TThe No Surprises Act has been hailed as a major bipartisan reform aimed at eliminating the most outrageous out-of-network bills.
For years, Americans have expected their insurance to protect them from high medical costs and cover a modest amount of out-of-pocket costs. But many have received unexpected bills for medical services at out-of-control prices when they accidentally choose out-of-network care providers or lose safe network options.
He wanted the No Surprises Act to solve this problem. But neither the law nor the recently published final rules address the flaws in private insurance that result in unexpected bills: high out-of-pocket costs and limited choice of insurers. The act is a very small Band-Aid to cover a large wound.
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The struggles over surprise billing show how those two flaws, the lack of sustainable political agreement between payers and caregivers, have created serious financial problems that make complex solutions themselves difficult to implement effectively.
Surprising bills are a predictable product of two of the main tools U.S. insurers use to control costs: narrower care networks used to negotiate lower rates. and high patient copayments, which are intended to reduce patients’ use of services, particularly for high-cost out-of-network care providers. These tools have failed to contain US health spending.
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Narrow care networks and high out-of-pocket costs are rare in other high-income democracies because payers instead develop effective cost controls, such as negotiated payments to privately employed physicians, hospital physician salaries, hospital budgets, and annual operating costs.
Narrow networks cause many people to receive out-of-network bills, which insurers won’t pay. According to a NORC survey, 60% of Americans experienced a surprise medical bill in 2018. Media stories have exposed this dark side of American health insurance and sparked calls for reform. In the year By 2020, 33 states had settled delinquent accounts. However, federal laws such as the Employee Retirement Income Security Act and Air Ambulance prevented state regulation of employer-funded health plans, prompting congressional action.
The No Surprises Act requires insurers to cover out-of-network services in several key situations:
- Care and air ambulance transport to emergency rooms and urgent care centers
- For non-network physicians working in network hospitals
- Because of inaccurate network directories for inadvertently out-of-network care, patients now pay more for in-network services.
Following the wishes of some hospitals and doctors, the no-surprise rule does not set prices. Instead, it requires insurers and insurers to negotiate rates within 30 days or accept a binding arbitration award. In arbitration, the insurer and network operator make a price proposal and the arbitrator selects the most reasonable offer, with the loser paying the cost of the arbitration. The new federal rules direct the arbitrator to accept the offer that most closely represents the cost of the medical care received, taking into account the average payment rate in the network and six factors related to the patient, the medical care received and the caregiver.
In this way, the No Surprises Act encapsulates the main toxic ingredients of the US health care recipe: complexity, costly administration, and ongoing funding wars. The bill authorizes $500 million to fund the arbitration and regulatory system. The Department of Health and Human Services estimates insurers will invest $5 billion to implement the act, and operating costs could average $1 billion annually.
Congress rejected two simple options: require all physicians to join the same insurance network as their hospitals, or require insurers to pay hospitals for all services and require hospitals to reimburse physicians for their services. Physician lobbying blocked both proposals, which would have forced caregivers to accept much lower network payments. Congress also rejected paying for out-of-network care at average prices set by Medicaid, Medicare or large private insurers, the model employed by Medicare Advantage for out-of-network care.
Caregivers remain free to impose higher prices on 30 million uninsured Americans because Congress has failed to cap the cost of medical care, such as Medicare or Medicaid.
U.S. insurers and employers believe that restricted networks and out-of-pocket costs will limit overall costs by reducing the amount of care and premiums paid. They don’t. Hospital admissions are 20% less and physician visits are 40% less than in the average high-income democracy in the US, but US health spending per capita is twice as high, due to higher prices, administrative costs, underserved rights, and caregiver shortages and fragmentation.
Emergency bills are private health insurance symptoms of chronic illness. Not surprisingly, legislation reflects the government’s preference for short-term and narrow thinking about large, ongoing and complex health care problems. While it may help people hit by sudden emergency bills, this act ignores others who are hurt long-term by out-of-pocket costs, narrow networks and high premium costs.
The No Surprises Act was not intended to improve insurance design, control costs, or encourage settlement agreements between payers and caregivers. As a result, the financial games will continue. Caregivers can still shell out high premiums, and insurers are inefficient but create disproportionately high out-of-pocket cost-sharing for Americans unlucky enough to need care. Lawyers, as always, will be busy.
By cutting gangrenous surprise bills, the No Surprises Act will help preserve business as usual — for now.
Mark Rodwin is Professor of Health Law and Policy at Suffolk University Law School in Boston. Alan Sager is Professor of Health Policy and Management at Boston University School of Public Health.
