As healthcare inflation continues into 2023, medical providers are increasing their fees to maintain revenues. This financially impacts most employers and plan participants who can expect to pay more for health coverage and provider services this new year.
According to a recent survey and analysis conducted by AHIP, during the first three quarters of 2022, there were an estimated 9 million No Surprises Act (NSA) eligible claims – about one-half of one percent of all commercial health insurance claims. Of those, AHIP estimates 275,000+ were submitted for Independent Dispute Resolution (IDR) arbitration.[i]
Simple extrapolation suggests there were 12 million claims where an individual used an out-of-network provider but had or would receive benefits as if the provider was in-network. Since Preferred Provider Organization (PPO) plan designs typically offer a higher level of benefits for those who use in-network providers (justified by the negotiated fees), the NSA operates to increase the number of benefits paid by the plan.
Who Wins: Participants who had medical expenses subject to the NSA likely received higher benefits and had less out of pocket expense in 2022.
Who Loses: Plans that paid more saw the cost of coverage increase – potentially triggering an increase in the participant’s point of purchase cost sharing (deductibles, copayments, etc.) and/or an increase in all covered employee contributions in 2023 and future years.
Interestingly, according to AHIP, only 275,000 of 9,000,000 (3%) of NSA claims triggered an arbitration filing. Why so few? Perhaps:
- Some out-of-network providers were already charging less than the in-network median. So, the Qualifying Payment Amount (QPA)[ii] may have actually been an increase in the covered charge, resulting in a revenue increase to the out-of-network provider.
- Some out-of-network providers were charging the median in-network amount. So, the difference between their charge and the QPA was de minimis.
- Some out-of-network providers accepted the lower fees on certain procedures and responded by raising their charges on other services.
- The potential cost of arbitration exceeded the amount in dispute.[iii]
Will the NSA ultimately be successful in controlling medical costs? Not likely. The NSA attempts to remove the patient from the process. That only hides the fact that patients indirectly absorb cost increases from higher deductibles, copayments, coinsurance and contributions. The trite adage used by health insurance professionals for many decades seems appropriate here: “Clearly, if you squeeze the balloon in one place, it expands in another.”[iv]
Adopting a RBP Plan Design Strategy
As best as we can tell, the only plan design likely to avoid the impact of the NSA is one that adopts a “pure” Reference Based Pricing (RBP) design.[v] Coupled with tech-driven data support, a pure RBP plan may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage and employee point of purchase cost sharing. Over time, plans with pure RBP designs, done right, will consistently pay less than the typical PPO.
[i] AHIP, No Surprises Act Prevents More than 9 Million Surprise Bills Since January 2022, Providers Routinely Use Arbitration As Number of Disputes Far Exceeds Early Estimates, November 2022, Accessed 1/4/23 at: https://ahiporg-production.s3.amazonaws.com/documents/202211_1P_Surprise_Billing.pdf
[ii] Generally, the qualifying payment amount is the median of contracted rates for a specific service in the same geographic region within the same insurance market as of 1/31/19. The rate is adjusted per the Consumer Price Index for All Urban Consumers (CPI-U).
[iii] In 2023, the nonrefundable administrative fee due from each party involved in any payment dispute that goes to arbitration will increase from $50 to $350. In addition to the filing fee, the IDR arbitrator can set a fixed fee of as much as $700 per single dispute that they receive in 2023, up from $500 in 2022. For batched cases, fees will increase from a maximum of $670 (2022) to $938 (2023). Loser pays the fee.
[iv] Plan costs are expected to increase due to increased administrative expense, less point of purchase cost sharing as more expenses are paid in-network, and increased fee demands by in-network providers who are charging below median rates. Participant costs will increase for several reasons, including increases in in-network deductibles to offset the greater number of claims paid as in-network, and increases in employee contributions as the cost of coverage increases. For example, see: T. Brennan, Medicare Hospital All-Payer Model: Can It Be Emulated? Health Affairs, 5/31/22. “CMS data on the All-Payer Model did reveal that in Maryland from 2014 to 2019 Medicare hospital spending growth was 8.17 percent, compared to 19.94 percent nationally. Meanwhile, non-hospital Medicare spending increased 28.45 percent in Maryland, compared to 21.30 percent nationally. Clearly, if you squeeze the balloon in one place, it expands in another.” Accessed 1/4/23 at: https://www.healthaffairs.org/do/10.1377/forefront.20220526.939479/
[v] A “pure” Reference Based Pricing design avoids negotiating fees with providers in favor of setting the maximum covered charge based upon Medicare allowable charges. The NSA may prompt a significant expansion in the prevalence of RBP plans, especially “pure” RBP designs, since RBP often eliminates the negative effects of excessive charges otherwise shared by the employer and the participant. See: aequum, LLC; No Surprises Act: What Every Plan Sponsor Needs to Know. Risk to Reference-Based Pricing Health Plans, 2022, Accessed 1/4/23 at: https://aequumhealth.com/white-papers/