What Is It?
On Jan. 1, 2022, legislation designed to protect patients from surprise medical bills, dubbed the No Surprises Act (NSA), took effect. The passage of this act offers patients federal protection from unavoidable out-of-network charges, such as when people in emergency medical situations later receive unexpectedly outsized bills for their care.
These inflated bills occur when patients receive out-of-network services, even when they are unable to choose in-network providers. This typically occurs after emergency care, or when patients lack the ability to choose in-network treatment—either because they are unaware they have a choice, or because their physical or mental condition prevents it.
In response, the No Surprises Act applies to all private healthcare plans as well as non-group health insurance policies, and restricts surprise billing for:
- Emergency care
- Non-emergency care by out-of-network providers at in-network facilities
- Air ambulance services
Why Is It Important?
This legislation recognizes the frequency of surprise medical bills, particularly with pregnancy and childbirth services. For example, 20% of new parents receive a surprise medical bill after the birth of their child, even if they use an in-network facility. When specialist providers—radiologists, neonatologists, etc.—choose not to join provider networks, they can later bill parents directly for their services. The NSA specifically prevents such specialists from unnecessary overcharges.
As this federal policy takes effect, members of self-funded plans, or those planning to switch to a reference-based pricing model may be wondering how the NSA affects them. Let’s take a look at how reference-based pricing plans will be affected by the No Surprises Act.
The No Surprises Act: An Overview
Before examining the effects of the NSA on reference-based pricing, it’s important to have a better grasp on the mechanics of the NSA. The policy declares patients are only responsible for in-network cost sharing amounts when they receive emergency out-of-network care, or out-of-network services at in-network facilities.
For example, if a patient selects an in-network facility for surgery, they may be unaware that the anesthesiologist they see prior to surgery is not a network member. When the hospital bill arrives, the patient discovers out-of-network charges for anesthesia, which are significantly higher than in-network rates. This is not the only instance in which surprise bills, also called balance billing, are alarmingly common.
Nearly 40% of emergency room visits, even those in-network, result in out-of-network bills. Because insurance does not cover any out-of-network charges, providers bill the patient directly for the remainder. In total, the NSA prevents balance billing for:
- Out-of-network emergency care at any facility
- Care at an in-network facility by an out-of-network provider, administered without the patient’s consent
- In-network emergency care by an out-of-network provider
- Air ambulance claims
Instead, patients pay the in-network amount, which counts toward the patient’s deductible as if they were receiving medical services at an in-network facility.
The No Surprises Act and Reference-Based Pricing
As a cost-containment strategy, reference-based pricing (RBP) uses Medicare pricing multiples as a pricing benchmark to establish reasonable payments for services to providers. Broadly, this creates a ceiling for payments and establishes a standard of integrity and transparency for service payments.
Because the NSA has no bearing on initial payments to the provider, existing cost containment strategies such as reference-based pricing are still valid under the new provisions. In addition, most RBP plans don’t use traditional network providers, and will therefore see little effect. In fact, the NSA will likely increase interest in RBP models because they often eliminate excessive charges shouldered by employers and employees.
However, brokers and third-party administrators (TPAs) should be prepared to address restrictions of the legislation by adopting RBP plans that prioritize the patient. Such plan transitions are expected to increase under the NSA as providers attempt to ameliorate the reduction in charges billed. Because more expenses will be paid in-network, sponsors may increase those in-network costs. This means patients are most likely to feel the costs when they show up as premium increases.
The expected increases in fixed costs to patients can be offset by emphasizing a reference-based pricing model that negotiates billed charges on a per-item basis. Providing patients with a strong repricing mechanism will further empower the transparency and protection afforded to them by the NSA.
The Right Reference-Based Pricing Partner
6 Degrees Health are experts in the healthcare reimbursement field that put cost containment at the forefront of our mission. We are dedicated to bringing patients and employers a comprehensive reference-based pricing solution that will save you up to 40% on healthcare spend.
Backed by MediVI and clean claim reviews, our reference-based pricing solution is a data-driven approach designed to bring you more transparent and reasonable charges in a cost-containment method ready for the post-NSA healthcare industry.
6 Degrees Health helps employers and employees navigate healthcare protocols to pay what is fair. Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.