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First Opinion


THE NO SURPRISES ACT: A BAND-AID PROTECTING BUSINESS AS USUAL

By Marc Rodwin and Alan SagerAug. 31, 2022

Reprints
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Misha Friedman/Getty Images
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The No Surprises Act has been hailed as a major bipartisan reform aiming to
eliminate most surprise out-of-network bills.

For years, Americans had expected their insurance to shield them from high
medical costs and cap their out-of-pocket payments at modest levels. Yet many
received unexpected bills for medical services at unregulated prices when they
accidentally chose out-of-network caregivers or lacked safe in-network options.

The No Surprises Act sought to solve that problem. But neither the legislation
nor the recently published final regulations address the endemic flaws in
private insurance that give rise to surprise bills: high out-of-pocket costs and
restricted choice of caregivers. The act is a Band-Aid that’s too small to cover
a large wound.

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The struggles over surprise billing reveal how those two flaws, coupled with the
lack of durable political deals between payers and caregivers, have generated
burdensome financial problems whose complex solutions are themselves difficult
to implement effectively.


RELATED: THE DOCTOR WHO IS TRYING TO BRING BACK SURPRISE BILLING

Surprise bills are a predictable product of the two main tools American insurers
use to try to control their costs: narrow caregiver networks, which are used to
negotiate lower prices; and high patient co-payments, which are intended to
reduce patients’ use of services, especially those from higher price
out-of-network caregivers. These tools fail to contain U.S. health spending.

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Narrow caregiver networks and high out-of-pocket costs are rare in other
high-income democracies because payers instead devise effective cost controls
such as negotiated capped fees for self-employed physicians, salaries for
hospital physicians, hospital budgets, and annual spending caps.

Narrow networks cause more people to receive out-of-network bills, which
insurers do not pay. Nearly 60% of Americans had received a surprise medical
bill by 2018, according to a NORC survey. Media stories exposed this dark side
of American health insurance, sparking demands for reform. By 2020, 33 states
had regulated surprise bills. Federal statutes, however, precluded state
regulation of employer self-funded health plans regulated by the Employee
Retirement Income Security Act and air ambulances, prompting Congressional
action.

The No Surprises Act requires insurers to cover non-network services in several
key situations:

 * for care in emergency departments and urgent care centers, and transport by
   air ambulances
 * for non-network physicians who work at in-network hospitals
 * for care unintentionally obtained in an out-of-network due to inaccurate
   network directories, for which patients now pay no more than for in-network
   services


TRENDING NOW: HOW MEDICINE ERASED BLACK WOMEN FROM A ‘WHITE MAN’S DISEASE’

Bowing to demands of some hospitals and doctors, the No Surprises Act doesn’t
set prices. Instead, it requires that insurers and caregivers negotiate prices
within 30 days or accept binding arbitration. In arbitration, the insurer and
non-network caregiver propose prices and the arbitrator chooses the more
reasonable offer, with the losing party paying the arbitration costs. The new
federal regulations direct the arbitrator to accept the offer that most closely
represents the value of the medical care received after considering the median
in-network payment rate and six factors related to the patient, the medical care
received, and the caregiver.

In this way, the No Surprises Act incorporates key toxic ingredients of U.S.
health care recipes: complexity, costly administration, and ongoing financial
warfare. The act authorizes $500 million to finance its arbitration and
regulatory system. The Department of Health and Human Services estimates that
insurers will invest $5 billion to implement the act, and that operating costs
might average $1 billion a year thereafter.

Congress rejected two simpler alternatives: require all physicians to join the
same insurance networks as their hospitals, or oblige insurers to finance
emergency care by paying the hospital for all services, leaving hospitals to
compensate physicians for their services. Physician lobbying blocked both
proposals, which would have required caregivers to accept much lower in-network
fees. Congress also rejected paying for non-network care at average prices set
by Medicaid, Medicare, or the largest private insurers, the model that has been
employed by Medicare Advantage plans for non-network care.

Caregivers remain free to impose their highest prices on 30 million uninsured
Americans because Congress failed to cap the sums they could be charged for
medical care at, for example, Medicare or Medicaid prices.

U.S. insurers and employers fantasize that restricted networks and high
out-of-pocket costs constrain total spending by reducing the volume of care and
prices paid. They do not. Hospital admissions are 20% lower and physician visits
40% lower in the U.S. than in the average high-income democracy, yet U.S. per
capita health spending is double, largely because of higher prices,
administrative costs, uncapped entitlements, and caregiver shortages and
maldistribution.

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Surprise bills are a symptom of private health insurance’s endemic illness. The
No Surprises Act manifests government’s own preference for short-term and narrow
thinking about large, persistent, and complicated health care problems. While it
may help people abused by acute surprise bills, this act ignores people
chronically harmed by other out-of-pocket costs, narrow networks, and high
premiums.

The No Surprises Act did not aim to improve the design of insurance, control
costs, or encourage peace treaties between payers and caregivers. Consequently,
the financial games continue. Caregivers can still extract high payments, and
insurers can employ cost controls that are ineffective but nonetheless generate
unpredictably high out-of-pocket cost-sharing for Americans unlucky enough to
need care. Lawyers, as always, will be busy.

By amputating gangrenous surprise bills, the No Surprises Act helps preserve
business as usual — for now.

Marc Rodwin is professor of health law and policy at Suffolk University Law
School in Boston. Alan Sager is professor of health policy and management at the
Boston University School of Public Health.

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ABOUT THE AUTHORS REPRINTS


MARC RODWIN


marcrodwin@gmail.com

linkedin.com/in/marc-rodwin-819b0415/


ALAN SAGER


asager@bu.edu

linkedin.com/in/alan-sager-5a5293a/


TAGS

health care costs

hospitals

insurance

patients

physicians




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