Fitch: No Surprises Act Likely Affects Health Insurers More Than Consumers

The Federal No Surprises Act (NSA), which will take effect on Jan. 1, 2022 as part of the Consolidated Appropriations Act of 2021, is designed to reduce the number of unexpected out-of-network medical bills for patients receiving emergency care or non-emergency care at in-network facilities.

Fitch Ratings said the legislation will be largely credit neutral for U.S. health insurers, as any potential increase in related claims paid by insurers is not expected to be material and will ultimately be factored into premium rates.

Balance billing refers to the practice of out-of-network providers or facilities billing patients for the difference between the total billed amount and the amount paid by the patient’s insurer.

Balance billing is prohibited under the NSA for patients insured through employer-sponsored and commercial health plans (including the Health Insurance Marketplace) when they receive emergency services, air ambulance services or most non-emergency services at a facility in their insurer’s contracted provider network. Under the NSA, the patient’s cost-sharing amounts must also be based on in-network provider rates.

One-fifth of emergency claims to private insurers include an out-of-network bill, according to the Kaiser Family Foundation, and these bills are sometimes quite substantial. Under the NSA, patients treated for emergencies and covered non-emergency services at in-network facilities will be billed only what they would normally be charged for in-network care, even if they receive services from out-of-network providers. Surprise bills for out-of-network services are often attributable to emergency room physicians, anaesthesiologists, radiologists and lab testing.

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While more than half of the states in the U.S. have existing consumer protections against balance billing, the level of protection can vary significantly by state and excludes self-funded employer plans. Although rather complicated, the NSA will provide greater regulatory uniformity across the U.S.

Although the NSA was enacted by Congress and signed by then-President Trump, the Biden administration is responsible for the law’s implementation. The administration has been releasing interim final rules since July 2021, laying out the details for the law’s implementation such as enforcement processes and the determination of final payment rates.

Under the proposed rules, Fitch believes that the NSA will result in insurers paying a modestly higher rate in situations where surprise bills previously would have emerged. The modest additional related medical costs, rather than being paid by the individual patient receiving care, will ultimately be incorporated into premium rates paid by the broader insured population.

Several lawsuits have been filed, including by the American Medical Association and the American Hospital Association, since the interim rules began to be released. The lawsuits are primarily aimed at rules directing how the qualifying payment amount should be determined when the independent dispute resolution process. Whether the lawsuits will result in a change in the final rules or a delay in implementation is currently unclear.