NSA IDR overhaul: What stakeholders need to know

Background

The NSA was enacted under the first Trump administration as part of the Consolidated Appropriations Act, 2021 (Public Law No: 116-260). The Departments jointly implemented provisions of the NSA by issuing two interim final rules in July 2021 and October 2021.

In relevant part, the NSA prohibits out-of-network (OON) providers from balance billing patients for certain services furnished at an OON facility (in the case of emergency services) or in-network facility (in the case of non-emergency services provided by OON providers). The NSA protects patients from receiving these “surprise” bills, effectively limiting patient responsibility for some services to no more than patients’ in-network cost-sharing amounts.

Per the NSA and as further implemented in the October 2021 interim final rule, plans and issuers are required to determine whether claims for items or services submitted by an OON provider or facility and subject to the NSA are covered under the plan or coverage, and must send an initial payment or notice of denial of payment to the OON provider or facility no later than 30 calendar days after the provider or facility submitted the claim to the plan or issuer.

To the extent the claim is covered, the NSA also sets forth a methodology by which plans or issuers must calculate the OON rate for OON providers or facilities that rendered items or services subject to the NSA. Plans and issuers must pay the provider or facility an amount determined by an applicable all-payer model agreement or, if none exists, an amount determined by applicable state law. If state law does not set forth a mechanism by which the OON rate should be determined, the plan or issuer may negotiate the rate with the provider or facility through an “open negotiation” process, which lasts 30 days. If the parties are unable to agree to an OON rate by the expiration of the open negotiation period, either party may initiate a dispute under the federal IDR process established by the NSA. The IDR process comprises several steps.

Since publication of the interim final rules in 2021, the Departments have issued additional rulemaking and a series of frequently asked questions related to certain aspects of the federal IDR process. However, stakeholders have continued to raise concerns regarding operational elements of the IDR process, including questions about determining claims eligibility for the process as a threshold matter. As a result, the Departments issued a proposed rule on November 3, 2023, that sought comments from stakeholders on the IDR process. After much anticipation, the Departments issued this final rule almost two years later.

Overview of significant clarifications and modifications to the IDR process

The final rule provides several significant operational clarifications of, and modifications to, the IDR process, including with respect to the disclosure of information plans and issuers must furnish to OON providers and facilities, the initiation of and dispute eligibility analysis related to the IDR process, and the imposition of IDR-related fees. The final rule also provides clarity with respect to bundled payment arrangements and batched items and services, modifies extensions of timeframes due to extenuating circumstances, and imposes requirements upon plans and issuers to register in a federal IDR registry.

A high-level overview of the most significant aspects of the final rule is set forth below.

Disclosure of information to OON providers and facilities

In the proposed rule, the Departments identified communication gaps between plans and issuers that contribute to inefficiencies in resolving disputes through the IDR process, including:

• Whether the NSA balance billing prohibitions apply to a particular item or service
• How cost sharing amounts and OON rates are determined
• How and with whom to initiate the open negotiation process.

To address these concerns, the final rule imposes several information disclosure requirements on plans and issuers.

For example, plans and issuers will be required to use claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs) with the initial payment or notice of denial of payment via the electronic or paper remittance advice that provides, in a standardized manner, information enabling providers to:

• Understand how and whether the NSA applies to the claims for OON items and services
• Determine if the claim is subject to a specified state law or all-payer model agreement for purposes of determining the OON rate
• Determine whether disputes are eligible for the IDR process.

The Departments will issue future guidance specifying the use of CARC and RARC codes.

The final rule also provides clarity regarding when plans and issuers must provide disclosures pertaining to the qualified payment amount. However, the Departments declined to require disclosure of additional information about the methodology and data used for calculating the qualified payment amount, indicating that these additional disclosures “would not assist parties in determining whether a payment dispute is eligible for the Federal IDR process and would be difficult to implement.”

Initiation of IDR process and dispute eligibility determinations

The final rule modifies the open negotiation process that is currently required during the 30 business days after the provider or facility receives an initial payment or denial and before the parties can pursue the IDR process. Under the final rule, notices and supporting documentation must be submitted via the federal IDR portal, and the receiving party must respond no later than the 15th business day of the 30-business-day negotiation period. These changes are intended to streamline the efficiency and effectiveness of the open negotiation process and, hopefully, reduce the number of claims that are ultimately adjudicated through the IDR process.

While simple in concept, identifying claims that are eligible for IDR is often complicated in practice, given that many states have their own surprise billing laws and only certain plans within each state are subject to those laws. To help alleviate confusion, in addition to imposing requirements pertaining to the use of CARCs and RARCs, the Departments finalized a requirement that plans and issuers subject to the IDR process register with a searchable federal IDR portal and provide certain data elements, including relevant contact information. The registry is intended to reduce the number of ineligible disputes initiated through the IDR process, as it will enable providers and facilities to identify the type of payer against which they are initiating a dispute, identify whether a specified state law or the federal IDR process applies to the determination of the OON rate, and reduce the number of disputes incorrectly initiated against the wrong payer.

IDR administrative fees

The final rule significantly reduces the federal administrative fee for IDR disputes from $115 to $15 per party per dispute (an 85% reduction). The Departments declined to finalize several earlier proposed changes related to the fee (e.g., timing of payment, the party that collects the fee), some of which they viewed as obviated by the lower fee.

Bundled payment arrangements and batching requirements

The final rule codifies the definition of “bundled payments” as set forth in the proposed rule, which incorporated the definition the Departments originally provided in federal IDR guidance issued in August 2022. A “bundled payment arrangement” is an arrangement under which:

• A provider, facility, or provider of air ambulance services bills for multiple items or services furnished to a single patient under a single service code that represents multiple items or services (e.g., a diagnostic related group (DRG) code); or
• A plan or issuer makes an initial payment or notice of denial of payment to a provider, facility, or provider of air ambulance services under a single service code that represents multiple items or services furnished to a single patient (e.g., a DRG code).

Notably, this definition allows disputes to be bundled by a single CPT code, DRG code, or Healthcare Common Procedure Coding System code. The final rule clarifies that bundled payment arrangements are subject to the rules for batched disputes.

For batched disputes, the Departments finalized a 50-line-item cap per batch, clarified when items and services may be deemed related to the treatment of a similar condition, and confirmed that batching for self-insured plans must be tied to the same group health plan (i.e., even where a third-party administrator is involved). The final rule shortens the “cooling off” period following a determination in a dispute consisting of multiple items and services batched by patient encounter or CPT code ranges to 30 business days. The Departments will also eliminate the current ability to resubmit improperly batched disputes, after a transition period.

Implementation of the final rule

Implementation of the final rule will occur in stages. For example, the $15 IDR administrative fee becomes effective shortly after Federal Register publication while certain disclosure requirements will take effect 60 days after publication. Certain other operational changes (such as the batching, open negotiation updates, and federal IDR registry requirements) will depend on future guidance. The Departments anticipate rolling out implementation over an extended period.

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For further reading on the final rule, please see this update from our McDermott+ colleagues, with whom we coordinate closely on NSA updates.  For more background, and to review our prior thought leadership on the NSA, visit our No Surprises Act Resource Center.