According to the federal government, medical debt in the U.S. has reached $111 billion1. While this number is down from $143 billion in 2018, it’s still the greatest source of debt for Americans.
One reason medical debt has increased in recent years is surprise billing. When an individual accidentally receives healthcare services from an out-of-network hospital, doctor, or other provider, they may receive a surprise bill.
A recent report2 found that one in five insured adults received a surprise medical bill in the last two years. It also found that18% of visits to emergency facilities resulted in at least one surprise bill. This is why Congress passed the No Surprises Act into federal law.
The No Surprises Act offers individuals greater surprise billing protections to make receiving healthcare more predictable. This blog will cover everything you need to know about the No Surprises Act and how it impacts millions of consumers.
What is the No Surprises Act?
In December 2020, the federal government passed the No Surprises Act as part of the Consolidated Appropriations Act of 2021. The law took effect in 2022. It creates billing standards and provides additional protections for consumers covered by group and individual health plans from surprise medical billing under certain circumstances.
These circumstances include emergency care at out-of-network facilities, out-of-network care at in-network facilities, and additional services.
The Act mandates that patients are only liable for care at in-network cost-sharing amounts. This means that certain non-emergency out-of-network ancillary services can’t bill patients more than their in-network cost-sharing amount, even if they received notice or consented to the service.
The Act applies to services and items like:
- Lab services
- Emergency medicine
- Other diagnostic services
Simply put, the No Surprises Act requires health plans to charge surprise out-of-network services at the patient’s in-network rate.
Other key features of the Act are that the healthcare provider and the insurer are now allowed to negotiate reimbursement separately, keeping the patient out of the process. Also, provisions are now in place to process independent dispute resolutions through “baseball arbitration.”
Baseball arbitration is when the provider and insurer present an arbitrator with the amount it believes the plan should pay the provider. The arbitrator then selects one proposal or the other. The decision made during arbitration is binding and isn’t subject to review by a court.
Who is affected by the No Surprises Act?
The No Surprises Act affects employers, third-party administrators (TPAs), insurance brokers, and all other participants in the healthcare industry.
This includes, but isn’t limited to:
- Hospital outpatient departments
- Ambulatory surgical centers
- Ancillary providers performing emergency and non-emergency services, like air ambulance services
Why is the No Surprises Act important?
Before the COVID-19 pandemic, two-thirds3 of Americans were worried about whether they could afford an unexpected medical bill. The No Surprises Act has created stricter patient protections regarding reporting, which is crucial for consumers to receive more direct medical care.
New procedures for the No Surprises Act include:
- Reporting requirements regarding air ambulance services
- Disclosures and reporting requirements regarding compensation to agents and brokers
- Procedures for enforcement of No Surprises Act provisions against providers, healthcare facilities, and air ambulance providers
- Disclosure and reporting provider requirements for health insurers
- Revisions to existing enforcement procedures
Around a fifth of emergency claims and a sixth of in-network hospital stays include an out-of-network medical bill4. While a patient’s health insurance plan may cover a portion of the medical bill, they’re responsible for the remaining balance. But many patients lack a variety of choices when choosing unexpected services, meaning they frequently have to pay the balance or go into debt.
The No Surprises Act increases transparency in the healthcare system in three ways:
- It requires insurers and providers to maintain up-to-date provider directory information
- It requires insurers to disclose in-network and out-of-network deductibles and out-of-pocket limits
- It requires both an insurer and network provider to provide a patient with cost estimates in advance of medical care
With better transparency around pricing, these new regulations create a better patient experience, increase consumer protections, and send fewer provider bills to debt collectors.
What you should know about the No Surprises Act
As with all new legislation, the intricate details of federal law can be complex. The main aspects of the No Surprises Act are surprise balance billing, the Good Faith Estimate, and gag clauses. These three rules lay the foundation for protecting consumers from a surprise bill.
Surprise balance billing
The term "out-of-network" describes a provider or facility outside your health plan. An out-of-network provider may be allowed to bill you for the difference between what your plan agreed to pay and the total amount charged for a service. This is called a balance bill through a process of balance billing.
With the No Surprises Act, you have protections against balance billing from a provider for emergency services and certain services at an in-network hospital or ambulatory surgical or medical center.
To further clarify, in regards to balance billing, your health plan typically must:
- Cover emergency services by out-of-network providers and without prior authorization
- Only charge you for the copays, coinsurance, and deductibles you would typically pay if the provider or facility were in your network, and show that amount in your explanation of benefits
- Count any amount you pay for emergency services or out-of-network services toward the balance of your health plan’s deductible, coinsurance, and out-of-pocket limit
Good Faith Estimate
Under this federal law, healthcare providers must give an uninsured patient an estimated bill for medical items and services. This is called a Good Faith Estimate.
Consumers have the right to a Good Faith Estimate for the total expected dollar amount of any non-emergency services or medicine, including related expenses like medical tests, prescription drugs, equipment, telemedicine services, and hospital fees.
You can ask your provider for an estimate before scheduling your appointment. But even if you don’t, your provider should give you a written estimate no later than one business day before you receive your service or healthcare item.
It’s critical to save a copy of your Good Faith Estimate with your medical records. Thanks to the No Surprises Act, you can dispute the bill if your balance is $400 more than the estimate you received.
The No Surprises Act also prohibits gag clauses5. In this situation, gag clauses prevent health plans and insurers from entering into contracts with providers, provider networks, TPAs, or other service providers that would restrict the plan from accessing or sharing certain information.
Under a gag clause, contracts can’t restrict the following information:
- Disclosing health costs or quality of care details to network providers, plan sponsors, or plan participants
- Electronically accessing de-identified data for individual participants and enrollees upon request
- Sharing the above information consistent with federal regulations, such as HIPAA
The No Surprises Act requires insurers that provide group health plans, fully insured, and self-insured group health plans to submit their first gag clause attestation by December 31, 2023. Plans that only provide expected benefits, health reimbursement arrangements (HRAs), or short-term or limited-duration benefits aren’t required to submit attestation.
Instructions on filing attestations compliantly are listed on the Department of Labor, the Department of Health and Human Services, and the Department of the Treasury websites6.
How employers can help their employees cover healthcare costs
Even with the No Surprises Act, medical expenses may be an issue for some individuals. Employers should review the type of health benefit they offer to ensure it does enough to balance rising healthcare costs. If you’re an employer looking to do more to support your employees’ medical care, it could be time for a change.
Let’s go into two health benefit options you can use to support your employees’ financial needs further while still keeping your overall costs low.
Health reimbursement arrangements (HRAs)
An HRA is an IRS-approved personalized health benefit designed to reimburse employees for 200+ out-of-pocket medical expenses and, depending on the type of HRA offered, health insurance premiums. They’re a good option for businesses that want greater control over their budget and taxes.
Because they’re an employer-funded arrangement, employers set a monthly allowance for employees to pay for medical care. Once an employee makes an eligible purchase, employers review the expense. If approved, the employee receives a reimbursement up to their allowance amount.
Here’s a brief overview of the HRAs employers can administer with PeopleKeep:
- Qualified small employer HRAs (QSEHRAs) are stand-alone health benefits for employers with fewer than 50 full-time equivalent employees (FTEs) that don’t provide group health insurance. QSEHRAs also have annual maximum contribution limits.
- Individual coverage HRAs (ICHRAs) are for employers of all sizes that want to determine benefit eligibility and allowance amounts based on specific employee classes. Employees can only use an ICHRA with individual health insurance coverage. However, they don’t have any contribution limits.
- Integrated HRAs, or group coverage HRAs (GCHRAs), are for employers of any size that offer a group health insurance plan. Employees enrolled in the employer’s group health plan use integrated HRA funds to pay for their deductibles, copays, network coinsurance, and other out-of-pocket expenses that the group plan doesn’t fully cover.
Another way businesses can help their employees cover their medical care costs is with a health stipend. With this type of stipend, employees receive a fixed sum of money to pay for health plans purchased via the Health Insurance Marketplace and other medical expenses.
The employer typically adds their contributions to employees’ paychecks as extra wages on a weekly, monthly, or quarterly basis. Because they’re considered additional wages, they have payroll and income tax implications that tax-free health benefits, such as HRAs, don’t have.
They also don’t satisfy the Affordable Care Act’s (ACA) employer mandate for organizations with 50 or more FTEs.
Nonetheless, stipends are an excellent way to offer a flexible health benefit. They are easier to implement and more straightforward to administer. Better yet, employees can decide what being healthy means to them and how to best achieve their wellness goals with their stipend.
The healthcare system is constantly under the watchful eye of the federal government and the Department of Health and Human Services. So it’s not surprising several new regulations have appeared in recent years. The No Surprises Act is complex, but creating billing standards for health insurance companies improves comprehensive protections for millions of Americans.
Even with the new surprise billing law, employers should carefully consider their health coverage options. An HRA or health stipend are effective ways to cover more out-of-pocket medical costs for your employees for budgets of all sizes. Contact our personalized benefits advisors for a customized health benefit for your organization today.
This article was originally published on April 13, 2022. It was last updated on July 13, 2023.