In December 2020, Congress No Surprise Act (NSA)) to protect patients from unexpected medical costs. Since its introduction, patients have benefited; Initial data A CMS study found that providers win three-quarters of cases in a newly created arbitration process to resolve payment disputes. If he wins, he receives a payout of 3x the median in-network fee. As a result, costs are rising for employers and ultimately for patients who must pay higher premiums.
background
Congress passed the NSA in December 2020 with the primary purpose of saving patients from unexpected medical costs. These surprise bills are often the result of patients inadvertently receiving services from out-of-network providers, and often occur in emergency situations where patients have no choice. their provider. Currently, patients are not responsible for most forms of surprise charges and instead pay only in-network cost sharing in such cases. Early signs are that the measure is working as intended.Recent investigation A percentage of stakeholders found that this law protects patients from the most prevalent form of surprise billing. But the law also aimed to curb soaring health care costs and establish fair payment between health care providers and insurance companies for out-of-network services.
Because patients were excluded from disputes, the bill also had to specify how much insurers would pay providers for out-of-network care. NSA required providers and payers to take the following actions: baseball style Arbitration Process for Determining Payment Settlement (also known as Final Offer Arbitration) The Independent Dispute Resolution (IDR) process works as follows. The health plan will make an initial offer to an out-of-network provider. Providers can initiate open negotiations if they want a better offer. If a health plan and provider cannot negotiate a reasonable payment, the provider can initiate an arbitration process. The arbitrator will then choose one of her two offers, which will be the final payment amount.
To ensure fair payments and contain costs, Congress established the following standards: Qualified Payment Amount (QPA) It represents the median contract price for each service, which the arbitrator should consider when weighing offers. However, the law did not specify how the arbitrator would use her QPA in the final decision.The Biden administration has since issued guidance requiring arbitrators to use QPA as a primary consideration in their decisions, but a Texas judge struck down of rule. As a result, arbitrators can consider many factors as well in determining fair payment, not just the median in-network rate for that service. A more modest version of the rules that adds predictability to the arbitration process is: Under litigationthe 5th Circuit heard that Oral argument In February 2024.
Increased costs for employers and patients
Recent report A report from the Centers for Medicaid and Medicare Services (CMS) found that providers won in 77% of cases brought to arbitration in the first half of 2023. Although this law took effect in 2022, the IDR process only started in April 2022, so the results will be unclear from the first two quarters of 2023 on how the process is working. You will get the best situation ever.
Providers win in more than three-quarters of cases and in the second quarter of 2023. received The median QPA is 322%, which is three times the median in-network rate. On the other hand, if the payer won in arbitration, he received his 100 percent of the QPA (regular rate for in-network services). Since the arbitrator allows her to choose only between two offers, this process depends on whether the first named party submits a reasonable offer. Early results reveal that providers are demanding and typically receiving significantly more than the median in-network rate. For example, in the second quarter of 2023, the median common offer for surgery was 567% of his QPA.
Beyond the results, the type of provider choosing to arbitrate also reveals some worrying trends.about two-thirds Private equity-backed provider groups dominate the initiators of cases that go to arbitration.These groups have strong power incentive This is to provide income to quickly pay off debts and additional financial resources to pay administrative fees and make claims. Some private equity-backed companies believe the NSA forced them into the bankruptcydata shows that some large private equity-backed provider groups are using the arbitration system to extract high payouts from insurance companies.
Because the insurance company loses to the health care provider in arbitration, the employer and ultimately the patient bear the financial consequences. For more expensive in-network providers, your insurance company will typically increase your premiums to pay the higher rates or remove the more expensive provider from your network. Insurers have less leverage in negotiations with health care providers because these negotiations often concern services provided by doctors not selected by patients, such as emergency physicians. Insurers and employers cannot plausibly exclude these providers from their networks and therefore rely primarily on the outcome of the arbitration process. Insurers lose money on 77 percent of cases and will likely be forced to raise premiums because they receive three times the median in-network rate.
CMS’s initial numbers differ from those from the Congressional Budget Office (CBO). projection. Under the assumption that arbitrators would use QPA as a key factor in their decisions, CBO projected that NSA would reduce premiums by about 1% over 10 years and reduce the federal deficit by $17 billion. However, CBO produced more than 100 unofficial estimates and stated in its report: presentation In early March, estimates varied depending on which side arbitrators favored and how the process affected prices within the network. The CBO estimates that, at its highest estimate, the NSA could: increase The federal deficit would increase by about $50 billion.
Still, even without specific instructions regarding the use of QPAs, the potential cost-containment issues contained in the NSA were predictable. In 2014, New York passed the Balanced Claims Act, which includes an arbitration process to resolve payment disputes. Arbitration process spanning over 4 years also favorable Health insurance services provide only 13% of cases. Additionally, in cases where providers won, they received payments up to 50 percent higher than the “usual and customary rate” (UCR). As with the NSA, one of the central issues with cost containment in New York is that guidance given to the arbitrator. In this case, the UCR benchmark for the arbitrator to consider was set at the 80th percentile of billed fees, and the payment threshold was even higher.
Management costs and backlog
The volume of cases brought to arbitration by providers has exceeded many expectations, including the CBO and the agencies responsible for implementation (Department of Health and Human Services, Department of Labor, and Department of Treasury).The ministry estimates that the number of infected people in the first half of 2023 will be 13 times more expensive than originally expected. Now, due to the unexpected volume, Ongoing litigation hurdlesThe IDR process has a backlog of approximately 300,000 cases as of June 2023.
The number of cases covering a wide range of areas is increasing. policy experts argue This means that the IDR process can incur hundreds of millions of dollars in annual administrative costs. In the first half of 2023, CMS collected $16.2 million in administrative fees and spent $58.9 million on compensation and other expenses for IDR entities. Proposed in October 2023 rule The Biden administration plans to address caseloads and fee structures by streamlining processes and slightly reducing administrative fees.President Biden’s 2025 budget Includes an additional $500 million over the next five years for NSA implementation. But making the process of awarding high payments to providers more efficient and less prohibitive could lead to more cases going to arbitration.
As the number of cases increases each quarter, costs will continue to rise until the arbitration process reaches a standstill until insurers and underwriters have a mutual interest in avoiding arbitration and can agree to terms on their own. right. brookings Analysts argue that without reliable benchmarks or collective certainty about the basis for IDR results, the number of infections is likely to continue increasing until projections reach a clear equilibrium. Because the initial decision is so favorable to the provider, its equilibrium is much higher than the median, and over time her QPA standard may rise even higher.
Looking to the future
President Biden’s 2025 budget This includes extending anti-surprise laws to ground ambulance services. While the NSA protects patients from surprise charges from air ambulance services, it does not cover ground ambulances. A potential expansion of the NSA this year or next would allow lawmakers to revisit and address the payment resolution process.
There are several ways to restart the payment resolution process. Although resolving payment disputes through arbitration is unnecessarily costly and cumbersome, several reforms could reduce costs and lead to more reasonable payments while preserving the arbitration process.
- Putting QPA at the center of arbitration: Congress should require arbitrators to use QPAs as the most important consideration in determining payment settlements.district judge struck down Health and Welfare Services in 2021 rule It would have made similar changes for procedural reasons, arguing that the rules conflicted with the NSA’s “bylaws.” If lawmakers added this change to the statute, the same legal challenge would no longer be relevant. Considering QPA first puts downward pressure on costs by bringing payments closer to the median in-network rate and making the process more predictable.
- Avoid considering previous or existing contract fees. Arbitrators should not take into account contracted rates that a provider has with an insurance company when determining the amount to be paid. Larger provider groups have additional leverage in negotiations with insurance companies and are therefore more likely to command higher contracted rates for certain services involved in arbitration.One reason provider reimbursements are three times the median in-network rate is because providers Previously contracted price as a factor in their decisions. Considering these rates in arbitration would undermine the goals of fair pay and spending reductions.
Still, the most cost-effective and efficient solution would be to benchmark rates and eliminate the arbitration process altogether. In CBO’s evaluation of the bill, they stated: It was revealed We believe that using arbitration instead of established benchmarks to resolve disputes may reduce savings. Congress already created market-based rates in the QPA. It reduces costs by requiring providers to pay the median in-network rate. Directly specifying the amount that insurers must pay for specific out-of-network services also reduces arbitration administration costs for both the federal government and health care providers. However, given the political challenges associated with abolishing federal processes like IDR, reforming existing arbitration processes is more likely.
We must continue to provide our patients with additional protection from unexpected charges. Still, Congressional action is needed because the NSA has unintended consequences for employers and taxpayers. The potential expansion of the NSA gives Congress a significant opportunity to modify the payment resolution process and prevent health care providers from using the system to extract higher payments from health plans.
