct arbitrators to give greater weight to median in-network payments or the qualifying payment amount (QPA) under the law. A court struck the provision as outside of the administration’s authority and not consistent with intent.  I supported the Biden administration’s efforts in this regard as plenty of data was available from state surprise billing laws using baseball-style arbitration, where providers win most of the awards and in fact the laws help drive up not only awards but costs as a whole.  In essence, in baseball arbitration an arbiter decides between one or the other last best offers from the sides and cannot craft a middle ground. The Biden administration was forced to adopt guidance with little direction to the arbitrator as it pursues its legal challenge to the court decisions.  Arbitrators are left to compare a range of different provider and plan data points/issues.

Enter a new Brookings Institution analysis, which could perhaps change some of the policy dynamics of the issue.  It analyzed arbitration decision data from the first half of 2023. Researchers focused on emergency care, imaging, and neonatal and pediatric critical care. All of these meet the protections in the law.

The study finds the following:

  • Arbitration requests were 13 times greater in the period than estimated for the entire first calendar year.
  • Providers won more than 75% of cases in the review period.
  • Awards are well above what traditional Medicare and most in-network private insurers would pay providers.
  • Median decisions were at least 3.7 times what Medicare would pay.
  • For emergency care and imaging, the median decisions were at least 50% higher than in-network commercial prices. The study finds that payouts are closer to historic out-of-network payments.
  • Plans could in part be driving some decisions in favor of providers.  The study finds that insurer offers tend to be slightly higher than the relevant QPA.  But the QPAs themselves provided by plans are at least 35% lower than even the low-end estimates of prior mean in-network prices.
  • Cases were dominated by some very large firms in the first six months.  Behavior and awards could be different in the future. Plans might raise offers in the future given their losses.
  • Based on the awards, the amount a provider could receive in out-of-network situations may not change substantially on average, with some increases or decreases depending on service area.
  • Regardless, providers now have health plans as their payors and not patients who often have limited means. This constitutes a steady source of income they did not have before.

The study concludes that such awards could possibly increase in-network rates as well as premiums.  This will drive costs across the whole healthcare system. The Congressional Budget Office (CBO) said that the NSA would mean reductions in prices paid to providers, which would reduce insurers’ costs and premiums. It projected reductions of about 1%.  What’s more, it said federal deficits would drop from 2021 to 2030 by $17 billion. Last, CBO predicted that decisions would come down close to in-network rates.

What’s worse is that the new law encourages some doctors to stay out of network as they will obtain higher reimbursement through the NSA. The huge arbitration caseloads are proof of this. Again, the CBO assumption about a move to in-network care did not happen, either. And, as such, insurers may have to pay more to network providers to meet access standards because of the law’s impact. So, prices will increase even more.

Providers are laughing all the way to the bank. Providers continue to fight various aspects of the law even though they have it so good.  What once might have been a threat to the providers became a consistent flow of money to them from reliable payers vs. the patients they were suing. 

All of this was orchestrated by the American Hospital Association, American Medical Association, and other provider groups.  They carefully picked off votes in each party on the issue and health plan lobbyists were caught flat-footed. The CBO’s inaccurate assumptions further ushered through a law that favors providers and will drive price even more in our already out-of-control system. Many private equity firms have invested in or bought provider groups and hospitals. This was their dream scenario!

Now, the NSA has saved so many from exorbitant non-network bills.  That is a good thing. But the bill should be fixed to close some loopholes that have popped up (including the ground ambulance exclusion and ensuring prudent layperson standards are followed by plans for NSA situations) as well as to fix the excessive awards to providers.

Brookings Institution analysis here:

#nsa #nosurprisesact #surprisebilling

— Marc S. Ryan

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