Is the No Surprises Act backfiring on patients?

And why is HHS Secretary Becerra letting it happen?

It’s an understatement to say Capitol Hill has struggled recently to find compromise on health policy. But one area of real compromise, and policy achievement, in recent years came in December 2020 with the passage of the No Surprises Act (NSA). 

For a decade, patients had seen an increase in “surprise bills” that were generated after an emergency room visit or some hospital-based procedures. In many cases, after a doctor provided emergency or specialist care at a hospital to a patient whose insurance was not “in-network” with that doctor, the patient received a bill for the balance left unpaid by their insurer. Sometimes those bills were into the tens and hundreds of thousands of dollars, driving a surge in medical debt.

The NSA took two years of intense deliberation by Congress and resulted in a significant bipartisan achievement for patients. It credibly addressed the problem in a way that was a compromise for insurers and doctors. It created a mechanism to set a reasonable, market-based rate for out-of-network medical procedures. As enacted by Congress, it seemed to be a fair means of resolving payment disputes between doctors and insurers, without patients in the middle. Consumers stopped receiving surprise bills and–even I believed–this was the rare problem in our health system that had been resolved fairly. 

I was wrong. And to my surprise, the fault lies squarely at the feet of the Biden administration’s Department of Health and Human Services (HHS). The way the administration wrote the regulations, undoubtedly with “help” from my former colleagues, insurers scored a major advantage. In doing so a law that was meant to be a shield for patients has turned into a sword for insurers.

Since the act’s implementation in 2022, HEALTH CARE Un-covered has learned, in talking with doctors around the country, that insurers have abused their authority under the law. This gets technical, so bear with me. 

The law created a new way to set the average cost of specific care in specific markets – called Qualified Payment Amounts (QPAs) – that is supposed to be the basis of patient cost-sharing. It’s also one of the factors in an arbitration process set up in the law when payers and providers can’t agree on out-of-network payment. 

The problem is that the Biden Administration’s regulations empowered insurers to set the QPA amount and then made it a “rebuttable presumption” of payment in the arbitration–meaning the QPA as determined by the insurer is just assumed to be appropriate and fair–ignoring all other factors. This is not what lawmakers intended, but Secretary Becerra essentially ignored Congressional intent and rewrote the law in a way that enabled the health insurance industry to put its big thumb on the scale. As a consequence, insurers have become the foxes guarding the hen house. (A “rebuttable presumption” is a legal principle that presumes something to be true unless proven otherwise. The burden of proof lies with the party hoping to rebut, or disprove, the presumption.)

Insurers are using the law to slash payments to doctors to boost profits

Hospital-based physicians I’ve spoken with have said that over the past two years, the law has empowered insurers to terminate contracts and offer far lower payment rates in return. Here’s how it works: an insurer tells a group of emergency room doctors they will no longer pay $100 for a procedure. Instead, the insurer says it will pay $40. Outraged, the doctors decline, which triggers the arbitration rules set out under the NSA. 

The arbiter, hired by HHS, looks to the QPA and other factors written in the statute for that procedure to determine if what the insurer wants to pay is fair. But because the insurer sets the QPA, it can simply tell the arbiter the QPA rate is higher than what it’s proposing. So, if the arbiter – via the insurer – finds the QPA is $30, they will find that a payment of $40 for that procedure is appropriate. 

Every hospital-based physician I spoke with about this issue reported significant contract terminations in the aftermath of the NSA. One insurer, Blue Cross Blue Shield of North Carolina, was brazen enough to include the NSA as the reason it cited in letters it sent to providers threatening to terminate their contracts if they didn’t accept an up to 30 percent decrease in their rates.

There is a mechanism in the law to ensure this doesn’t happen, and insurers have to provide a reasonable QPA to the arbiter, and the QPA is supposed to only be one of several factors considered as to what rate is reasonable. And that, unfortunately, is where the failure of HHS Secretary Xavier Becerra is laid bare. Despite multiple federal court rulings against insurers and in favor of hospital-based doctors, Becerra’s agency has refused to enforce the act to ensure fair payment rates to both sides. 

Now, you might be thinking, why should I care? Some of the hospital-based doctors making the most money off of surprise bills were backed by wealthy investors, and the act has successfully put a stop to all that. There is no doubt that there were bad actor physician groups taking advantage of surprise billing and that is why Congress acted in the first place. There are also some who believe physicians are making too much money anyway. 

But wherever you land on the perspective of doctor compensation, you should be concerned about data that shows that since the act’s implementation, there has been a worsening shortage of doctors in rural and underserved areas. Emergency room wait times are increasing, and specialists are becoming more difficult to schedule. The NSA, as written by Congress, would have stopped surprise billing by bad actors while stabilizing the health care system by creating an equal playing field for resolving out-of-network disputes between insurers and providers. Instead, Becerra’s implementation of the law has rigged the system in a way that pads insurers’ profits. 

HHS and CMS have ignored federal court rulings on the law’s implementation

One of the many challenges regarding the implementation of this law came when a federal judge vacated previous guidance by the Centers for Medicare and Medicaid Services (CMS) and demanded new guidance that would comply with the spirit and intent of the law.  How did Becerra’s CMS respond to this federal ruling?  They responded by ignoring the ruling and provided the following new guidance:

“Accordingly, plans and insurers are expected to calculate QPAs using good faith, reasonable interpretation of the applicable statutes and regulations”. As if that wasn’t bad enough, CMS went on in its guidance to let insurers know that they would exercise their “enforcement discretion…” such that they would not penalize any payer that follows the old guidance until at least May 1 of this year and possibly until November 1, or longer if need be.  Given this, does anyone expect insurers to do the right thing?

Why did CMS feel the need to give insurers a pass on this critical piece of legislation?  Well, in its recent guidance, CMS was concerned that insurers would have “significant challenges associated with the recalculations” of the QPA and that it would “require significant resources and take many months if not longer.”  This comment has been met with utter disbelief from hospitals and doctors who are struggling with significant challenges, and yet they see insurers like UnitedHealth Group post $32.4 billion in profits last year.

As insurers are using HHS’ approach to enforcement to squeeze providers to drive higher profits, the casualty is ultimately the patient. Becerra has been hounded by Republicans and Democrats alike on this issue, and he should take notice. Not enforcing a bipartisan law as Congress intended to the benefit of insurers is policy–and political–malpractice. And it affects a core constituency of President Biden’s: working Americans with employer-based insurance who deeply value the benefits they believe they have. 

The Biden White House surely would not want Americans to visit the emergency room and find wait times longer than under the Trump administration. But that’s where we’re headed unless HHS reconsiders the NSA regulations it has put in place.