Surprise Bills No More—So What Will Docs Get Paid?

By: Jennifer Berman, CEO of MZQ Consulting

As we have previously shared, effective for plan years beginning on or after January 1, 2022, “surprise billing” is prohibited. This means that plan participants can only be billed in-network rates even when they go to out-of-network providers for “protected services.” These protected services include emergency services, services provided at an in-network facility by an out-of-network provider, and air ambulance services. 

This creates a gap between what the plan participant pays and what the provider charges that needs to be filled. Consider the following example, in which a participant has an emergency visit to an out-of-network hospital:

Total Amount Charged by Hospital:$2,500  
Plan In-Network Negotiated Rate for Same Services:  $1,000  
Participant Coinsurance:20%  
Paid by Participant:$200  
Amount Plan Would Pay In-Network:$800  
Balance “Due” to Hospital:$1,500

The Dispute Resolution Process

The participant can no longer be billed this $1,500 “balance”—so, the question becomes, what does the provider get paid? The payor in this scenario is the plan, but the plan hasn’t agreed to pay the provider what they are billing, and the provider hasn’t agreed to accept less. Guidance recently issued by the Departments of Labor, Treasury, and Health and Human Services sets out the framework for how this disconnect will be resolved. This new procedure, which generally applies if there is not an otherwise applicable process at the state-level, is described below:

Step 1Plan issues initial payment or denial of payment to provider.The payment or denial must include a statement informing the provider: That they may initiate a negotiation within 30 business days; That if that negotiation is unsuccessful, an independent dispute resolution process is available; and how to contact the plan to initiate the open negotiation period, including a phone number and e-mail address.
Step 2Provider accepts payment as total payment or issues a “Open Negotiation Notice” within 30 business days.The open negotiation notice must include: Information sufficient to identify the items or services at issue, including the date provided and service code; The initial payment amount or denial of payment; An offer of an amount the provider will accept; and contact information for negotiating the claim.
Step 3The parties agree to a payment amount within 30 business days, or 30 business days elapse and the open negotiation period ends.   After the open negotiation period ends, both parties have 4 business days to request an independent review through the independent dispute resolution (IDR) process. The IDR process is initiated using a new web portal the Federal government is creating for this purpose.   A Notice of IDR Initiation can be filed on the portal. The notice must include: Information sufficient to identify the items or services at issue; The names and contact information of the parties involved; That state where the items or services were provided; The commencement date of the open negotiation period; The preferred IDR Entity (i.e., the third-party entity that will review the case);An attestation that the items or services at issue are covered by the No Surprises Act; The qualified payment amount; and General information describing the Federal IDR process for the non-initiating party.
Step 4The parties agree to an IDR Entity, or one is assigned by the Federal government.   If the non-initiating party does not object to the IDR Entity requested within 3 business days, that IDR Entity is assigned.   If the non-initiating party objects, the parties have 3 business days to agree to an IDR Entity.   If the parties do not agree, an IDR Entity will be randomly assigned.The IDR Entity is the third-party responsible for determining the amount the plan will ultimately pay the provider.   Strict conflict of interest rules apply to ensure that the IDR Entity does not have any material, familial, or professional relationship with either party.
Step 5Within 10 business days after the selection of the IDR Entity, each party submits an “offer” to the IDR Entity.This offer must be expressed as both a dollar amount and a percentage of the qualified payment amount (QPA).   The QPA is generally the median in-network contracted rate that the plan pays for the items or services at issue. If a plan does not have sufficient information to determine their median contracted rate, they can use a database free from conflicts of interest to determine the QPA.
Step 6Within 30 business days after being chosen, the IDR Entity must select one of the offers presentedThe IDR Entity must select the offer that is closest to the QPA unless creditable evidence submitted by the parties clearly demonstrates that the QPA is materially different from an appropriate out-of-network rate.   For these purposes, the IDR Entity may not take into account: Usual and customary charges; Any amount that would have been billed to a plan or insurance carrier; or reimbursement rates payable by any public payor (such as Medicare).
Step 7IDR Entity issues written decision.The written decision is provided to the parties and the Federal government. It must include the rationale for the IDR Entity’s decision. If that decision was not the closest offer to the QPA it must also include: A detailed explanation of the additional considerations relied on; whether the information about those considerations submitted by the parties was credible; and the basis upon which they determined that the QPA was materially different from the appropriate out-of-network rate.
Step 8The plan pays the provider any balance due within 30 calendar days from the date the IDR Entity issues its written decision.The IDR Entity’s decision is binding on all parties.  Following the issuance of a decision, the same parties may not enter into the IDR process again regarding the same items or services for 90 calendar days. This “cooling off” process is designed to encourage entities to mutually agree to pricing moving forward. The IDR’s fees are ultimately paid by the losing party.

Expansion of External Review Rules

The No Surprises Act also amends the external review rules created by the Affordable Care Act (ACA) by adding to the types of determinations that may be subject to external review. Notably, these new categories are subject to external review for ACA grandfathered plans—thereby creating the first external review requirements for those plans. 

The new determinations that are subject to external review include:

  • Services constituting “Emergency Services” under the No Surprises Act definition;
  • The claimant is asserting the plan did not apply the No Surprises Act appropriately relative to out-of-network services provided at an in-network facility;
  • The issue relates to whether the participant consented to treatment from an out-of-network provider; and
  • There is question as to whether a service that may be subject to protection under the No Surprises Act was coded correctly.


Many of the requirements of the No Surprises Act will be handled by insurance carriers and claims administrators, including those outlined above. Plan sponsors are, however, generally responsible for ensuring that the new participant notice regarding their rights under the No Surprises Act are distributed. These notices should be distributed with the other legal notices generally provided during open enrollment for the first plan year beginning on or after January 1, 2022. We will continue to monitor developments and bring any additional information to you as it becomes available.

Medicare Part D Coverage Notice Due Date Approaching

By: Lee Susan Spiegel and Megan Diehl

The deadline for plan sponsors that offer prescription drug coverage to provide notices of creditable or non-creditable coverage to Medicare-eligible individuals is coming up very soon. These notices need to be provided before October 15, 2021. Creditable coverage means that the plan is expected to cover, on average, as much as the standard Medicare Part D prescription drug plan.

Plan sponsors are required to provide such notices to the following individuals before the October 15 deadline:

  • Retirees and their dependents
  • Active employees who qualify for Medicare and their dependents
  • COBRA participants who qualify for Medicare and their dependents

The Medicare Part D annual enrollment period begins October 15 and runs through December 7 for coverage that begins on January 1, 2022. Prior to the enrollment period, plan sponsors must specify whether an individual’s prescription drug coverage is creditable or non-creditable. The annual deadline to provide coverage notices applies to all plans that offer prescription drug coverage, regardless of plan size, employer size, or grandfathered status. Plan sponsors can provide the required notice along with annual enrollment materials as long as the notice is “prominent and conspicuous.” This can be as a separate mailing, or electronically, if the participants have daily access to the plan sponsor’s electronic information system as part of their work duties.

If the notices are mailed to participants, a single notice can be provided to a covered Medicare individual and their dependents, unless it is known that a spouse or dependent resides at a different address than the participant. Model notices can be found on; plan sponsors should carefully review and customize these notices to ensure they accurately reflect plan provisions. In addition to providing Medicare-eligible individuals with annual notices of prescription drug coverage status, all plan sponsors are responsible for disclosing whether such plan is creditable or non-creditable to the Centers for Medicare and Medicaid Services (CMS). The plan sponsor has 60 days after the beginning of each plan year to complete the Creditable Coverage Disclosure Form on the CMS Creditable Coverage website.

Please note that MZQ Consulting automatically provides the required Medicare D notices to all clients using their Compass or Compass Plus products.

Biden Announces Vaccine Mandate and Guidance Issued on Air Ambulance Reporting Requirements and Individual Market Compensation Disclosure

By: Jessica Waltman – Principal, Forward Health Consulting

On Thursday, September 9, the Biden Administration released a new COVID-19 Action Plan. The plan states that the Occupational Safety and Health Administration will be issuing a rule requiring all private businesses with 100 or more employees to ensure their employees are fully vaccinated or produce a negative COVID-19 test weekly. The plan also indicates that any health care organization receiving funding from CMS and all federal contractors will be required to ensure their employees are fully vaccinated to retain their federal funding. However, the Administration still needs to issue the actual rules effectuating the changes.

We are carefully monitoring the situation and will provide you with additional information when it becomes available.

In other news…

On Friday, September 10, the Departments of Health and Human Services, Labor, and Treasury issued proposed rules laying out their plans for implementing specific provisions of the No Surprises Act. This Act, which is part of the Consolidated Appropriations Act of 2021, includes the national prohibition on surprise billing, new transparency requirements for health plans, a mandate that health plans analyze how they comply with the Mental Health Parity and Addiction Equity Act, and more.

Last Friday’s guidance concerns two less-known reporting requirements: (1) related to air ambulances and (2) related to broker compensation in the individual health insurance market.

Air Ambulance Reporting

The No Surprises Act’s prohibition on balance billing does not extend to air ambulance expenses. Instead, the Act seeks additional information on air ambulance usages, cost, etc., to facilitate a report from HHS (with the help of the Department of Transportation) to Congress on the widespread concerns surrounding air ambulances expenses. Under the Act, health plans (including employer-sponsored self-funded and fully insured plans) must report to the Administration on air ambulance claims.

The proposed rules require these reports on a calendar year basis (even for non-calendar year plans) for 2022 and 2023. They will need to include the following data elements for each air ambulance claim received or paid for during the applicable year:

  • Information identifying the plan, plan sponsor, and carrier or reporting entity, as applicable;
  • The plan’s market category (i.e., small group, large group, self-funded, etc.);
  • Date of service;
  • National Provider Identification information for the billing entity;
  • The CPT Code or HCPCS Code;
  • Transport information (including aircraft type, loaded miles, pick-up, and drop-off, whether transportation was emergent, etc.)
  • Whether the plan had a contract with the air ambulance provider;
  • Claims adjudication information (including if denied, the reason for such a denial); and
  • Claims payment information (including submitted charges, amounts paid, and cost-sharing amount, if applicable).

Presumably, claims payors will handle much of this reporting rather than employers. However, plan sponsors do have responsibilities related to these requirements.

  • For fully insured plans: The health insurance issuer can assume responsibility for this reporting (as they also have an independent obligation to complete the reporting). However, to avoid liability if an insurer fails to do so, the plan sponsor should ensure that their carrier contract expressly addresses how the insurer will assume responsibility for this requirement.
  • For selffunded plans: The plan sponsor can contract with a TPA to provide this reporting. However, if the TPA fails to meet its contractual obligations, the group plan will be in violation of the reporting requirement.

Compensation Disclosure in the Individual Health Insurance Market

The proposed rules also provide additional details about the requirement that individual market health insurance carriers give their policyholders information about compensation paid to insurance agents and brokers. These rules apply to both major medical policies and short-term limited-duration policies, and carriers will need to report both direct and indirect compensation paid to brokers and agents. The insurance carrier must disclose this information before the point of purchase and annually at renewal (either in renewal paperwork or, if none, as part of the first bill for the new policy year). This requirement will apply to new contracts (or revisions to material terms to existing contracts) with brokers or agents entered into on or after December 27, 2021.

Notably, the proposed regulations do not address the similar but more extensive compensation disclosure requirements for brokers and other consultants who serve group health plans.  These requirements are scheduled to go into effect for contracts between advisors and plans entered into or renewed on or after December 27, 2021. The No Surprises Act does not require the development of regulations on the group plan disclosure requirements. It is unclear if the Biden Administration will publish any implementation rules or sub-regulatory guidance this fall.

ACA Affordability Percentage Decreased for 2022

Jessica Waltman – Principal, Forward Health Consulting

Megan Diehl – Manager, Compliance Consulting, MZQ Consulting

The Affordable Care Act (ACA) considers the affordability of employer-sponsored health plans for the purposes of the shared responsibility rules and the premium tax credit (PTC). Affordability depends on a certain percentage of the employee’s household income for the tax year, which is typically adjusted annually for inflation. Recent guidance from the Internal Revenue Service (IRS) decreases the affordability percentage from 9.83 percent in 2021 to 9.61 percent in 2022.

Beginning January 1, 2022, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage under the most affordable medical plan they are eligible for does not exceed 9.61 percent of the employee’s household income for the year. No matter what type of coverage an employee actually elects, the single premium rate is always the basis for calculating affordability.

The new affordability percentage is essential for applicable large employers (ALEs) to know because the ACA requires them to offer affordable, minimum value health coverage to their full-time employees or pay an employer mandate penalty. The affordability percentage decrease for 2022 means that employers may need to increase the amount that they contribute towards employee coverage in order for their employee benefits to remain affordable.

The IRS has created three safe harbors for group health plans to establish and report on benefits affordability: the federal poverty line safe harbor, the rate of pay safe harbor, and the W-2 safe harbor (which is based on Box 1 of the W-2). The rate-of-pay and the W-2 safe harbors are calculated on an employee-by-employee basis, while the federal poverty line safe harbor is a dollar constant. A monthly employee contribution of $103.14 or less will satisfy the federal poverty line safe harbor in 2022, as the federal poverty line for a single individual is $12,880 in everywhere but Alaska and Hawaii.

It is important for employers to keep in mind that the ACA health insurance exchange marketplaces also consider affordability when determining an employee’s eligibility for a premium tax credit. If an ALE’s full-time employee purchases exchange-based individual coverage and receives a PTC because their lowest-cost, employee-only monthly contribution exceeds 9.61% of their household income for the 2022 plan year, that credit will trigger a shared responsibility penalty for the employer.

Biden Administration Delays Enforcement of New Plan Transparency and Disclosure Requirements

Jessica Waltman – Principal, Forward Health Consulting

All health insurance carriers and employers that offer group health coverage to their employees have a wide range of pending compliance responsibilities related to the “No Surprises Act” section of the Consolidated Appropriations Act of 2021 (CAA) and the final health plan transparency rules. However, the Biden Administration just gave these entities a bit of a break by delaying quite a few of the upcoming transparency and disclosure requirements via FAQ guidance issued on August 20, 2021.

The original compliance deadlines were generally December 27, 2021, for plan or policy years starting on or after January 1, 2022. Now, certain enforcement deadlines have been extended by months and others by up to a year. In still more instances, a good faith compliance standard applies until implementation regulations are finalized. 

The new requirements apply to all types and sizes of employer group health plans, including those employer plans with grandfathered status. Businesses that offer fully insured coverage share liability for compliance with their carrier. Companies that self-fund their group coverage have sole responsibility for making sure the provisions of both the CAA and the transparency regulation are carried out.

The following charts explain how deadlines have changed for employers, carriers, and, when applicable, health care providers.   

RequirementApplicabilityEnforcement ChangeOther Important Notes
Publish machine-readable files on a public website of in-network reimbursement rates and out-of-network allowed amounts and billed charges.Carriers and Group Health Plan SponsorsDelayed for plan or policy years beginning on or after January 1, 2022, until July 1, 2022.For 2022 plan years and policy years beginning after July 1, 2022, plans and issuers should thus post the machine-readable files in the month in which the plan or policy year begins.
Publish machine-readable files on a public website of prescription drug costs and pricing data.Carriers and Group Health Plan SponsorsDelayed until further notice.The Administration plans to use the rulemaking and public comment process to determine whether the requirement remains appropriate.

Consolidated Appropriations Act of 2021 – No Surprises Act Requirements

RequirementApplicabilityEnforcement ChangeOther Important Notes
Publish an Internet-based price comparison tool online for all enrollees and plan participants.Carriers and Group Health Plan SponsorsEnforcement deadline changed from plan years starting on or after January 1, 2022, to plan years starting on or after January 1, 2023.Since the requirement is largely duplicative of the internet-based self-service price disclosure requirement in the health plan transparency rule, the Administration intends to determine if they can combine compliance for both through the rulemaking and comment process. Leading up to January 1, 2023, the Administration will focus on compliance assistance.  
Disclose very detailed plan or policy pharmacy and claims cost data to the federal government on December 27, 2021, and every June 1 thereafter.Carriers and Group Health Plan SponsorsEnforcement of the December 27, 2021, and June 1, 2022, reporting deadlines is delayed pending the issuance of regulations or further guidance.Employer plans and issuers are strongly encouraged to be ready to begin reporting the required information with respect to 2020 and 2021 data by December 27, 2022.  
Provide enrollees with “advance EOBs” before they incur a claim and following the receipt of a good faith estimate of charges from the insured’s provider. Carriers and Group Health Plan SponsorsEnforcement of the plan years starting on or after January 1, 2022, compliance date is delayed until the finalization of implementation regulations.The Biden Administration plans to investigate whether an interim solution to provide enrollees with advance cost and issuer payment information is feasible.
Provide insured individuals with a good faith estimate of expected charges when they schedule treatment. The requirement applies to both the scheduled item or service and any items or services reasonably expected to be provided in conjunction with those items and services, including those provided by another provider or facility.ProvidersEnforcement of the January 1, 2022, compliance deadline is delayed until the finalization of implementation regulations with a prospective applicability date.   The Administration will release implementation guidance on providing estimates to uninsured people before January 1, 2022, so providers will need to provide estimates to those individuals on time.
Surprise balance billing requirements.Providers, Carriers, and Group Health Plan SponsorsCompliance responsibility with the surprise billing requirements beginning with plan years starting on or after January 1, 2022, is not delayed.  However, plans and issuers are expected to implement these requirements using a good faith, reasonable interpretation of the statute until all related implementation rules are final. Group health plans have a disclosure requirement to follow starting with the 2022 plan year.  The Biden Administration published a model disclosure form and directions in July of 2021.  If group plan sponsors use it, they will be considered compliant.
Prohibition of “gag clauses” in provider contract with group health plans and health insurance carriers.Providers, Carriers, and Group Health Plan SponsorsThe December 27, 2021, enforcement deadline is delayed until the finalization of implementation rules. A good faith compliance standard applies until then.  The Biden Administration will issue sub-regulatory guidance to explain how plans and issuers should submit attestations of compliance. The Administration instructs plans and issuers to anticipate collecting those attestations starting in 2022.
Verification of the accuracy of in-network provider directories.Carriers and Group Health Plan SponsorsEnforcement of the plan years starting on or after January 1, 2022, compliance date is delayed until the finalization of implementation regulations.Until rules are final, if there is a network directory error and someone uses an out-of-network provider that they believed to be in-network due to the mistake, then the plan or issuer cannot require participants to pay any more than in-network cost sharing to be considered compliant. Also, the plan or issuer needs to count those cost-sharing amounts toward any deductible or out-of-pocket maximum.
Include clear information on printed and electronic health plan ID cards about all applicable deductibles and out-of-pocket maximum limitations. Cards must also include a telephone number and website address for individuals to seek consumer assistance. Carriers and Group Health Plan SponsorsEnforcement of the plan years starting on or after January 1, 2022, compliance date is delayed until the finalization of implementation regulations.Until rules are finalized, plans and issuers are expected to implement the ID card requirements using a good faith, reasonable interpretation of the law.  
Establish continuity of care protections to protect enrollees in instances when terminations of certain contractual relationships result in changes in provider or facility network status.Carriers and Group Health Plan SponsorsEnforcement of the plan years starting on or after January 1, 2022, compliance date is delayed until the finalization of implementation regulations.  Until rules are finalized, plans and issuers are expected to implement continuity of care protections using a good faith, reasonable interpretation of the law.  

New Federal FAQs Address the ACA Preventive Care Rules for HIV Prevention, Medical Management Techniques, and Recommendations that Include a Broad Scope of Care

By: Jessica Waltman, Principal, Forward Health Consulting

Federal regulators recently released frequently asked questions (FAQ) guidance about how health insurance issuers and group health plans need to implement the Affordable Care Act’s (ACA) preventive care requirements. This round of FAQs specifically explains how non-grandfathered health insurance plans must provide preventive care benefits to people at high risk of contracting the human immunodeficiency virus (HIV). They clarify how plans and issuers need to apply ACA preventive care standards to the entire scope of each federal preventive care recommendation. Plus, the FAQs explain how plans and issuers may apply medical cost management practices to preventive care coverage. The FAQs focus on HIV pre-exposure prophylaxis services specifically but also address general ACA preventive care principles.

The ACA requires all plans without grandfathered status to cover specific preventive care services without applying participant cost-sharing requirements. The list of preventive care services that plans and issuers must cover on a first-dollar basis includes services that have an “A” or “B” rating in the current recommendations of the United States Preventive Services Task Force (USPSTF). On June 10, 2019, the USPSTF released an “A” rating recommendation that clinicians offer pre-exposure prophylaxis (PrEP) with “effective antiretroviral therapy to persons who are at high risk of human immunodeficiency virus (HIV) acquisition.” The recommendation describes PrEP as a comprehensive intervention comprised of both antiretroviral medication and essential support services. The support care includes a clinical assessment to ensure the therapy is appropriate for the individual. It also covers a variety of screening tests and medication adherence counseling. When offered as part of PrEP, all these services qualify as preventive care under the ACA.

Based on the timing of the recommendation, applicable plans and issuers had to start covering PrEP and its related services without applying cost-sharing in plan or policy years beginning on or after June 30, 2020.  However, some plans and issuers only covered antiretroviral therapy on a first-dollar basis and not all related services. The new FAQs clarify that when a preventive care recommendation like PrEP includes multiple components of care, plans and issuers should cover all parts without cost-sharing. Since many carriers and plans did not fully understand the scope of the requirement before the publication of these FAQs, there will be no federal enforcement against plans that have not covered the full range of necessary services for the next 60 days.

The FAQs also address how plans and issuers can legally apply medical management to PrEP specifically and preventive care in general. Reasonable limits on the frequency, method, treatment, or setting of preventive care are permitted if the relevant federal guidelines do not address them.  For example, with PrEP, the USPSTF recommendation addresses the frequency of some services, so a plan or issuer needs to follow their guidelines. However, the recommendation does not require the use of brand-name medications. So, a plan or issuer could limit first-dollar coverage to the generic version and require cost-sharing for anyone who chose the brand-name medication. In that case, a plan or issuer would need to make accommodations if the generic were medically inappropriate for a specific individual. These guidelines are valid for PrEP and they are also transferable to medical management for all ACA preventive care services.

National Prohibition on Surprise Billing Effective Starting January 1

On Thursday, July 1, 2021, the Department of Labor (DOL) issued interim final rules governing the prohibition on surprise billing contained in the Consolidated Appropriations Act, 2021 (CAA).  Under the CAA and these new rules, “surprise billing” is prohibited for plan years beginning on or after January 1, 2022.[1]

A surprise bill is an unexpected bill from a health care provider or facility that occurs when a covered person receives medical services from a provider or facility that, usually unknown to that person, does not participate in their medical plan.  Under the new rules, these surprise bills are no longer permitted for emergency services, services provided at an in-network facility by an out-of-network provider unless consent has been provided, and air ambulance services (the “protected services”).

What does this mean for participants?

Plan participants can still be billed for protected services, but their cost sharing responsibilities (i.e., copayments, coinsurance, and deductibles) will apply as if the protected services were provided in-network.  Health plans will be required to pay any balance to the out-of-network facilities directly.

Additionally, these rules require that health plans:

  • Cover emergency services without requiring prior authorization.
  • Provide an explanation of benefits showing that participant cost-sharing for protected services was based on in-network rates.
  • Count any amounts participants pay towards protected services provided out-of-network towards their in-network deductibles and out-of-pocket limits.
  • Make a notice that explains the surprise billing rules publicly available.  The regulations include a template for this notice, which must be posted on the plan’s public website and be included with each explanation of benefits for protected services.

How is emergency care defined?

Emergency care is defined broadly for purposes of these rules.  Specifically, emergency services include:

  • An appropriate medical screening to determine if an emergency medical condition exists; and
  • Further medical examination and treatment to stabilize the individual.

These services also expressly include:

  • Pre-stabilization services provided after the patient is moved out of the emergency department and admitted to the hospital; and
  • Post-stabilization services, unless:
  • The attending emergency physician or treating provider determines the patient can travel using nonmedical or nonemergency medical transportation, and the patient can travel to an available participating provider or facility located within a reasonable travel distance taking into account the patient’s medical condition;[2]
  • The provider or facility satisfies the notice and consent criteria (described below);
  • The patient (or their authorized representative) is in a condition to provide informed consent under applicable state law; and
  • Any other requirements or prohibitions that exist under applicable state law are met.

The new rules also limit a plan’s ability to deny emergency claims. Specifically, they provide that plans may not automatically deny emergency claims based on a list of final diagnosis codes.  Instead, plans must review claims on a case-by-case basis to determine if the “prudent layperson” standard has been met before denying an emergency services claim.  Under this standard, a claim for emergency services must be covered if treatment is sought due to:

              “A medical condition [including mental health or substance use disorders] of sufficient severity (including severe pain) such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in a condition…(1) placing the health of the individual (or with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy, (2) serious impairment of bodily functions, or (3) serious dysfunction of any bodily organ or part.

Also notable for these purposes, plans are prohibited from:

  • Restricting coverage based on the time elapsed from the onset of symptoms until when care is sought; and
  • Denying coverage for qualifying emergency services based on other general plan exclusions.[3]

What will health plans have to pay providers?

The new rules do not require health plans to pay providers based on billed charges.  Instead, they introduce a complex set of rules for determining what the in-network rate “should be” for out-of-network services.  The rules are similar but not identical for purposes of determining participant cost-sharing versus provider payments.

For participant cost sharing, the “in-network rate” is:

  • The amount determined by an applicable All-Payer Model Agreement.  These are agreements that certain states, most notably Maryland, have reached with the Centers for Medicare & Medicaid Services (CMS) that set specific pricing which all payers in the state abide by in paying for certain services; or 
  • If no All-Payer Model Agreement exists, the amount determined under a specified state law; or
  • If neither of the above applies, the lesser of the actual billed charge or the “qualified payment amount,” which is generally the plan’s median contracted rate.[4]

For purposes of paying providers and facilities:

  • Plans have 30 days from the date they receive a bill from an out-of-network provider/facility to send a payment or deny the claim;
  • If the provider/facility does not accept the plan’s payment as payment in full, the parties have 30 days to resolve the matter privately.
  • If the plan and provider/facility do not resolve the billing issue within 30 days, the plan must pay the provider/facility based on the “in-network rate” calculation described above for determining participant contributions. 
  • If the provider/facility does not accept this additional payment as payment in full, the final payment amount will be determined by an independent dispute resolution (IDR) entity.

These rules for determining in-network rates will add significant complexity to claims administration surrounding the protected services.  There are many outstanding questions related to the IDR process that will be addressed in forthcoming regulations.

What are the notice and consent rules, and how do they work?[5]

As noted above, post-stabilization services can revert to out-of-network rates if certain conditions are met and the provider/facility gives notice that they are out-of-network and receive informed consent to continue treatment.  Certain out-of-network providers at in-network facilities can also charge out-of-network rates if they follow these procedures.

For these purposes, the provider/facility notice must:

  • State that the provider/facility is out-of-network;
  • Include a good faith estimate of the amount that will be charged for the services;
  • State that the estimated charges do not constitute a contract;
  • Provide information about whether prior authorization or other care management requirements may apply; and
  • State that the patient is not required to provide consent and that they may instead seek treatment from an in-network facility/provider.[6]

To be valid, the notice must:

  • Be provided separately from, and not attached to or incorporated into any other documents;
  • Be written and provided on paper, or, as practicable, electronically as selected by the patient; and
  • Be provided:
    •  At least 72 hours before the appointment (if the appointment is made 72 hours or more in advance); or
    • On the day the appointment is made and at least 3 hours before services are rendered (if the appointment is made less than 72 hours before services are to be provided).

The regulation does not include a model consent notice but specifies that the federal Department of Health and Human Services will release one shortly.

For a consent to be valid, it must:

  • Be provided voluntarily;
  • Follow the standard format provided by the Department of Health and Human Services;
  • Be signed (including by electronic signature) by the patient or their authorized representative;
  • Meet applicable language access requirements;[7]
  • Acknowledge that the patient has been notified that any payments made by them may not accrue towards their in-network deductible or out of pocket maximum;
  • State that the patient agrees to be treated by an out-of-network provider/facility and understands they may be balance billed;
  • Include the date notice was provided and the date and time at which the consent was signed; and
  • Be provided to the patient in-person, or through mail or e-mail as selected by the patient. 

Even if these complex notice and consent procedures are followed, surprise billing protections cannot be waived relative to:

  • “Ancillary services,” which include:
    • Items or services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology (whether provided by a physician or non-physician practitioner);
    • Items or services provided by assistant surgeons, hospitalists, and intensivists;
    • Diagnostic services, including radiology and laboratory services; and
    • Items or services provided by an out-of-network provider if no in-network provider can provide such item or service at the facility.
  • Items or services furnished as a result of unforeseen, urgent medical needs that arise during the course of treatment;
  • Items or services by a provider/facility not listed in the notice; or
  • Consent that is withdrawn in writing before an item or service has been provided.

Providers/facilities that do provide notice and receive consent must notify the patient’s health plan so that claims can be administered appropriately and provide the plan with a signed copy of the written notice and consent documents.

What are the next steps for plan sponsors?

It is admittedly a hectic year for health plan sponsors and their service providers—and requests have been made to extend many of the forthcoming deadlines impacting plans. Note, however, that considering the issuance of the interim final rules described above, it is improbable that the implementation of the surprise billing prohibition will be delayed. 

For fully insured plans, carriers will be responsible for ensuring compliance with these new rules, and no direct action is needed at this time.  Self-funded plan sponsors, however, are legally responsible for ensuring compliance. To that end, plan sponsors should work closely with their claim’s administrators in the coming months to ensure the plan is in a position to comply on a timely basis and that plan participants will get appropriate notifications. 

[1] These rules do not apply to health reimbursement arrangements or other account-based plans; plans consisting solely of excepted benefits; short-term, limited duration insurance; or retiree-only plans.  The rules do apply to traditional indemnity plans that do not have networks of providers or facilities.  This means the rules will apply to reference-based pricing plans.  However, there are many open questions on how this will work and the regulators have requested public comments on this issue.

[2]  The guidance seeks additional public comments on this rule as it is the intent of the regulators to add additional requirements related to how an individual’s location, social risk, and other risk factors may impact their access to transportation.  For example, the regulators note that individuals may not have the ability to pay for a taxi, may not have access to a car, may not be able to safely take public transportation due to their medical condition, or may not have public transportation available. 

[3] For example, emergency claims for a pregnant dependent cannot be denied based on a general plan exclusion for dependent maternity care.

[4] For this purpose, self-funded plans subject to ERISA are permitted to “opt-in” to an All-Payer Agreement or a formula established by state law.  Alternatively, they can simply calculate the in-network amount based on the lesser of the billed charges or the qualified payment amount.

[5] All references to the patient in this section apply to the patient or their authorized representative.

[6] For post-stabilization services, the notice must also include a list of in-network providers/facilities who are able to furnish the items or services involved.

[7] Notice and consent materials must be made available in the 15 most common languages in the geographic region in which the applicable facility is located.

IRS Releases Long-Awaited COBRA Subsidy Guidance

Jennifer Berman – CEO, MZQ Consulting

Late in the afternoon of May 18, 2021, the IRS released its long-awaited guidance on the COBRA subsidy created by the American Rescue Plan Act of 2021 (ARPA). The guidance, IRS Notice 2021-31, is predominantly in question-and-answer format. It addresses eighty-six specific questions related to the ARPA COBRA subsidy. The associated answers address many, though not all, of the outstanding COBRA subsidy application quandaries. The “new” information gleaned from this notice is detailed below.

Before diving in, a word on vocabulary—the IRS guidance expressly acknowledges the complexity of the terminology and concepts associated with the ARPA COBRA Subsidy. The guidance includes some newly defined terms to help plan administrators and other advisors.  These include:

“Assistance Eligible Individual” or “AEI”A COBRA qualified beneficiary eligible for COBRA between April 1, 2021 and September 31, 2021, resulting from a reduction in hours or involuntary termination of employment, is an AEI. An AEI may not be eligible for coverage under another group health plan or Medicare.
“COBRA Continuation Coverage”Continuation coverage available under the federal COBRA law -OR- a state program that provides coverage comparable to the federal COBRA law. 
“COBRA Premium Assistance”The temporary premium assistance available under ARPA (i.e., the COBRA subsidy).
“Federal COBRA”COBRA continuation coverage under the Internal Revenue Code, ERISA, and the Public Health Service Act.
“ARP Extended Election Period”The new election right created by ARPA (i.e., the “second bite at the apple”).

Eligibility for COBRA Premium Assistance

  • It is possible to become an AEI more than once. For example, suppose a person qualifies as an AEI due to an involuntary termination and elects subsidized coverage on April 1, 2021. On June 1, 2021, this individual loses AEI status due to eligibility for another group plan through a new employer. Then the employee loses group health plan eligibility through their new employer on August 1, 2021, due to another involuntary termination. In that case, the person is an AEI again. 
  • Employers may require individuals to self-certify or attest to their eligibility for the COBRA Premium Assistance. Employers are not technically required to do so. Still, as a practical matter, businesses will need to document eligibility as part of the tax credit that will ultimately pay for the subsidy.  Presumably, the Summary of the COBRA Premium Assistance and Request For Treatment as an Eligible Individual Form in the DOL’s model ARPA notice will satisfy this requirement.
  • Employers may rely on individual attestations of eligibility (including loss of coverage because of a reduction in hours or involuntary termination of employment) unless the employer has actual knowledge an individual’s attestation is incorrect.
  • No qualifying events trigger a right to the COBRA subsidy other than involuntary termination or reduction of hours. Other qualifying events including death, divorce, voluntary termination, etc., do not trigger subsidy rights.  If an individual is already eligible for COBRA when they experience a reduction in hours or involuntary termination of employment, they are not an AEI.
  • Suppose an AEI obtains a benefits-eligible position through a new employer. In that case, their eligibility for the subsidy lasts until the day that coverage could start, even if they do not elect the new coverage. Said differently, an AEI remains eligible for assistance during the waiting period for coverage under a new employer-sponsored plan.
  • Sometimes a COBRA period extends beyond the typical timeframe (due to a disability extension, secondary qualifying event, or more extended applicable state law requirement). If the individual with extended COBRA is otherwise an AEI, then they can still qualify for Premium Assistance during that extension.
  • The subsidy does not apply to individuals given access to extended COBRA-like coverage by their employer but who are not technically entitled to COBRA.  A classic example of this type of situation would be a plan that offers domestic partner coverage.
  • An AEI remains eligible for the subsidy even if they are not “up-to-date” on their COBRA payments.

Reduction in Hours

  • A reduction in hours does not have to be involuntary for an individual to qualify for Premium Assistance.
  • A furlough or temporary work stoppage can qualify for this purpose.
  • Note that the guidance does not specifically address what happens if the reduction in hours is due to an unprotected leave of absence.  The DOL has seemingly taken the position that it would trigger the subsidy; however, without assurance from the IRS, it is not possible to determine if employers would ultimately be able to claim the tax credit if subsidized coverage was extended under these circumstances.

Involuntary Termination of Employment

  • Employers must determine if a termination of employment is involuntary based on the facts and circumstances. For this purpose, involuntary termination is “severance from employment due to the independent exercise of the employer’s unilateral authority to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue services.

Examples include:

Involuntary TerminationNot Involuntary Termination
Employer ending employment due to the employee’s absence from work due to illness or disability.Employee’s absence from work due to an illness or disability before the employer takes action to end the employment relationship.
A situation where the employer would have terminated an employee’s employment relationship but deciding to “retire.”Retirement.
Involuntary termination for cause.Termination for “gross misconduct”—in this case, no COBRA right is triggered.
Employee’s termination of employment due to general concerns about workplace safety ifthe employee can demonstrate that the employer’s actions (or inactions) result in a material adverse change to the employment relationship (i.e., constructive discharge).Employee-initiated termination of employment due to general concerns about workplace safety.
Resignation because of a material change in the geographic location of employment.Employee-initiated termination of employment due to the health condition of a family member, inability to find daycare, or similar issues (unless employer refuses to provide reasonable accommodations).
Employee participation in a qualified early retirement program.Death of an employee.
Failure to renew contract where the employee is willing and able to continue the relationship under similar terms.Completion of a contract if, at all times, when the services were performed, it was understood that the contract had a set term and would not be renewed.
Employee-initiated termination of employment in response to a material reduction in hours. 

Coverage Eligible for COBRA Premium Assistance

  • Premium Assistance is available for dental-only and vision-only plans (including circumstances when the AEI never enrolled in medical coverage through the employer).
  • Premium Assistance is also available for traditional health reimbursement arrangements (HRAs) and individual coverage health reimbursement arrangements (ICHRAs).  It is not available for qualified small employer health reimbursement arrangements (QSEHRAs).
  • If an employer no longer offers the same plans, an AEI must get the opportunity to elect the plan available to active employees that is most similar to their previous plan. This new plan will qualify for the subsidy even if the premium is greater than the premium in the initial plan.

Beginning of COBRA Premium Assistance Period

  • The Premium Assistance Period begins as of the first coverage period beginning on or after April 1, 2021.
  • AEIs may elect coverage retroactively to the beginning of the Premium Assistance Period or prospectively.
  • Even if an employer is no longer subject to Federal COBRA (i.e., they dropped to under 20 employees), they are still required to administer the subsidy if the applicable qualifying event occurred while they were subject to Federal COBRA.
  • The subsidy can apply to coverage elected after September 30, 2021—but only with respect to coverage associated with periods before September 30, 2021.

End of COBRA Premium Assistance Period

  • The Premium Assistance Period ends on the earliest of: (1) the first date the AEI becomes eligible for coverage under another employer-sponsored major medical plan or Medicare; (2) the date the individual ceases to be subject to COBRA; or (3) the end of the last period of coverage beginning on or before September 30, 2021.
  • If an AEI fails to notify their employer that they no longer qualify for the subsidy, they could be subject to a penalty of $250 per failure to notify (or, if more, and the failure was fraudulent, 110% of the subsidy they should not have received). The penalty does not apply if the failure to report is based on reasonable cause and not willful neglect.

Extended Election Period

  • The extended election period or “second bite at the apple” does not apply to State continuation laws unless expressly provided for under applicable state law.
  • An AEI may elect coverage as of April 1, 2021 (or prospectively at the time of the election), even if this creates a coverage gap. Presumably, many AEIs could elect coverage going back further in time (perhaps as far back as the initial coverage loss due to the Outbreak Period).  However, once an AEI makes an election, otherwise applicable election rights terminate. Put another way, if the AEI elects a coverage date later than the date of their loss of coverage, then they will have a coverage gap and will not be afforded another opportunity to elect coverage for that gap.
  • If an AEI elects COBRA coverage under an HRA, the subsidy applies to expenses incurred during the Premium Assistance Period only.
  • Suppose an individual previously elected coverage under some, but not all, of the lines of COBRA coverage they were eligible for, the new election right applies to the other lines of coverage.

Payments to Insurers Under Federal COBRA

  • If an insurer typically collects Federal COBRA premiums on behalf of employers, they must treat AEIs as having paid in full. Notwithstanding the contractual arrangement between the employer and the insurer, the employer is responsible for paying the insurer for this coverage. The employer can then seek reimbursement from the Federal government.

Comparable State Continuation Coverage

  • The subsidy applies to state continuation coverage in states where the maximum continuation period differs from Federal law.
  • Where state continuation coverage applies, the insurer, not the employer, is responsible for fronting premium dollars and seeking reimbursement from the Federal government.  In this case, the employer may not take the tax credit.

Calculation of COBRA Premium Assistance Credit

  • An employer (or insurer in the case of state continuation coverage) is entitled to a tax credit equal to what the AEI otherwise would have paid for COBRA coverage. Generally, this is 102% of the premium or equivalent.
  • The tax credit does not cover any extra administrative fees (such as the added costs to the employer of administering these new rules).
  • For an ICHRA, the Premium Assistance Credit limit is 102% of the amount paid by the employer in premiums.
  • If the employer helps to offset the cost of COBRA (such as in the case of severance) they cannot claim that amount as part of the tax credit.  The employer can only be reimbursed for what the AEI would actually be required to pay for the coverage.
  • To avoid this result, employers are permitted to stop their subsidies towards COBRA effective April 1, 2021.  However, if they do so, they must treat all similarly situated individuals the same.
  • The IRS also provides a workaround for this issue by noting that the employer can still maximize the federal subsidy and pay an employee what was otherwise intended using taxable compensation.

How Employer Subsidies Work

For purposes of these examples, assume 102% of the applicable premium for COBRA coverage is $1,000/month.

Example 1    The employer pays for half of the premium (i.e., $500), and the qualified beneficiary is otherwise required to pay $500 for coverage.The employer is eligible for an ARPA tax credit of $500.
Example 2Before April 1, 2021, the employer paid half of the premium.  Effective April 1, 2021, the plan charges all qualified beneficiaries $1,000 per month.The employer is eligible for an ARPA tax credit of $1,000.
Example 3Same facts as Example 2.  In addition, beginning April 1, 2021, the employer provides a taxable severance benefit of $600 to AEIs.The employer is eligible for an ARPA tax credit of $1,000.

Claiming the COBRA Premium Assistance Credit

As a refresher, the following entities are responsible for “fronting” the cost of the subsidy and then claiming reimbursement via a tax credit.

Type of PlanPremium Payee (i.e., entity entitled to the tax credit)
Multiemployer planThe plan itself
Plan subject to Federal COBRAThe common law employer maintaining the plan
Plan subject to State continuation coverage but not fully-insuredThe common law employer maintaining the plan
Fully-insured plan subject to State continuation coverageThe insurer
  • A premium payee is entitled to claim the tax credit as of the date the AEI elects coverage for any period of subsidized coverage that began before that date.  After that, the payee can claim it as of the first day of each subsequent coverage period.
  • The premium payee claims the credit using Form 941, Employer’s Quarterly Federal Tax Return. In anticipation of filing this return, the payee can: (1) reduce the deposits of federal employment taxes, including withheld taxes, that it would otherwise be required to make up to the amount of the anticipated credit; and (2) request an advance of the amount of the anticipated credit that exceeds those amounts using Form 7200, Advance Payment of Employer Credits Due to COVID-19. Form 7200 may be filed after the close of the payroll period in which the payee became entitled to the credit. 
  • Form 7200 must be filed by the earlier of: (1) the day the quarterly tax return for the applicable period is filed; or (2) the last day of the month following that quarter.
  • Use Form 941 to claim the credit even when a payee has no employment tax liability. The guidance includes specific instructions on how to complete Form 941 in these circumstances.
  • Suppose an AEI fails to give proper notification that they are no longer eligible for the subsidy. In that case, the payee still may claim the credit unless the payee learns the AEI has other coverage. 
  • Detailed instructions are available when an employer relies on a third-party payer, such as a PEO, to submit their taxes.

Additional Issues The new guidance ends with a statement indicating that the Treasury Department and IRS “are aware of certain additional issues related to the COBRA premium assistance provisions.”  It also promises they are “continuing to consider these issues and the possibility of issuing guidance with respect to them.”  It is undoubtedly the case that many more questions remain.  It is also the case that this guidance provides many long-sought-after answers.  We will continue to monitor developments carefully and bring any additional information to you as it becomes available.

PPE is Now A Qualified Medical Expense

Jessica Waltman – Principal, Forward Health Consulting

According to new guidance from the Internal Revenue Service (IRS), the personal protective equipment (PPE) people use to help stop the spread of COVID-19 is now a deductible medical expense under IRC Section 213(d). Common items that we all need to buy like masks, hand sanitizer, and sanitizing wipes, could now be part of someone’s medical expense deduction on their personal income tax return. These items could also count as reimbursable expenses under certain account-based health coverage options.

Employers that offer employees access to health flexible spending arrangements (health FSAs), health reimbursement arrangements (HRAs), Archer medical savings accounts (Archer MSAs), and/or qualified high deductible health plans (HDHPs) that pair with health savings accounts (HSAs), need to take note of this change. Now, plan participants may be able to use funds from those accounts to pay for PPE.

Another consideration for group plan sponsors is if coverage offerings include either an HRA, a health FSA, or both, then a plan amendment could be necessary to make PPE a reimbursable expense. Employees with HSAs and Archer MSAs will automatically be able to use their HSA or MSA monies to pay for PPE, but health FSA and HRA participants will need their employer to decide if PPE is on the reimbursable expense list.

Employers that need to make a plan amendment will also have to decide if they want to make a retroactive change or if they want it to apply the change to expenses moving forward. Those that opt for retroactive eligibility have until December 31, 2022 (at the latest) to amend their plan documents. They can make PPE a reimbursable expense dating all the way back to January 1, 2020 or decide to make PPE a reimbursable cost through a health FSA or HRA at any time moving forward.

If a plan amendment is required, the IRS gives group sponsors up to two years to make the change, as long as they operate the plan consistently between the effective date of the change through the date the amendment is adopted. The guidance states that amendments must be adopted by the last day of the first calendar year that begins after the end of the plan year in which the amendment is effective.  

Here are some examples of how this will work in practice:

  1. A group with a January 1 plan year decides to make PPE a reimbursable expense for health FSA participants. They want to make the change retroactive back to March 1, 2020, when the pandemic really hit the United States. In this case, they need to finalize their Section 125 plan amendment by December 31, 2021.
  2. A business offers employees PPO coverage paired with an HRA, and their new plan year starts on June 1. Upon hearing of this guidance, the group decides to let participants get HRA reimbursement for PPE starting with the new plan year. That group would need to complete their plan amendments by December 31, 2022.

If an employer that offers employees access to an HRA or health FSA doesn’t want to include PPE on the list of reimbursable expenses, then they do not have to do so.  For example, an employer that uses an HRA to offset each employee’s plan deductible might not want to amend their plan to include PPE as a reimbursable expense. That choice is completely permissible. If a group offers access to account-based coverage options that may be affected by this guidance, best practice would be to reach out to the entity used to administer reimbursements to make sure that they will be processed correctly. Communicating the change to employees will also be key.

President Biden’s Executive Order Marks New Era for ACA

Jennifer Berman JD, MBA – CEO of MZQ Consulting

On January 20, 2017, the date of his inauguration, former President Trump issued an the first of several executive orders directing the federal government to “minimize the economic burden” of the Patient Protection and Affordable Care Act (ACA).  Last week, on Thursday January 28, 2021, President Biden signed his own executive order intended to strengthen the ACA. 

This new order included directing the federal agencies to review all existing guidance relating to Medicaid and the ACA to identify and change:

  • Any policies and practices that may undermine protections for individuals with pre-existing conditions (including COVID-19);
  • Any demonstrations or waivers (or policies regarding such demonstrations or waivers) that may reduce coverage under Medicaid or the ACA;
  • Any policies or practices that may undermine health insurance market (include the individual, small and large group markets);
  • Any policies or practices that may present unnecessary barrier to individuals and families attempting to access health coverage, including for  mid-year enrollment; and
  • Any policies of practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents.

This Executive Order highlights the changes we can expect to the rules and enforcement surrounding the ACA over the next four years.  The order also has the impact of repealing the executive orders issued by President Trump that restricted the applicability of the ACA.  Several of the rules adopted under President Trump’s executive orders are now likely to change.  These include:

  • The creation of individual coverage health reimbursement arrangements (ICHRAs);
  • The expansion of short-term limited duration health insurance plans;
  • The “new” association health plan rules (which are still being challenged in federal courts); and
  • The IRS safe harbor that loosened the distribution requirements for IRS Form 1095-Bs.

While many of the actual changes that will result from Biden’s Executive Order will take months to materialize, one big change is taking place quickly.  In response to the Executive Order, CMS immediately announced that the federal health insurance marketplace will have a new open enrollment period from February 15, 2021 – May 15, 2021.  This new open enrollment period is intended to make it easier for people to enroll in coverage in light of the pandemic.  The change only applies to the federal exchange; however, CMS is strongly encouraging that states maintaining their own health exchanges allow for such a mid-year open enrollment period as well.

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