On July 1, 2021, the Biden-Harris Administration issued “Requirements Related to Surprise Billing; Part 1,” an interim final rule (IRM) that will restrict health care providers and facilities from sticking patients with excessive out of pocket costs through surprise billing and balance billing. The rule will implement the first of several requirements passed in the No Surprises Act (the Act) of division BB of the Consolidated Appropriations Act, 2021. The rule will become effective on January 1, 2022 and will, in many cases, be superseded by state law.
The No Surprises Act contains key protections to hold consumers harmless from the cost of unanticipated out-of-network medical bills. Specifically, the Act prohibits an out-of-network provider from balance billing, which occurs when the provider charges the individual the difference between the billed charged and what the individual’s plan or insurance has covered. This type of practice is most damaging in emergency situations, where a patient might not have the ability to choose a health care provider based on their network’s coverage and instead might need to seek care from any provider in the interest of their well-being. For non-emergency situations, an individual might choose an in-network provider, but then might not be aware that someone providing an ancillary but important function (i.e. an anesthesiologist) is an out-of-network provider1. The IRM protects patients from unreasonable expenses resulting from these circumstances as well as from charges for air ambulance services provided by out-of-network providers2.
The IRM limits the cost sharing for out-of-network services subject to these protections to no more than what it would cost for an in-network provider. The IRM states that out-of-network providers “shall not bill and shall not hold patients liable” for an amount that is more than the in-network cost sharing amount for such services3.
While this IRM will become effective on January 1, 2022, many states have passed their own laws in the previous decade while they awaited federal action. It is important to note, however, that self-insured plans are federally regulated by the federal Employee Retirement Income Security Act of 1972 (ERISA). This preempts states from legislating or regulating self-insured plans themselves. States are also limited in their ability to address surprise bills that involve an out-of-state provider4. Also, under the Airline Deregulation Act, states are also preempted from regulating costs for air ambulance services. Therefore, the IRM would provide the last word on how out-of-network providers can engage individuals in payments for those services. States can regulate fully insured plans, which are about half of the commercially insured population, provided that the provider is in the same state. Thus, these state rules supersede the IRM so long as the structure of the state rule applies to the type of plan and/or provider involved, and the provider and health insurance issuer are also licensed in the state5. If the provider is not licensed in the state, the IRM would supersede any state law.
In short, the IRM will take effect on January 1, 2022. It will effectively try to lower health care costs for consumers by prohibiting surprise billing and bill balancing by out-of-network health care providers in certain circumstances, and it will supersede state laws in some circumstances but it will also exist in addition to existing state laws regulating out-of-network providers where it is applicable.
1 Requirements Related to Surprise Billing; Part I Interim Final Rule with Comment Period, CMS (Jul. 1, 2021), https://www.cms.gov/newsroom/fact-sheets/requirements-related-surprise-billing-part-i-interim-final-rule-comment-period
2 Requirements Related to Surprise Billing; Part I, 86 FR 36872 (July 13, 2021) https://www.federalregister.gov/documents/2021/07/13/2021-14379/requirements-related-to-surprise-billing-part-i