The Federal No Surprises Act and State "Surprise Medical Bill" Laws-What Are They and Why the Medical Industry Needs to Pay Attention.

Thomas LaGreca, Executive Director, Medical Revenue Recovery, Callagy Law, PC

Several years ago, states began to enact “Surprise Medical Bill” Laws. The New Jersey Surprise Bill Law (SBL) took effect on August 30, 2018, and the New York SBL had been enacted 3 years earlier. Today numerous states have SBLs, including California, Illinois, Texas, Florida, Ohio, Georgia, and many others. Approximately the same number of states do not have their own SBL. These state laws shield patients from large out-of-network (OON) balance bills when the patient is treated by an OON medical provider through no choice of the patient. Accordingly, emergency and inadvertent OON treatment are the targets of the legislation. Fair enough. All applaud this purpose. The natural follow-up question, however, is how fair to the medical community the reimbursement regime, and its concomitant arbitration process, since the OON provider is denied the ability to bill the patient for any balance beyond the allowed amount. To ensure fairness to the medical community, the arbitration process should require the carrier to make the medical provider whole, filling in the gap created by protecting the patient from a balance bill.

Though these state laws succeeded in protecting patients in these circumstances, each of these states, and the laws they passed, had jurisdiction only over medical claims involving health plans regulated by that state. Out-of-state plans and federally regulated plans were not covered by these laws. To remedy this, the federal government passed the No Surprises Act (NSA), the federal version of the law. Very few changes to the law surrounding reimbursement for medical treatment have created as much trepidation in the medical community as the NSA, which became effective on January 1, 2022. Though the state laws caused some anxiety when they were passed, none caused as much as the NSA when it became effective. This is probably because most commercial insurance (CI) claims are governed by federal rather than state law, so the state SBLs were seen as having less impact on revenue. The anxiety also, though, was based on a misconception. Most providers assumed, understandably, that the federal NSA would preempt the state SBLs, and all CI claims to qualify as emergent or inadvertent OON would be resolved in the federal forum and not the state forum, and the federal reimbursement standard, by all appearances, would be much worse than the state SBL standards. The stress being felt by the medical community was not unwarranted. There was, is, and still could be legitimate cause for concern, but, ultimately, it might not be as bad as anticipated.

Federal Law Versus State Law

Any medical provider treating a patient on an OON basis through the ER or inadvertently must know at the outset which forum—federal or state--will resolve any payment dispute. This is necessary because the forums vary in their timelines and procedures as well as the reimbursements likely to be awarded.

“To ensure fairness to the medical community, the arbitration process should require the carrier to make the medical provider whole, filling in the gap created by protecting the patient from a balance bill.”

Generally, the state SBLs regulate fully insured health plans typically written for small employers in that state. State SBLs also govern state-employee self-funded health plans. All other self-funded plans, which include large-employer plans and union plans regulated under ERISA, are typically governed by federal law. Federal employee plans are also governed by federal law, not state law, so they too would come under the purview of the NSA. Accordingly, if a state, such as New York or New Jersey, already has its own SBL, the NSA does not preempt the law of that state with respect to its state-regulated health plans.

In addition, the NSA applies to both federally regulated plans and state-regulated plans originating in states which have not yet passed their own SBLs. This means any OON ER claim or OON inadvertent treatment comes under federal law whether it is otherwise a state-regulated plan or federally regulated plan from a state with no SBL of its own.

Finally, federal law applies to claims involving out-of-state plans, where the treatment is in one state and the plan originated in another. An ER claim, for example, involving a fully insured plan written by Blue Cross Blue Shield of Texas would be resolved in the Federal IDR process if the treatment occurred in a state other than Texas.

In short, the federal forum covers claims involving federally regulated health plans from states with their own SBLs, plus all qualifying claims from states without their own SBL, and also claims involving plans from states other than the states where the treatment occurred. This makes for a complicated upfront analysis, but it is critical to master because choosing the wrong forum can result in untimeliness. To assist with this, many providers investigate whether a plan is state-regulated or federally regulated before even billing the claim so that they are aware of the forum for dispute resolution immediately at receipt of the EOB or payment. The Federal NSA comes with a 30-day deadline for objecting to payment, so if you commence an action in the wrong forum, you will likely be shut out of the arbitration process when you get to the correct forum. Knowing the proper forum when the EOB or payment is received goes a long way toward ensuring timeliness.

Medical Denials

The SBL and NSA processes do not cover medical denials. These denials are to be pursued in the existing external appeal process. Typically, only underpayments and, to a more limited extent, administrative denials, are addressed in the SBL and NSA processes. If you are not conscious of this distinction, it is very possible you could find yourself in one or the other forum and be shut out temporarily for being in the wrong forum and/or permanently for untimeliness.