Medical debt in the U.S. has reached $140 billion and is now the greatest source of debt for Americans. One reason medical debt has increased is surprise billing.
Surprise medical bills happen when insured consumers inadvertently receive care from out-of-network hospitals, doctors, or another provider they didn’t choose.
The Journal of the American Medical Association reports that one in five insured adults havereceived a surprise medical bill in the past two years, and 18% of emergency room visits resulted in at least one surprise bill. This is why Congress passed the No Surprises Act into federal law.
The No Surprises Act created new federal protections against surprise medical bills to lessen healthcare affordability issues for a patient. This blog will go over everything you need to know about the No Surprises Act and why it’s important for consumers.
What is the No Surprises Act?
In January 2022, the No Surprises Act was passed as part of the Consolidated Appropriations Act of 2021. It was created to increase protections for consumers covered by group and individual health plans from surprise medical bills under certain circumstances, such as emergency care at out-of-network facilities or for out-of-network care at in-network facilities.
The Act mandates that a patient is only liable for care at in-network cost-sharing amounts. Meaning particular non-emergency out-of-network ancillary care can’t be billed more than their in-network cost-sharing amount, even if the patient received notice or consented to the service.
This includes certain services like:
- Laboratory services
Simply put, the No Surprises Act requires health plans to treat surprise out-of-network services as if they were in-network when determining the amount to charge the patient.
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 have been created 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 Acts affects employers, third party administrators, brokers, and all participants in the healthcare industry.
This includes, but isn’t not 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?
Even before the COVID-19 pandemic, two-thirds of Americans were worried about whether they could afford an unexpected medical bill. The No Surprises Act has created stricter 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 providers of air ambulance services
- Disclosure and reporting 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 bill. While a patient’s health plan may cover a portion of the medical bill, they’re responsible for the remaining balance. However, 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 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 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 points to understand about the No Surprises Act are regarding surprise balance billing and the Good Faith Estimate.
The two rules we discuss below 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 are protected from a balance bill by 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 was 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 need to 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 cost of any non-emergency medicine or services, including related expenses like medical tests, prescription drugs, equipment, and hospital fees.
Your healthcare provider should give you a written Good Faith Estimate at least one business day before receiving your medical service or item. You can also ask your healthcare provider for a Good Faith Estimate before scheduling a service.
It’s critical to save a copy of the Good Faith Estimate you receive with your medical records. If you receive a balance bill of at least $400 more than your Good Faith Estimate, you can dispute the bill.
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’re offering to ensure it does enough to balance out 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 sometimes 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 eligible purchase is made, the expense is reviewed. If approved, the employee is reimbursed up to the allowance amount.
Here’s a brief overview of the HRAs that PeopleKeep offers:
- Qualified small employer HRA (QSEHRA): For employers that have less than 50 full-time employees, don’t provide group health insurance, and want to offer the same allowance amount to all employees. QSEHRAs also have annual contribution limits.
- Individual coverage HRA (ICHRA): For employers of any size that want to determine benefit eligibility and allowance amounts based on specific employee classes and family status. With an ICHRA, there are no minimum or maximum allowance caps.
- Integrated HRA, or group coverage HRA (GCHRA): For employers of any size that offer a group health insurance plan. Funds are used to cover an employees' deductibles, copays, coinsurance, and 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's contributions are typically added to the employees’ paycheck as extra wages and are usually provided weekly, monthly, or quarterly.
However, health stipends are considered income, meaning they have payroll and income tax implications that tax-free health benefits, such as HRAs, don’t have.
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 goals with their stipend.
The healthcare system has been under a watchful eye, with several new regulations introduced in recent years. The No Surprises Act is complex, but standardizing bill requirements for insurance companies improves and extends comprehensive protections to millions of Americans.
Even with the No Surprises Act, employers should consider their options when choosing healthcare coverage. An HRA or health stipend are effective ways to cover more out-of-pocket medical costs for your employees.
Contact our personalized benefits advisors for a customized health benefit for your organization today.