The Hidden Costs of the No Surprises Act for Self-Funded Plans – Administrative burden, fees, and indirect cost drivers

By: Kate MacDonald

These days, plan administrators may feel like the self-funded landscape is akin to the wild, wild west. Many plan administrators wear many hats: They’re often both business owners and are responsible for insuring their employees and their dependents. Assuming this dual role doesn’t always come naturally to plan administrators due to the ever-changing regulations that evolve with the regulatory landscape, emerging litigation, and quick pace.

Just one of these significant regulations that has changed the self-funded industry and taken the day-to-day responsibilities of plan administrators by storm is the No Surprises Act (NSA). While plan administrators often have third-party administrators and other industry experts available to help with the administrative tasks and other functions, everyone in the industry has had to take a crash course in all things NSA since its inception in 2020 as part of the Consolidated Appropriations Act of 2021, ultimately enacted in 2022.

The NSA was created to help protect plan participants from unexpected medical bills after seeking medical aid and determine who assumes financial risk for paying bills under specific circumstances. Before its inception, it was not uncommon for providers to balance bill plan members, or for plan participants to seek healthcare at an in-network hospital but wind up being seen, unknowingly, by an out-of-network provider and be on the hook for a devastating bill. While the NSA sought to alleviate these situations by mitigating significant financial exposure, many group health plans have found that it introduces hidden visible costs that must be accounted for during plan design or risk bearing those liabilities themselves.

With an eye toward planning for these potential losses, let’s explore some possible expenditures.

QPA: When the Plan Pays the Bill

One of the most significant costs of the NSA on the plan level thus far has been the calculation of the qualifying payment amount (QPA). This is the base payment amount for out-of-network providers within scope, and is an important tool, given that providers can no longer balance bill patients. The NSA requires the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury to determine the methodology for plans to use to determine their QPA calculations (based on the median charge for services provided in a given area). QPAs have been central to several district court cases, however, if a plan’s QPAs are high, providers may leave networks in favor of other networks. This can also have a domino effect of stoploss carriers raising rates, and premiums for plans out of necessity.

The IDR Process: Heading to Arbitration

As per the NSA, if a participant receives out-of-network emergency care at an in-network facility, then the provider and plan must agree on reimbursement without balance billing the individual (as the provider would have pre-NSA). Without an agreement, they must enter the Independent Dispute Resolution (IDR) process, which involves an arbitrator who picks one party’s suggested payment, weighing different factors. This entire process can be costly, including the ultimate cost of the award if the plan were to lose its “case,” as well as compliance-based administrative costs, and other dispute resolution expenses. Moreover, it has been estimated that providers win approximately 85 percent of IDR emergency-related cases, and the average award in those cases is 2.7 times the would-be QPA amount, which can be very financially burdensome for self-funded-plans.

Given the fact that, nationwide, there are an estimated 500,000 emergency room-related claims disputes annually, this can be a significant concern for plans that are not financially prepared to contest claims. It has also been approximated that the average ER-related claim takes 15 months to resolve, so this can be a drawn-out burden on self-funded plans.

Plan Language Changes

Plan sponsors cannot be expected to be experts in regulations; they are experts in their company. Every time a new component of the NSA is amended, ruled on, or expanded, this often necessitates a change in plan language. This is not necessarily a bad thing; this simply means that the law is evolving and becoming more workable for plans. For instance, there are FAQs released seemingly constantly that provide helpful clarification on how to use various components, including the Gag Clause Prohibition Compliance Attestation.

This also prompts many plans to update their plan provisions to ensure that they remain in compliance with the law. It can be a time-consuming and expensive process, whether a company uses internal employees to work on plan language or consults with experts like The Phia Group to craft amendments or restate a plan document to ensure everything is up-to-date with the latest and greatest language.

Either way, while the NSA was necessary to save patients an unthinkable amount of money over time by ensuring no surprises are found in medical bills at the end of the day, although plan sponsors are ultimately going to have to do their homework to make sure they are not faced with any surprises either.