No Surprises Act: What Healthcare Payers and Providers Need to Know

The No Surprises Act (NSA) is federal legislation that is meant to protect consumers from surprise medical bills and promote price transparency in healthcare. Since going into effect in January 2022, the No Surprises Act has led to the successful prevention of more than 9 million surprise bills, according to AHIP. Also, more than 20% of payers said implementing pre-service estimates to comply with the No Surprises Act is a top priority for 2023 according to the Trends in Healthcare Payments Annual Report.

Although the exact requirements and enforcement details of the No Surprises Act have yet to be determined, enough of the law is outlined that providers and payers can start working toward compliance now.

What Is the No Surprises Act?

The No Surprises Act is part of a larger push by the federal government to protect consumers from surprise bills. This legislation, in particular, is designed to limit excessive costs due to emergency services from out-of-network providers. It is important to note that this law is different from the federal price transparency rule requiring hospitals to post prices online so that consumers can research costs prior to making an informed choice.

Instead, the No Surprises Act targets scenarios where consumers have little or no choice in the care they receive, including emergency care and care from out-of-network providers at in-network facilities. If a person is having a life-threatening medical emergency such as a heart attack, there is no time to consider healthcare costs. Immediate treatment is a high priority.

However, prior to the No Surprises Act, that person having a heart attack could be charged for receiving care at an out-of-network facility. Even if the facility is in-network with their health plan, the consumer may unknowingly receive care from an out-of-network provider. Often, the provider will charge the consumer the difference between the allowed amount and how much the health plan pays. This is known as balance billing.

The intent of the law is to eliminate situations where consumers cannot reasonably be expected to understand how their care will result in a large bill or to avoid the additional costs of out-of-network care. The effectiveness of the law remains to be determined.

Why is There a No Surprises Act?

Current trends in healthcare payments tell us that surprise bills are a big problem. In fact, 76% of consumers reported receiving an unexpected medical bill. More than half of consumers reported getting a medical bill for an amount more than expected.

A surprise medical bill can create payment friction for consumers in healthcare. The amount due on those medical bills adds even more stress for consumers. The price tags of surprise bills average between $750 and $2,600, which shouldn’t come as a surprise when considering that the average deductible is more than $1,700 for an individual. Deductibles for a family health plan are even more.

The friction of surprise bills adds to the overall stress for consumers in healthcare payments. About half of consumers had out-of-pocket healthcare expenses in the last 12 months with a significant portion of those balances over $1,500. Healthcare costs can also influence whether a consumer seeks medical care at all. Nearly 40% of consumers did not seek care due to cost.

When Exactly Will the No Surprises Act End Surprise Bills?

The No Surprises Act was first introduced in 2019. The law was included in the Consolidated Appropriations Acts of 2021 which has other mandates designed to end surprise bills in healthcare. In this package, the No Surprises Act was officially enacted in December 2020. Though passed in 2020, the No Surprises Act first became effective more than a year later in January 2022.

There are still many unknowns about this law. For example, providers and payers have certain requirements to comply with the law, but the standards for those requirements have not yet been fully defined. Additionally, the law is set to be officially enforced later this year, yet it remains to be seen what, if any, consequences there are for non-compliance.

Essentially, the law has been defined and the intent is there. In instances where there is no opportunity to research care, consumers cannot be charged for out-of-network charges. These facts alone may help the No Surprises Act reduce the incidence of surprise bills for consumers. However, until there is enforcement, and the requirements are fully determined, surprise bills may not completely go away.

What Payers Need to Know About the No Surprises Act

Under the No Surprises Act, when requested by a member, payers must produce an Advanced Explanation of Benefits to the member before scheduled care. This is also referred to as AEOB. Before the law, payers only sent an explanation of benefits after care. Just like Good Faith Estimates, the requirements of the Advanced Explanation of Benefits are still being defined.

Payers are also required to include relevant out-of-pocket costs for in-network and out-of-network care directly on member IDs, such as deductible amounts. This may seem to be a straightforward requirement for payers. However, the requirement also creates an opportunity to increase digital engagement by driving members to plan portals to download new ID cards.

What Providers Need to Know About the No Surprises Act

Under the new law, healthcare providers must give certain patients a cost estimate of care called a Good Faith Estimate. This requirement is sometimes abbreviated as GFE. Unfortunately, which patients need that estimate and what the estimate should look like is unclear.

Providers are voicing concerns about how the Good Faith Estimate will interfere with current processes. Almost half of medical practices reported challenges related to disruptions to workflows when implementing and distributing Good Faith Estimates. Any such disruption will only create further strain on healthcare providers already experiencing staff shortages.

Despite the new federal laws and associated requirements, only 21% of providers are prioritizing price transparency. This could cost providers in the long run. Most notably, there are the penalties for non-compliance with federal law. While these costs have yet to be determined, the final price tag could be steep.

Instead of waiting for enforcement to be specified, providers can create processes that meet the intent of the law while the letter of the law is still being defined. New processes must focus on early financial engagement for all patients, and be supported by efficient and secure payment technology. A holistic approach to price transparency is more likely to improve patient experiences and increase payment collections overall for providers.

The Potential of the No Surprises Act for Healthcare

The reality is that consumers are not happy about the payment experience in healthcare. Many consumers would switch providers for a better healthcare payments experience. That percentage increases to 74% of consumers when looking at the millennial generation. Surprise bills only contribute to overall member dissatisfaction.

The federal government’s effort to promote price transparency may not solve all problems that consumers experience with healthcare payments, but it’s a start. The No Surprises Act, while not perfect, should be viewed as an opportunity to not only improve the consumer journey but also make healthcare payments better.

For example, a new payment dispute process may help to alleviate the burden of resolving surprise bills for consumers. Going forward, payment disputes between providers and payers will follow a formal process defined through the No Surprises Act with a portal hosted by CMS. If a payment amount is not agreed upon in 30 days, the conflict will go through the independent dispute process.

Ultimately, the impact of the No Surprises Act is still unknown. Yet, the new law offers hope that much-needed change is on the horizon.