Medical Cost Disputes to Be Settled by Arbitrator

The new system stems from the No Surprises Act, a milestone legislation for patient advocates and lawmakers because it aims to limit out-of-pocket costs for unexpected medical bills. It applies to more than 130 million people with employer-sponsored health plans covered by federal law and many people who live in parts of the country without a state-based law that bans surprise bills. The 2020 No Surprises Act goes into effect on Jan. 1.

The legislation directs insurers and providers who can’t agree on a reimbursement amount to submit to arbitration. It also tasked the administration with setting up the independent resolution process, which has had hospitals and insurers sparring over whether the system will financially favor the other, as third-party dispute resolutions could affect their bottom lines.

“Have you ever experienced a surprise bill? Then you know why this is so important,” said Department of Health and Human Services Secretary Xavier Becerra in an interview. “If it’s a surprise bill, it was probably an emergency or some sort of out-of-network treatment you needed…it really is an issue of peace of mind.”

The regulation released Thursday says the arbitration process kicks in when a doctor, hospital or other health provider or insurer disagrees with the reimbursement amount. If they can’t reach an agreement after 30 days, either party can start the process of taking the dispute through a federal independent resolution process.

The insurer and health provider can jointly select an arbitrator that attests to no conflict of interests. Both sides submit their payment offers with supporting documentation, according to the rule. The arbitrator will issue a binding decision, selecting one of the parties’ offers as the payment amount. Both parties must pay an administrative fee of $50 in 2022 and the party that doesn’t prevail pays for the cost of the independent resolution.

The rule provides a process to certify entities that operate as arbitrators and a way for members of the public, insurers and medical providers to petition to have the arbitrator’s certification revoked. Arbitrators must provide regular monthly reporting for quarterly public reports.

Insurers have been concerned that arbitration could put them at a disadvantage and favor linking out-of-network reimbursement to a benchmark rate.

In addition, the regulation would require providers to give patients who are uninsured or paying out-of-pocket for their care a “good faith estimate” on the cost of treatment. Because it may take time for hospitals to prepare for the requirement, HHS will exercise its “enforcement discretion” from Jan. 1, 2022, through Dec. 31, 2022

“For a surgery, the good faith estimate might include the cost of the surgery, any labs or tests, and the anesthesia that might be used during the operation,” according to the rule.

When an uninsured or self-paying patient gets billed significantly more than the estimate, the patient can enter into a patient-provider dispute resolution process, according to the rule. The patient must begin the process within 120 calendar days after getting the bill, which must be at least $400 more than the estimate. For patients, the fee for the dispute process in the first year will be $25.

The regulation is the second major action from the administration under the No Surprises Act. HHS in July implemented key parts of the legislation that protect patients from being billed by out-of-network doctors who provide treatment at in-network hospitals, as well as protecting them from surprise bills for both emergency and nonemergency care.

Those protections apply to emergency medical services received from doctors, nurses and other providers who are out of a patient’s insurance network, air ambulance services and nonemergency services given at health facilities that are in-network.

The rule issued Thursday will undergo a 60-day comment period and largely applies to contract years beginning on or after Jan. 1, 2022.

Altogether, the No Surprises Act is expected to lower consumer premiums by about 1% and slim the federal deficit down by $17 billion over the next decade, according to estimates from the Congressional Budget Office. Some of that savings come from lowering federal subsidies for private insurance.

Arbitration over billing disputes has been the most contentious part of the legislation, with disagreements over the process almost scuttling passage of the law. Insurers have been concerned that third-party arbitration would favor hospitals in decisions and sought to have a system pegged to market-based prices in local areas.

Matt Eyles, president and chief executive of America’s Health Insurance Plans, said his group supports the arbitration process. “This is the right approach to encourage hospitals, health care providers and health insurance providers to work together and negotiate in good faith,” he said.

The American Medical Association and some state medical associations worried arbitration could financially hurt small physician practices still reeling from the pandemic.

Chip Kahn, chief executive of the Federation of American Hospitals, a trade association for taxpaying hospitals, opposed the rule, calling it a “miscue.” He added, “This regulation discards all of that hard work, misreads congressional intent and essentially puts a thumb on the scale benefiting insurers against providers and will over time reduce patient access.”

Stacey Hughes, executive vice president of the American Hospital Association, criticized the rule, saying that “the administration’s rule has moved away from congressional intent and brought new life to harmful proposals that Congress deliberately rejected. Today’s rule is a windfall for insurers.”

Thursday’s rule came from HHS, the Labor Department, the Treasury Department and the Office of Personnel Management.

Write to Stephanie Armour at [email protected]