Who Will the No Surprises Act Surprise the Most?

In this edition of The Wired Practice video for MedPage Today, Vanguard CEO Ron Harman King sorts out who will be the winners and losers in the coming major change to healthcare law.
Watch the video on MedPage Today

By Ron Harman King, MS, CEO

Small medical practices may be the biggest losers in the No Surprises Act

Video transcript

A major change in healthcare law is coming soon, and as usual, the biggest question prior to it taking effect in January 2022 is, who will be the winners and the losers?

The new law is called the No Surprises Act; President Trump signed the bill into law in December 2020. The big winners are certainly to be patients with healthcare insurance. As for those possibly standing to lose the most, in my estimation, it may well be small clinics, provider groups and independent physicians in private practice.

Passed with bipartisan support in Congress, the No Surprises Act ensures that Americans no longer must pay medical bills for both emergency and non-emergency care beyond normal in-network costs covered by their health insurance plans. It’s arguably a well-intentioned law, and it’s aimed especially at exorbitant surprise billings for emergency treatment.

Protects against surprise emergency room bills out of health insurance network

One example is charges for air ambulance services. In a medical emergency the typical patient or bystander calling 911 hardly has time — or the capability or the authority — to determine whether a flight-for-life helicopter is indicated and certainly whether the one summoned is owned by a company within the patient’s insurance network. As a result, a study by the University of Michigan found that 71% of the time, an ambulance provider doesn’t accept its patient’s insurance plan.

For ground ambulance service, the bill going to the patient averages about $550 — certainly not a bankruptcy trigger for all Americans. On the other hand, one survey found that nearly 4 in 10 Americans would have to borrow money to cover a medical emergency costing more than $1,000 each. Just an ambulance ride potentially gets them halfway to that mark.

Far worse, the cost of a flying ambulance can bankrupt some unsuspecting trauma survivors, leaving them on the hook for as much as $20,000 each. Mind you, about three-quarters of air ambulance transports of commercially insured patients are out of network. Granted, air ambulance transports are rare, but anesthesiologists are not, to cite another example of a source of surprise billings. How many patients choosing a surgeon for elective procedures think to check whether their surgeons’ choices for anesthesiology are in their network?

Apparently very few, according to a JAMA-published analysis that found that nearly 7 of 10 Americans hit with unaffordable medical bills did not know at the time they received care that the provider was not in their health insurance plan’s networks. In addition, one estimate is that surprise bills account for 20%-44% of hospital visits and elective surgeries and can total more than $100,000 each.

Patient advocates laud No Surprises Act, but there’s a rub

So there’s plenty of reason for patient advocates to laud the No Surprises Act as welcome relief for healthcare consumers. It’s certainly the kind of legislation that politicians of any party or philosophy can campaign on in the next election.

But here’s the rub. The Act moves payment responsibility from the patient to the patient’s insurance company, assuming he or she has one. Starting in January, the patient is off the hook, and the insurer will have to negotiate payment with the provider. And we can only imagine how contentious those negotiations will become.

To address the certainty of ubiquitous stalled negotiations, Congress has charged three federal agencies with creating a national independent dispute resolution system. The No Surprises Act stipulates that any dispute between an insurer and provider must go first to negotiations. If negotiations fail, then what’s called baseball-style arbitration begins.

Baseball arbitration leads insurers to lowball provider offers

In baseball negotiations, each side drafts and submits a proposal. In the 32 states without preexisting surprise billing laws of their own, the arbitrator can pick only one proposal. Just one. With rare exceptions, the arbitrator will not be permitted to devise a settlement amount independently. This stands in stark contrast to state laws that generally give arbitrators greater latitude.

But wait, there’s more. Under American law there is no appealing arbitration decisions. Going back nearly a century, arbitration was born out of a strong motivation to unclog the courts by encouraging parties in dispute to settle their differences quickly and at less expense. Over time, however, critics say arbitration has often become as, or even more, expensive as going to trial, due to growing incentives to hire lawyers.

Furthermore, the U.S. Supreme Court effectively closed any pathways to appealing arbitrators’ decision in a 1984 landmark case. Now, some good news for insurance companies: under a preliminary rule the feds issued in October, an arbitrator must select the settlement proposal closest to what’s called the Qualifying Payment Amount (QPA), which is the insurer’s median contracted rate.

As I see it, the bad news for some providers – whether they’re ambulance operators or anesthesiologists – is that this system encourages insurers to lowball their settlement offers. For a provider to receive more than the QPA, he or she must produce evidence that “clearly demonstrates that the QPA is materially different from the appropriate out-of-network rate.”

Favors big health insurance companies tied to big health systems

In the end, the system favors larger insurance companies holding contracts with larger health systems and provider groups, which they favor because they can offer their customers larger in-network plans with more participating physicians and other providers. Similarly, as a rule of thumb, larger provider groups can settle for smaller reimbursements knowing they can count on larger patient volumes generated by their affiliation with the big insurers. Moreover, larger groups possess greater resources to challenge QPAs through time-consuming research and presentation.

Meanwhile, docs in small and solo private practices don’t swing as big a bat. They typically lack the time as well as the financial resources to hire attorneys to duke it out with insurers on a regular basis. Adding insult to injury, the losing side has to pay arbitration’s administrative costs.

Negotiating directly with insurers is already perhaps the most distasteful aspect of medical practice for some. With the No Surprises Act, it seems to me that once again, the little guy and gal will be pressured to take what’s offered and go back to the daily grind of caring for more patients forever shrinking reimbursements. At the same time, uninsured patients are probably in a worse position by having to negotiate on their own with providers.

Of course, let us acknowledge that the No Surprises Act is still very much a work in progress. It includes a number of public benefits, including new oversight of air ambulance claims and insurer compensation to agents.

More clarity is coming, and I’m hoping very much that by the time the Act takes effect, the transition for all healthcare professionals will resemble what a patient might hope for in recovery from surgery: that it’s relatively short and with as little pain as possible.