Topic: How NSA Rules Are Influencing Stop-Loss Coverage and Risk Management: What Brokers Should Be Discussing with Carriers.

By: Jon Jablon

At its core, stop-loss has a nice, simple job: to provide financial protection for a health plan, via the employer, when the plan incurs covered catastrophic claims. That’s still the case, but the No Surprises Act (NSA) has made it significantly more difficult to decipher what claims and what amounts are truly “covered.”

While it’s true that many NSA claims can be expensive (particularly emergency and air ambulance), a more immediate, and more complicated, issue is that the NSA’s framework creates payment outcomes that often don’t fit neatly into the plan document’s payment framework, the stop-loss policy’s reimbursement terms, or the carrier’s underwriting assumptions. Rather than expend resources to work out a solution to one of these problems when it arises, the simpler solution – and what is so often supported by stop-loss policy language – is for the carrier to issue a denial. So, while the NSA may have solved the problem of patient protection for NSA claims, it also created significant new friction between health plans and their stop-loss carriers.

The first step in the NSA’s dispute process is open negotiation. Not settling during the open negotiation period leads to IDR, which has its own, far more complex set of headaches than what is designed to be a simple, straightforward, arm’s-length negotiation. This is why many plans try to settle at this stage without proceeding to the next step. If a plan and provider settle during the open negotiation period, legally that amount is no different from any other negotiated rate for that claim; a contract is a contract, and if the plan and provider can agree on a payment rate, then everyone is happy (or, maybe more commonly, everyone is unhappy, but in any event, everyone at least agrees on the outcome). But, when it comes to stop-loss, what the plan perceives as a simple negotiation can have unexpected complications, since it is fairly rare to see a stop-loss policy that will implicitly cover any negotiated rate the plan chooses to agree to. Practically speaking, if the carrier were simply bound to consider any plan negotiation to be a covered expense under the policy, then a plan would have no reason not to pay an exceptionally high negotiated rate; in reality, to avoid this – for NSA open negotiations, non-NSA case-by-case negotiations, direct provider contracts, or any other negotiations – stop-loss policies typically define their covered expenses on their own terms rather than deferring to whatever the plan decides. Through that lens, stop-loss carriers can ensure that they manage risk effectively without bumping up against the misconception that stop-loss is a substitute for plan payment diligence rather than a safety net to catch the excess.

As simple as open negotiation sounds, the complexity is a hidden danger – but it still can’t hold a candle to how convoluted the IDR process is. Unlike open negotiation, the Independent Dispute Process (IDR) doesn’t even come close to mimicking an ordinary claims processing task; for one thing, IDR isn’t supposed to be permitted until the plan and provider have already failed to amicably negotiate a rate; then, even after open negotiation, the plan waits through IDR initiation, entity selection, offer submissions, fee payment, a determination, and then a payment window. In practice, this often stretches weeks or months beyond the initial claim adjudication; the federal timelines allow up to potentially five months from the initial claim submission to the plan’s payment of a final IDR award, and that’s if there are no delays or hiccups in the process.

CMS describes IDR as a separate federal process for resolving payment disputes between providers and plans, which is exactly the point: It is not just normal claim adjudication with a fancy label. The complexity involves a significant time commitment, which is largely spent waiting – and when stop-loss is concerned, a health plan’s biggest enemy is waiting. Time delays often turn a reimbursable stop-loss claim into a contentious denial, since the policy period is an explicit set date after which claims won’t be considered, no matter when they were incurred, and no matter why they were delayed. Put bluntly, the plan’s legal requirement to follow this process (i.e., not being made aware of the final payment amount for quite some time after the claim was incurred and even initially adjudicated) doesn’t require a carrier to also abide by the process. A claim can be timely under the NSA process but late under the stop-loss policy, especially towards the end of the policy period. Same claim; different clocks.

A related problem is the lack of policy recognition of this NSA friction to begin with. As noted above, many stop-loss policies still do not meaningfully address open negotiation settlements or IDR awards at all. Even though the NSA has been effective for years now, just as stop-loss policies lagged when the ACA made external review an integral part of the claims ecosystem, most stop-loss policies still do not include language that either holds a claim open pending a mandatory IDR review or allows reimbursement of additional amounts that the plan is required to pay via IDR. Even now, a surprising number of stop-loss policies still read as if NSA and IDR simply do not exist, which causes real tension between what the plan must cover and what the carrier may cover.

Some plans interpret a stop-loss policy’s silence as a good thing, since the lack of exclusion can be framed as implicit coverage – but it’s not usually quite that simple, since silence means that the important questions remain unanswered, such as: If the provider and plan agree to a settlement via open negotiation, does the plan clearly cover that settlement payment? Does the carrier reimburse any negotiated rates the plan agrees to without underwriting them? Does the stop-loss policy exclude any amounts paid solely based on agreements external to the plan document itself, such as a negotiated rate? If an IDR entity selects the provider’s offer, is that amount an eligible expense? Does it fit the “usual and customary” definition? Even though required by law, is it payable under the plan document that was underwritten? Is it excluded because it exceeds the plan’s ordinary reimbursement methodology? Does the stop-loss carrier treat the IDR award as binding on the plan but not binding on the carrier? If the policy does not answer those questions, the plan may discover the answer only after the money is already out the door.

While it’s certainly easier to amend a plan document than it is to amend a stop-loss policy, many plan documents unfortunately still don’t clearly explain how NSA-covered claims are paid, how open negotiation affects final payment, or whether IDR determinations are incorporated into the plan’s benefit structure. For underwriting, this means carriers are forced to put more premium focus on industrywide NSA exposure (which, according to CMS data, is far from favorable to plans), network gaps, emergency claims, air ambulance, vendor practices, QPA methodology, and whether the plan’s payment strategy is likely to invite disputes. Maybe ironically, the uptick in partial or complete reference-based pricing over the past couple of decades means that many plans have fewer contracted claims and therefore incur a higher percentage of NSA claims, which skews the underwriting numbers even further and generally less predictably, resulting in even more cautious underwriting.

The takeaway is that health plans and those who service them cannot automatically assume that a health plan’s open negotiation settlement or IDR payment is a reimbursable stop-loss expense. The plan document and stop-loss policy need to be reviewed in detail, but maybe the most important step is to have a conversation with the carrier to gauge their temperature on the matter. Different carriers will inevitably treat different situations in different ways, and while there may be nothing the plan can do to truly change a carrier’s mind if it’s made up, being prepared for a denial and having a reasoned appeal already in the chamber can be very valuable if push comes to shove.