Market insight from year-end 2020 SFCRs: Sample of life insurers based in Luxembourg
Gross written premiums in our sample of Luxembourg-based life insurers decreased 20% in 2020.
Signed into law on December 27, 2020, the Consolidated Appropriations Act (CAA) of 2021 requires the most comprehensive changes to active employee health plans since the Patient Protection and Affordable Care Act (ACA). The CAA protects consumers from certain balance-bills for out-of-network (OON) medical services and establishes the first federal procedure to handle eligible disputed OON medical claims. The CAA also includes several provisions to increase health plan transparency around medical costs and coverage. Additional price and quality transparency measures, including new disclosure requirements, took effect when the U.S. Departments of Labor, Treasury, and Health and Human Services issued the Transparency in Coverage final rule (TiC Rules) on January 11, 2021.
The No Surprises Act is a key component of the CAA. This legislation prohibits plan sponsors and providers from billing participants for more than the in-network (INN) cost-sharing amount due under their plans in most cases of out-of-network surprise billing for emergency services, for services at INN facilities, and for air ambulance services (covered settings). The most notable exclusion is ground ambulance transport. All amounts paid by a participant must count toward the participant’s INN annual deductible and INN annual out-of-pocket maximum. The first No Surprises Act Interim Final Rule1 clarifies these provisions and provides detailed instructions for determining cost-sharing and payment amounts in covered settings. This paper is designed to help plan sponsors understand the IFR provisions and how they will impact their specific plans.
Additional CAA provisions address independent dispute resolution (IDR), ID card requirements, continuity of care, updating of provider directories and explanation of benefits, pricing comparisons, gag clause removal, and requirements for mental health parity and addiction. Compliance with the new legislation places major administrative burdens and potentially higher costs for compliance on plan sponsors.
On August 20, 2021, the U.S. Departments of Labor, Health and Human Services, and Treasury released an FAQ on the CAA and TiC Rules, delaying the enforcement date of certain provisions. They will issue more guidance for many CAA provisions and updated TiC Rules after January 1, 2022. However, the enforcement date for the balance-billing provisions of the No Surprises Act was not deferred in the FAQ. For a detailed explanation of CAA regulations and how they will impact plan sponsors, see Milliman’s April 2021 white paper "CAA and other transparency measures: Timing and implication of surprise billing for plan sponsors."
The U.S. Departments of Health and Human Services (HHS), Labor, and Treasury, as well as the Office of Personnel Management, issued an interim final rule implementing one of the key provisions of the No Surprises Act, which seeks to protect patients against surprise billing at the federal level. Surprise billing happens when people unknowingly get care from providers that are outside of their health plans' networks. Surprise bills can happen with both emergency and nonemergency care. Surprise bills have two primary components—higher cost-sharing amounts due to less generous OON benefits, and balance-bills, which are provider bills for the cost of the service in excess of a plan’s OON-allowed amount. Federal health programs such as Medicare and Medicaid provide strong surprise billing protections to enrollees. The No Surprise Act extends similar protections to Americans insured through employer-sponsored and commercial health plans, with key elements of these protections outlined in the interim final rule (IFR).
Among other provisions, the IFR:
HHS views tackling balance-billing as critically important, and cited several supporting data points in the IFR. Two-thirds of all bankruptcies filed in the United States are tied to medical expenses. Researchers estimate that one of every six emergency room visits and inpatient hospital stays involves care from at least one out-of-network provider, resulting in surprise medical bills. And a 2019 study by the Government Accountability Office (GAO) found that the median price charged by air ambulance providers ranged from $36,400 to more than $40,000, and over 70% of these transports were furnished out-of-network, meaning most or all costs fell to the insured individual alone.2
Balance-billing can occur when a participant intentionally or unintentionally receives care from an OON provider. Most OON care is planned for, but in certain situations consumers may not be aware that they are seeing an OON provider, such as when receiving emergency care at an out-of-network (OON) facility or nonemergency care at an in-network (INN) facility from an OON provider. In these cases, participants can be responsible for the difference between what the group plan sponsor reimburses OON providers and what the OON provider charges. OON charges are high—typically two to three times INN payment rates.3 Because there is no limit to the amount that OON providers or facilities may charge, balance-billing can result in significant financial obligation to the participant. Balance-billing also frequently occurs with ground and air ambulance providers. Specifically, the IFR provides balance-billing protection to participants for the following medical services:
The notice and consent provision outlined in the IFR will be used to determine whether nonemergency services delivered by OON providers at INN facilities are protected from balance-billing. For a participant to relinquish balance-billing protections, the provider must obtain written consent from the participant after written notice. The IFR includes guidance for the application of the notice and consent provision, and notes that plans must proceed as if protections still apply until notice and consent documentation is received.
The IFR states that balance-billing protections apply to all emergency services as defined under the Emergency Medical Treatment and Labor Act (EMTALA), section 1867 of the Social Security Act, with the following modifications:
The definition of emergency services also includes post-stabilization services rendered after a participant is moved out of the emergency department and admitted to the hospital, unless both of the following criteria are met:
If state laws prohibit consent to balance-billing, those laws supersede the criteria outlined above, and all post-stabilization services are protected.
Currently the ACA defines an emergency medical condition as a medical condition such that a prudent layperson would reasonably think bodily harm or death could occur if medical attention were not sought immediately. Plan sponsors can deny emergency claims if the prudent layperson criteria are not met, and frequently use only final diagnosis codes to make the initial determination.
The IFR specifies that when denying an emergency claim, plan sponsors:
Plan sponsors should review their emergency claim adjudication process to ensure compliance with this provision, as the plan sponsor is liable for noncompliance even if an outside entity is responsible for claim adjudication and review.
The No Surprises Act prohibits balance-billing for surprise medical bills for nonemergency services provided by OON providers at INN facilities. The IFR clarifies this provision by defining a healthcare facility as a facility that has a contractual relationship either directly or indirectly with a plan sponsor, including a hospital, outpatient department of a hospital, critical access hospital, ambulatory surgical center, and potentially urgent care centers. The IFR further expands this definition to include single-case agreements for specific participants at OON facilities.
The IFR defines a visit to include telemedicine, imaging, lab work, and preoperative and postoperative services regardless of whether an offsite vendor is used.
This provision applies to all air ambulance claims if the plan sponsor covers any benefits related to air ambulance services, even if there is not an established network of providers of air ambulance benefits.
The No Surprises Act protects against balance-billing by requiring notice and disclosure requirements for providers, facilities, and plan sponsors. Plan sponsors must post an explanation of plan benefits related to the No Surprises Act on the plan’s website including:
The IFR includes a model notice for plan sponsors to customize and post on their websites. Similar disclosure requirements are mandated for providers and facilities.
Under the No Surprises Act, participants can consent to be balance-billed by certain OON providers if they are notified of the provider or facility network status in a timely manner and sign a consent form. The No Surprises Act details the timeline of this consent process as follows:
The IFR further specifies that OON providers and facilities must notify plan sponsors that the notice and consent criteria were satisfied prior to any given service and provide supporting documentation. Further, the OON provider, or INN facility on behalf of the OON provider, must indicate whether the services are subject to the protection in the No Surprises Act. In situations where the participant provides consent and is billed directly, the bill can include this notice.
The CAA requires out-of-network providers and facilities to inquire whether a participant has health insurance at the time an appointment is scheduled, and subsequently provide the group plan sponsor a good faith estimate of out-of-pocket participant costs for all scheduled services. The group plan sponsor must then provide an advanced explanation of benefits to the participant. This provision was deferred in the FAQ released August 21, 2021, and an enforcement date will be specified in future guidance released after January 1, 2022. The notice and consent provisions described above were not deferred in the FAQ and are effective for plan years beginning on or after January 1, 2022.
The IFR defines the rates and amounts applicable to participant cost sharing and OON provider payments for services protected by the No Surprises Act:
The IFR provides guidance on how to calculate each of these rates and amounts. Service providers, third-party administrators (TPAs), preferred provider organization (PPO) networks and pharmacy benefit managers (PBMs) should perform the calculations for plan sponsors according to their roles in the claim negotiation and payment process, and this service should be specified in all relevant 2022 contracts. Plan sponsors may need to facilitate communications between relevant entities when claims are administered by several different vendors.
For services protected under the No Surprises Act, participants cannot pay more than they would have paid for services at INN facilities or providers. Additionally, the cost-sharing amount must be counted toward each participant’s INN deductible and INN out-of-pocket maximum.
The amount used to determine cost sharing for services other than air ambulance services is the recognized amount, which the IFR defines as:
Total cost sharing for air ambulance claims is based on the lesser of the QPA and the billed amount.
When the QPA is used as the recognized amount, the plan sponsor needs to disclose the following information with the initial payment or declination of payment to the provider:
If requested by the OON provider, the plan sponsor must also provide the following information:
The OON rate is defined as the total amount paid to the OON provider by the plan sponsor. This amount is determined as follows:
The application of the all-payer model agreement and state laws are subject to the same provisions as the recognized amount. To be applicable, each must apply to the plan, to the OON provider, and to the item or service.
If a state law has a connection with ERISA plans, such as a law that governs the payment of benefits or the timing and methodology for determining an OON rate, the state law preempts the IDR process, and the IDR process is not applicable. Plan sponsors not subject to ERISA, such as nonfederal governmental plans, can opt in to the state laws for determining rates, but cannot selectively opt in, and must opt in for all items and services for which the state laws apply. If a plan sponsor opts in, it must indicate so on all materials it distributes.
State laws may not be applicable in determining the OON rate for an air ambulance claim, due to the Airline Deregulation Act of 1978.
There may be situations where the recognized amount is less than the OON rate. In these situations, the plan sponsor will be responsible for paying the total amount owed on the OON rate, less the cost sharing based on the recognized amount.
The No Surprises Act specifies that the plan sponsor must make an initial payment or send a notice of declination of payment within 30 days of receiving a bill. The IFR clarifies that the plan sponsor does not need to make an initial payment until 30 days after the provider provides a “clean” bill, defined as a bill with sufficient detail to determine whether No Surprises Act provisions apply. The IFR does not specify how the initial payment amount should be determined but does specify that the initial payment plus member cost sharing calculated based upon the recognized amount should equal the full payment from the plan sponsor’s point of view.
The No Surprises Act requires plan sponsors to comply with some of the most burdensome tasks since the ACA. The "Requirements Related to Surprise Billing: Part I" IFR clarifies surprise billing provisions and provides detailed instructions for determining cost-sharing and payment amounts for OON emergency services, OON nonemergency services at INN facilities, and OON air ambulance services. With most provisions taking effect on January 1, 2022, the timeline for compliance is tight and plan sponsors are advised to move forward as quickly as possible. Specifically:
While it seems evident that the No Surprises Act will lower out-of-pocket costs for participants, the cost impact to plan sponsors is still unknown. Carriers and plan administrators could potentially raise their prices to pay for the extra work required to manage and implement the new processes. Additionally, this legislation can increase costs for self-funded plans by making plan sponsors responsible for amounts not covered by participant cost sharing. Prior to balance-billing protections, plan sponsor liability was typically capped at the defined OON-allowed amount minus participant cost sharing for OON benefits.
Plan sponsors should also note that additional regulations are forthcoming. The IFR states that the Part I IFR described in this white paper is the first of several regulations that the federal agencies will be issuing to implement the No Surprises Act. Regulations on the independent dispute resolution (IDR) process are expected later in 2021. Several provisions of the CAA and TiC Rules were recently deferred, including the price comparison tool, advanced explanation of benefits, and certain data disclosures. Rules on other Consolidated Appropriations Act provisions, including insurance card requirements, continuity of care, provider network directions, and prohibition on gag clauses, will likely not be provided until after January 1, 2022, but plan sponsors are expected to implement the provisions using a good faith interpretation of the law.
The No Surprises Act defines the QPA as:
The first step in determining the QPA is to calculate the median contracted rate (MCR) as of January 31, 2019, with respect to all coverage offered in the same insurance market. To calculate the MCR, arrange the contracted rates of all plans of a specific plan sponsor or administrating entity from least to greatest. The MCR is the middle value, or in the case of an even number of contracts, the average of the two middle values. Rate observations are determined at a contract level—each distinct rate is counted once, regardless of the number of providers or facilities receiving that same rate or the number of claims paid at that rate. Contracted rates include any rented networks, but exclude single case agreements.
The IFR defines the contracted rate as the total amount that a plan has agreed to pay an INN provider or facility, either directly or through a third-party administrator or PBM, including any participant cost-sharing amounts. Each contracted rate represents an individual rate in the MCR calculation. The IFR requires that there must be at least three rates included in the MCR calculation in order for a specific service to have sufficient information.
The IFR further specified the level at which the MCR is to be calculated. The MCR for a given service is only determined based on contracted rates:
Services provided on a basis other than fee-for-service (FFS), such as bundled payments and capitated arrangements, must be included in the MCR. These contracted rates should be determined using an underlying fee schedule used to calculate member cost sharing if one exists. Otherwise, a derived amount consistent with the cost of providing coverage should be used.
Some services, such as anesthesia services and air ambulance mileage, are calculated by multiplying a base cost by a number of units. For these unit-based services, the “same or similar service” is based on all services using that same basis. The MCR is calculated as the median base cost, so all contracted rates should be divided by the number of units prior to the MCR calculation.
To calculate a specific MCR, there must be at least three applicable contracted rates. If sufficient data is not available, the MCR should be determined using an All-Payer Claims Database or an eligible third-party database. Allowed amounts reported in the selected database are then used to determine the MCR.
Third-party databases are eligible if they:
Plan sponsors must use a consistent methodology when relying on a database. Plan sponsors are permitted to change databases at the end of the calendar year and may use different databases for different services as long as the choice of database is based on business factors such as the sufficiency of data in each database, and not on the rates in each database. Once a QPA has been determined for a specific service, future same or similar services in the same insurance market offered by a provider in the same or similar specialty in the same region must be calculated using this QPA.
Initially, if there is not sufficient data to calculate the MCR, but there is enough data in a subsequent year, calculate the QPA using the MCR from that year. There must be at least three contracted rates as of January 31 of the preceding year, and the rates must account for at least 25% of the total number of claims for that service and year for all the plans provided by the plan sponsor.
Once the MCR is determined, calculate the QPA by indexing the MCR by the CPI for each year. The CPI for each year is defined as the average for the 12-month period ending August 31 of that calendar year, rounded to 10 decimal places. For unit-based service, the MCR is indexed using the CPI and then multiplied by the number of units associated with the specific service to determine the QPA. For services with insufficient information for which a QPA was determined in a prior year, the prior year’s QPA is indexed using the CPI.
1 U.S. Departments of Health and Human Services (HHS), Labor, and Treasury. Interim Final Rule: Requirements Related to Surprise Billing; Part I. Federal Register. Retrieved November 30, 2021, from https://www.federalregister.gov/documents/2021/07/13/2021-14379/requirements-related-to-surprise-billing-part-i.
2 U.S. Department of Health and Human Services (July 1, 2021). HHS Announces Rule to Protect Consumers From Surprise Medical Bills. Press release. Retrieved November 30, 2021, from https://www.hhs.gov/about/news/2021/07/01/hhs-announces-rule-to-protect-consumers-from-surprise-medical-bills.html.
3 David Lewis (September 2018). The Changing Landscape of Out-of-Network Reimbursement. Milliman White Paper. Retrieved November 30, 2021, from https://www.milliman.com/-/media/milliman/importedfiles/uploadedfiles/insight/2018/changing-landscape-oon-reimbursement.ashx.
This update is intended to provide information and analysis of a general nature and should not be interpreted as legal or other professional advice. Milliman recommends that readers of this update be aided by their own qualified professional for guidance on their specific circumstances.
Consolidated Appropriations Act, 2021, No Surprises Act Interim Final Rule: Summary of requirements and implications for plan sponsors
The No Surprises Act requires plan sponsors to comply with some of the most burdensome tasks since the Affordable Care Act.