Understanding the “No Surprises” Law


Surprise! This can be fun if it is followed by a party with your friends, and maybe even cake and ice cream. But it’s not so much fun when it surrounds medical bills.

In 2017 the state of California passed a law that prohibits surprise medical bills from out of network providers when seeking non-emergency care from an in-network facility. For example, you need surgery, you choose a facility that is in your health plans preferred provider network. You are relieved that you won’t have to worry about how everything is covered.

Then the bills start rolling in. You find that anesthesiologist or lab are not contracted with your hospital. This used to be a regular occurrence in the North State and you would be left with substantial additional out of pocket costs.

Fortunately the 2017 CA bill protects you. It states that you would pay only the in-network cost sharing amounts and you may not be balanced billed. There is a fact sheet to explain the process available online: https://dmhc.ca.gov/portals/0/healthcareincalifornia/factsheets/fsab72.pdf.

However, this bill did not protect individuals covered under an employer “self-funded” plan. Self-funded plans are regulated by the US Dept. of Labor.

A new federal law took effect on January first that extends these types of protections to all citizens and filled in the gap for the 6 million Californians that were covered under self-funded plans. https://www.cms.gov/nosurprises.

But, as they say, “the devil is in the details”! The American Hospital Association (AHA) and American Medical Association (AMA) are challenging the way in which the law is administered. The rules are set to direct the health plans and providers to negotiate the payment between themselves and leaving the insured to pay only the in-network copays and co-insurance.

If the health plans and providers cannot agree, the process moves to arbitration. Both sides provide their best offer and the arbitrator chooses the winner, leaving the loser with the reduced amount as well as the arbitration costs of between $200-500.

The Biden administration has put heavy emphasis on the “in-network negotiated rate” at the standard for the process. These AMA and AHA lawsuits allege that this is unfair and not in the spirit of the law since the Congress did not specify weighting this factor.

Health & Human Services Secretary Xavier Becerra stated in interview last year that if the arbitration process were “wide open” costs would go up, so a system that “provides the guideposts to keep us efficient, transparent and cost-effective” was established.

As the law stands now the Congressional Budget Office project the Federal No Surprises Act could lower premiums by about 1% and reduce the Federal deficit by $17 billion!

Couched in the concept of being unfair to the medical provider, these lawsuits also allege that it gives insurers an advantage when negotiating with providers. But the other scenario is with the consolidation of medical groups an area could end up with just one anesthesia group for example, and the group could simply refuse to negotiate.

California as the 5th largest economy in the world has some meaningful experience with this type of regulation. In a four year period the Department of Managed Health Care resolved 1006 consumer complaints about balance and surprise billing, yielding near $1 million to 467 enrollees. I suspect there were many more potential claimants who don’t even know this law exists.

Here we have one more small step in reforming our very cumbersome and inefficient health care system. Remember that it is important to know your deductible, copays and out of pocket limits on your health plan. The “No Surprises” laws don’t cover the fact that you didn’t understand your plan!

P.S. A note to Anthem Blue Cross EPO Network Insureds: As of 1/1/2022 the following University of California Health Hospitals will no longer be covered: Benioff Children’s Hospital Oakland (AKA Children’s Hospital & Research Center of Oakland); University of California San Francisco (USCF) Medical Center; UCSF Children’s Hospital; University of California Davis (UCD) Medical Center. Remember that EPO means Exclusive Provider Organization, so if you go out of network there is zero coverage. A letter has gone out to insureds explaining the continuity of care process for those already undergoing treatment at these facilities

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She founded Affiliated Benefit Services.

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