Surprise Billing

The term surprise billing typically refers to an individual receiving a large, unexpected medical bill for out-of-network care. Often surprise billing occurs when a consumer is unknowingly, and potentially unavoidably, treated by a provider outside of the consumer's health insurance plan network and, as a result, unexpectedly receives a larger bill than he or she would have received if the provider had been in the plan network.¹ For example, a consumer could receive a surprise bill after he/she receives emergency services from an out-of-network provider or nonemergency services from an out-of-network provider working in an in-network facility.

As these situations imply, surprise billing is rooted in most private insurers' use of provider networks. Therefore, this report begins with a discussion of the relationship between provider network status and private health insurance billing before discussing various aspects of federal surprise billing requirements.²

Federal surprise billing requirements were implemented by the No Surprises Act, part of the Consolidated Appropriations Act, 2021 (P.L. 116-260). No federal requirements directly addressed surprise billing prior to the passage of the No Surprises Act, but over half of states had implemented policies to address surprise billing in some capacity.

This report answers frequently asked questions about the nature of the federal surprise billing requirements and corresponding consumer protections, the interaction between federal and state surprise billing requirements, and the enforcement of the federal provisions. A summary of various federal surprise billing requirements can be found in an appendix table (Table C-1). The Departments of Health and Human Services (HHS), the Treasury, and Labor were developing implementation regulations at the time this report was being drafted; therefore, the report reflects statutory language and certain aspects of the report may be further defined through the regulatory process. Although the requirements are discussed in the present tense to facilitate easy reading, they will come into effect on January 1, 2022.

The body of the report generally does not discuss implementing requirements (e.g., required rulemaking) and other deadlines and deliverables, but all deadlines and deliverables included in the No Surprises Act are summarized at the end of the report (Table A-1).

The No Surprises Act also included other provisions that relate to the topic of surprise billing but do not relate directly to the requirements on insurers and providers regarding the cost of, and payment for, services provided in surprise billing situations. Some of these "other provisions" that are not discussed or referenced within the body of this report are summarized in Appendix B.

Private Health Insurance Billing Overview

The charges and payments for health care items or services under private health insurance are often the result of contractual relationships among consumers, insurers, and providers for a given health plan.

Health care providers establish dollar amounts for the services they furnish; such amounts are referred to as charges and reflect what providers think they should be paid. However, the actual amounts a provider is paid for furnishing services vary and may not be equal to the provider-established charges. The amounts a provider receives for furnished services, and how the payment is divided between the insurer and the consumer, can vary due to a number of factors, including (but not limited to) the provider's network status (i.e., in network or out of network), whether the services are covered under the plan, whether an insurer pays for services provided by out-of-network providers, enrollee cost-sharing requirements, whether a provider can bill the consumer for an additional amount above the amount paid by the consumer in the form of cost sharing, and the insurer's contract with the provider.

Figure 1 highlights the effects of these distinctions. The following sections discuss them in the context of in-network and out-of-network coverage.

In-Network Coverage

With private insurance, the amount paid for a covered item or service is often contingent on whether a consumer's insurer has contracted with the provider. Insurers typically negotiate and establish separate contracts with hospitals, physicians, physician organizations (such as group practices and physician management firms), and other types of providers.³ If a particular insurer has a contract with a specific provider, that provider generally is considered to be part of that insurer's provider network (i.e., that provider is considered in network).

The contents of contracts between insurers and providers vary and typically result from negotiations between the two parties; however, these contracts generally specify the amounts providers are to receive for providing in-network services to consumers (i.e., negotiated amounts).⁴ Negotiated amounts typically are lower than what providers would otherwise charge had they not contracted with an insurer.

When an in-network provider furnishes a service to a consumer, the insurer and the consumer typically share the responsibility of paying the provider the negotiated amount established in the contract.⁵ The consumer's portion of the negotiated amount is determined in accordance with the cost-sharing requirements of the consumer's health plan (e.g., deductibles, co-payments, coinsurance, and out-of-pocket limits; see Figure 1).⁶ If the consumer receives covered services from in-network providers, the consumer generally has lower cost-sharing requirements than if he/she had received the same services out of network. Generally, in-network providers are contractually prohibited from billing consumers for any additional amounts above the negotiated amount (i.e., balance bill).

Figure 1. Illustrative Examples of Billing Under Private Health Insurance (20% coinsurance for in-network services and 40% coinsurance for out-of-network services)

Source: Congressional Research Service. Notes: These examples are for illustrative purposes only; they do not represent the full spectrum of possible billing scenarios. The examples assume the consumer's deductible has been met, the in-network out-of-pocket (OOP) limit has not been reached, and there is no out-of-network OOP limit. In the example, Provider Charge = $50,000, Total Allowed Amount = $35,000, and Negotiated Amount = $30,000. Consumer cost-sharing amounts are based on these totals, where applicable. Outside of this example, coinsurance rates for in-network and out-of-network services may vary by plan.

Out-Of-Network Coverage

When no contract between an insurer and a provider exists, the provider is considered to be out of the insurer's provider network. The total costs for services furnished by an out-of-network provider, and who pays for such services, depend on a number of factors; one key factor is whether the plan covers out-of-network services in the first place. Generally, point-of-service plans and preferred provider organization (PPO) plans cover out-of-network services. By contract, exclusive provider organization plans and health maintenance organization (HMO) plans generally cover only services by providers within the plans' networks (except in an emergency or, beginning in 2022, in certain surprise billing situations).

Insurer Pays for Out-Of-Network Services

When an insurer covers out-of-network services, both the consumer and the insurer contribute some amount to the provider, with the consumer's amount determined in accordance with the plan's cost-sharing requirements. Consumer cost-sharing requirements for services provided by an out-of-network provider may be separate from (and typically are greater than) cost-sharing requirements for the same services provided by an in-network provider. For example, a plan may have different deductibles for in-network and out-of-network services.

Table 1 provides an example of how cost-sharing requirements may differ for in-network and out-of-network services.

Cost-sharing requirements indicate how an insurer and a consumer will share the cost for a service, but the insurer determines the total amount that cost-sharing requirements will be based on—often referred to as the total allowed amount.⁷ (Because there are no contracts between out-of-network providers and insurers, there are no negotiated amounts on which to base consumer cost sharing.)

The total allowed amount does not necessarily match the negotiated amount insurers may have contracted with other providers or the provider charge amount for that service.⁸ In other words, there could be a discrepancy between the insurer and the provider over the total cost of care.

Insurers have their own methodologies for calculating the total allowed amount. They may do so by incorporating the usual, customary, and reasonable rate (UCR), which is the amount paid for services in a geographic area based on what providers in the area usually charge for the same or similar medical services.⁹

If an out-of-network provider's total charge for a service exceeds the total allowed amount determined by the insurer (and if allowed under law), the provider may directly bill (i.e., balance bill) a consumer for the amount of that difference (sometimes referred to as the excess charge; see Figure 1). The consumer would therefore be responsible for paying amounts associated with any cost-sharing requirements and the balance bill amount.

The provider is responsible for collecting any balance bill amounts; from an administrative standpoint, it is considered more difficult to collect these balance bill amounts than to collect payments from insurers.¹⁰ In some instances, providers may settle with balance-billed consumers for amounts that are less than the total balance bill.

Insurer Does Not Pay for Out-of-Network Services

If a consumer receives out-of-network care not covered by his or her plan, the consumer is responsible for paying the total amount charged by the provider for the out-of-network services (represented in Figure 1 as "Out-of-Network Services Not Covered Under Plan").¹¹ Although the consumer pays the provider in this instance, the consumer costs are not technically cost sharing (because the insurer is not sharing costs with the consumer), nor are they the balance remaining after the provider receives certain payments. Therefore, this report refers to these costs as other consumer costs.¹²

Similar to balance bills, providers are responsible for collecting these other consumer costs. Providers ultimately may decide to settle with the consumer for amounts that are less than the initial charges.

Federal Requirements Addressing Surprise Billing

Federal surprise billing requirements were established as part of the No Surprises Act, Title I of Division BB of the Consolidated Appropriations Act, 2021. The requirements will take effect starting with plan years that begin on or after January 1, 2022.¹³ The No Surprises Act placed requirements on insurers and providers to create a degree of consumer protection in specified surprise billing situations.¹⁴

The following section answers frequently asked questions about the broadly applicable consumer protections that will be required in specified surprise billing situations and the corresponding requirements that will apply to both insurers and providers.

In many specified situations, the surprise billing consumer protections and corresponding insurer/provider requirements are structured similarly. However, some distinctions exist with respect to how federal requirements apply to specific surprise billing situations. Such distinctions are noted throughout the report. Furthermore, a table that summarizes various federal surprise billing requirements, by situation, can be found in Table C-1.

What Plan Types Are Addressed?

Federal private health insurance requirements generally vary based on the segment of the private health insurance market in which the plan is sold (i.e., individual market, fully-insured small group market, fully-insured large group market, or self-insured market).¹⁵ Some requirements apply to all market segments, whereas others apply only to selected market segments.¹⁶ For example, plans offered in the individual and fully insured small-group markets must comply with the federal requirement to cover the essential health benefits; however, plans offered in the fully insured large-group market and self-insured plans do not have to comply with this requirement.

Federal surprise billing requirements generally apply to individual market plans, fully insured small-group and large-group plans, and self-insured plans.¹⁷ In addition, many surprise billing requirements apply to Federal Employees Health Benefits (FEHB) Program plans and grandfathered plans.¹⁸ However, of the surprise billing requirements described in this report (see "When Do Surprise Billing Requirements Apply?"), the continuity-of-care and provider-directory surprise billing requirements do not apply to FEHB Program plans or grandfathered plans. Emergency service-related surprise billing requirements apply only to plans in the aforementioned markets that cover emergency services in general.

When Do Surprise Billing Requirements Apply?

Federal surprise billing requirements apply to a variety of services and provider types. Specifically, surprise billing requirements address the following:

• Out-of-network emergency services
• Out-of-network services provided to a consumer during an outpatient observation stay or an inpatient or outpatient stay during the visit in which a consumer receives emergency services
• Out-of-network nonemergency, non-ancillary services provided at an in-network facility
• Out-of-network nonemergency, ancillary services provided at an in-network facility¹⁹
• Out-of-network air ambulance services
• Services scheduled at least three business days in advance
• Out-of-network services from a provider that initially was in-network but subsequently became out-of-network during the course of treatment (i.e., continuity of care)
• Out-of-network services from a provider that the consumer assumed was in-network based on incorrect information from the plan (e.g., incorrect provider directory information)

What Consumer Protections Apply in Surprise Billing Situations?

Surprise billing consumer protections generally take one of two forms: financial protections and informational protections. Financial protections generally limit the financial liability of consumers who inadvertently receive out-of-network care, which typically costs more than in-network care. Informational protections generally provide consumers with information on their provider's network status before the consumers receive care. If a consumer is notified before receiving care that he or she will be seen by an out-of-network provider, the consumer could decide whether to see the out-of-network provider or could seek a different, in-network provider. A consumer who is able to make this sort of informed decision about where to receive care may be less likely to be surprised by a bill that is higher than anticipated due to the provider's network status.

The types of consumer protections vary depending on the surprise billing situation. Some surprise billing situations have requirements that relate to both financial and informational protections; other surprise billing situations have requirements that relate to only one type of protection. For example, some surprise billing situations apply financial protections only if informational protections are not applied appropriately, whereas other surprise billing situations apply financial protections in all instances.

Financial Protections

Surprise billing financial protections apply to all surprise billing situations except when services are scheduled at least three business days in advance.²⁰ These protections reduce the amount consumers pay in cost sharing and balance bills (when consumers have plans that cover out-of-network care) and the amount consumers pay in other consumer costs (when consumers have plans that do not cover out-of-network care).²¹ Specific consumer protections vary slightly across surprise billing situations, as specified in Table 2.

In general, and regardless of whether the consumer's plan covers out-of-network care, the consumer will pay only in-network cost-sharing amounts or rates when he/she receives out-of-network care in surprise billing situations. For example, if a plan has a $100 co-payment for in-network emergency services, the plan also must have a $100 co-payment for out-of-network emergency services. Furthermore, out-of-network providers generally are prohibited from balance billing the individual for amounts in addition to the consumer cost sharing.

Roughly half of the surprise billing situations further specify that, in general, the cost-sharing amounts are to be calculated as if total cost for the service were the median of all amounts the insurer had negotiated with various providers for that service in 2019, as adjusted for inflation,²² referred to as the median in-network amount. (These scenarios are specified in Table 2.) As shown in Figure 2, in specified surprise billing situations, a 20% coinsurance rate would be based on the insurer's median in-network amount for 2019, as adjusted for inflation, instead of on an amount negotiated with a particular provider or on the insurer's total allowed amount.

However, if the service were provided in a state with an applicable surprise billing law or an all-payer model agreement, the cost-sharing amount would be calculated in accordance with such law or agreement.²³

Figure 2. Illustrative Examples of Consumer Billing, Including Specified Surprise Billing Situations (20% coinsurance for in-network services and specified surprise billing situations; 40% coinsurance for out-of-network services)

Source: Congressional Research Service. Notes: These examples are for illustrative purposes only; they do not represent the full spectrum of possible billing scenarios. The examples assume the consumer's deductible has been met, the in-network out-of-pocket (OOP) limit has not been reached, and there is no out-of-network OOP limit. In the example, Provider Charge = $50,000; Total Allowed Amount = $35,000; Median In-Network Amount = $32,500; and Negotiated Amount = $30,000. Consumer cost-sharing amounts are based on these totals. Outside of this example, coinsurance rates for in-network and out-of-network services may vary by plan type. *** = Amount paid by plan, which is determined through a separate process. Median In-Network Amount = the median of the plan's negotiated amounts for that service in 2019, as adjusted for inflation. Median in-network amount may be higher or lower than a particular in-network provider's negotiated amount. Specified Surprise Billing Situations = out-of-network emergency services; out-of-network services provided to a consumer during an outpatient observation stay or an inpatient or outpatient stay during the visit in which a consumer receives emergency services; out-of-network nonemergency, non-ancillary services provided at an in-network facility; and out-of-network nonemergency, ancillary services provided at an in-network facility.

Except in the context of emergency services, consumer financial protections generally apply only to covered services (i.e., services that would be covered by the plan if they were provided in network). For example, if a particular service would not be covered by the plan if provided by an in-network provider, the service would not be subject to the surprise billing protections if provided by an out-of-network provider at an in-network facility.

In some situations, surprise billing consumer financial protections always apply; in other instances, the consumer protections apply only if specified criteria are met. Most commonly, the protections apply only if the consumer does not receive notice and give consent to receiving such out-of-network care. Table 3 lists surprise billing situations where consumer protections are conditional upon criteria.

Informational Protections

Because surprise billing may occur when a consumer is unknowingly treated by a provider outside of the consumer's health insurance plan's network, some surprise billing protections include requirements that seek to provide consumers with more information about the providers in their network and/or the care they are scheduled to receive. Theoretically, this additional information provides consumers with the ability to make an informed decision about their medical care before they receive such care. These requirements alone do not eliminate surprise billing charges, but they reduce the prevalence of unexpected out-of-network use.²⁴

The surprise billing informational protections are structured as consumer notices and provider directories.²⁵ Most often, the appropriate application of informational protections precludes the consumer from receiving financial protections in surprise billing situations (see Table 3).

Notification requirements affect the following surprise billing situations:

• Out-of-network services provided to a consumer during an outpatient observation stay or an inpatient or outpatient stay during the visit in which a consumer receives emergency services
• Out-of-network nonemergency, non-ancillary services provided at an in-network facility
• Services scheduled at least three business days in advance
• Out-of-network services from a provider that initially was in network but subsequently became out of network during the course of treatment (i.e., continuity of care).

Provider directory requirements affect the following surprise billing situation:

• Out-of-network services from a provider that the consumer assumed was in network based on incorrect information from the plan (e.g., incorrect provider directory information).

Notification

In the surprise billing context, consumer notifications are intended to inform the consumer of the network status of the provider that he or she is scheduled to receive services from, as well as of other specified pieces of information (see Table 4). Depending on the surprise billing situation, this information may be provided by the insurer and/or by the provider. In theory, a consumer scheduled to receive services from an out-of-network provider could use this information to either keep the scheduled services with the out-of-network provider or attempt to find an in-network provider.

Depending on the surprise billing situation, consumer notification may affect the surprise billing financial protections applicable to that situation (see Table 3). Most commonly, notifications (and consumer consent) are used to satisfy criteria that exempt providers from having to apply consumer financial protections in specified surprise billing situations. For example, certain out-of-network providers in an in-network facility can provide notice to consumers in advance of providing care. If the consumer is provided with such notice and consents to receiving such care, the financial protections associated with that surprise billing situation would not apply;²⁶ by consenting to and receiving the out-of-network care, the consumer is acknowledging that he or she is willing to pay more to see the out-of-network provider.

By contrast, in the continuity of care surprise billing situation (i.e., situations where a provider is initially in network but subsequently becomes out of network during the course of a consumer's treatment), the notification is used to inform the consumer of the provider's network status and of the consumer's right to receive specified financial protections.²⁷

Provider Directories

Provider directories are repositories of information for consumers about the providers that are in a plan's network. Both insurers and providers are subject to provider directory requirements that seek to ensure consumers have, or have access to, accurate information about which providers are within their plans' networks. Insurer provider directory requirements address print provider directories, web-based provider directories (i.e., databases), and methods by which individuals can verify a provider's network status by calling or electronically communicating with the insurer.²⁸ Providers are required to support insurer compliance with such requirements by providing insurers with the necessary information for the directory.²⁹

If a consumer uses a provider directory or communicates electronically or by phone with the insurer and receives incorrect information about the provider's network status, the consumer is provided financial protections that limit costs of services from providers that the consumer thought were in network.³⁰

How Much Do Insurers Pay Providers in Surprise Billing Situations?

As discussed in the "Private Health Insurance Billing Overview" section, in general, payment for out-of-network services depends on whether the plan covers out-of-network benefits. Regardless of whether a plan provides out-of-network benefits, there is no contract establishing a set payment rate between an insurer and an out-of-network provider—that is, there is no amount that providers and insurers both recognize as the total cost for care.

Where federal surprise billing financial protections apply, insurers (whether or not they provide out-of-network benefits) generally are required to pay out-of-network providers some amount for furnishing services. Federal requirements specify the methodologies insurers must use to determine the payment amount for these services. When coupled with requirements that limit the amount consumers pay providers in surprise billing situations, these methodologies effectively result in the provider and the insurer recognizing the same total price for care.

Under federal requirements, most surprise billing situations require the insurer to make an initial payment (or notice of denial of payment) to the provider, after which the provider or the insurer may initiate open negotiations to determine how much the health insurer must pay the out-of-network provider.³¹ If negotiations are unsuccessful, the parties may use an independent dispute resolution (IDR) process.

However, the federal methodology does not apply in all situations. If the services were provided in a state that has its own surprise billing law that applies to a given plan type, provider type, and service, for example, the federal methodology would not be used; instead, the state law methodology would be used to determine how much the health insurer must pay the out-of-network provider.³² Relatedly, if these services were provided in a state that has an all-payer model agreement, the amount designated under the agreement would apply.

As shown in Table 5, federal requirements do not explicitly specify the methodologies for reimbursement in all surprise billing situations.

Initial Payment

Where applicable, insurers are required to make an initial payment (or notice of denial of payment) to a provider within 30 calendar days of receiving a bill for services.³³

Open Negotiation

After the insurer makes an initial payment (or notice of denial of payment), the out-of-network provider or the insurer may initiate open negotiations for the purpose of determining a mutually agreed-upon payment amount. The negotiations may be initiated during the 30-day period that begins on the day the out-of-network provider receives an initial payment (or notice of denial of payment) from the insurer regarding the out-of-network claim.³⁴ The provider and insurer then have 30 days from the date the negotiations were initiated (i.e., the open negation period) to reach an agreement. If the negotiations are successful, the insurer is required to pay to the provider the agreed-upon amount (or, after accounting for the initial payment, any remaining balance) within 30 days.³⁵

After the 30-day open negotiation period, insurers and providers may access the IDR process; insurers and out-of-network providers may continue to negotiate a payment rate after initiation of the IDR process. If an agreement is reached between the parties after an IDR process is initiated and before a determination is made through the IDR process, then the agreed-upon rate will be treated as the final payment rate and there will be a process for determining how the parties will split the payment of the IDR process fees.³⁶

Independent Dispute Resolution Process

If out-of-network providers and insurers cannot reach an agreement during the open negotiation period, then either party may seek to initiate the IDR process within a four-day period following the end of the open negotiation period.³⁷ The IDR process is a "baseball-style" arbitration process under which the out-of-network provider and the insurer submit to a neutral third party their best and final offers for the amount each party considers adequate payment. The neutral third party must review the offers and make a binding determination based on certain factors as to which offer is the reasonable payment that the out-of-network provider must receive as payment in full. Generally, the process is the same across the various scenarios in which it applies, with a few differences for situations involving services provided by air ambulance providers.

Once the IDR process has been initiated, the insurer and the out-of-network provider have three business days to jointly select a neutral third party (i.e., certified IDR entity) to make a payment determination. The selected certified IDR entity cannot be party to the determination; cannot have a material familiar, financial, or professional relationship with the insurer or the provider; and cannot have a conflict of interest with the insurer or the provider. If the parties do not make a selection by the deadline, the Secretaries of HHS, the Treasury, and Labor are to assign a certified IDR entity.

No later than 10 days after the certified IDR entity has been selected, the out-of-network provider and the health insurer each must submit an offer for a payment amount (and other information requested by the certified IDR entity). The two parties also may submit other information relating to their offers.

The certified IDR entity must determine which offer is most reasonable based on factors specific to the situation in which the service was furnished.³⁸ The certified IDR entity is prohibited from considering certain factors when making a decision; Table 6 lists the factors the certified IDR entity is required to consider or prohibited from considering when making a payment determination. The factors differ in situations involving air ambulances; Table 7 lists the factors the certified IDR entity is required to consider or prohibited from considering when making a payment determination involving an air ambulance provider. The certified IDR entity's decision must come within 30 days of the entity's selection.³⁹

After the certified IDR entity makes a payment decision, the plan must make the final payment to the provider within 30 days of the decision. The party whose offer was not chosen is responsible for paying IDR entity fees, and both parties must pay a fee to the Secretaries of HHS, the Treasury, and Labor to be used to carry out the IDR process.⁴⁰

The certified IDR entity's decision is binding on both parties, unless the claim for payment is fraudulent or facts presented to the certified IDR entity were misrepresented. A binding payment determination generally is not subject to judicial review except in limited situations.⁴¹

During the 90 days after an IDR decision has been made, the party that initiated the IDR process may not subsequently attempt to initiate the IDR process to seek a payment determination involving the same opposing party and service that were subject to the initial notification.⁴²

How Are Surprise Billing Requirements Enforced?

Enforcement Mechanisms Applicable to Insurers

With respect to insurers, federal law adopts the existing applicable enforcement frameworks of the Public Health Service Act (PHSA), Employee Retirement Income Security Act of 1974 (ERISA), and Internal Revenue Code (IRC).⁴³ These existing enforcement frameworks are described briefly below.⁴⁴

In general, the PHSA enforcement framework applies to health insurance issuers in the group and individual markets and gives states the option to be the primary enforcers of the federal requirements.⁴⁵ If the HHS Secretary determines a state has failed to "substantially enforce" the federal requirements in that state, however, the Secretary must enforce the requirements.⁴⁶ The Secretary may impose a civil monetary penalty on issuers that fail to comply with the PHSA's requirements. The maximum penalty imposed under the PHSA is currently $162 per day for each individual with respect to which such a failure occurs.⁴⁷

Private-sector, employment-based group health coverage (including self-insured plans and coverage provided by health insurance issuers) generally is subject to the enforcement frameworks under both ERISA and IRC.⁴⁸ Among other enforcement mechanisms, the relevant ERISA provisions, subject to specified exceptions, authorize plan participants, other specified individuals, and the Secretary of Labor to file civil actions to enjoin any act or practice that violates ERISA.⁴⁹ The IRC, by contrast, subjects employers or group health plans to an excise tax for noncompliance with the IRC's requirements, generally at a rate of $100 per day for each affected plan participant during the noncompliance period.⁵⁰

Enforcement Mechanisms Applicable to Providers

With respect to providers, federal law adopts an enforcement framework that is similar to that which applies to insurers under the PHSA.⁵¹ Specifically, the law gives states the option to be the primary enforcers of the requirements on providers (including air ambulance services).⁵² If the HHS Secretary determines that a state has failed to "substantially enforce" the federal requirements in that state, however, the HHS Secretary must enforce the requirements.⁵³

Under the federal enforcement framework, the HHS Secretary may impose a civil monetary penalty on providers that fail to comply with federal surprise billing provisions. The maximum penalty the Secretary may impose is $10,000 per violation through procedures set forth in Section 1128A of the Social Security Act.⁵⁴ The HHS Secretary, however, must waive penalties for a provider that (1) does not knowingly violate and should not have reasonably known it violated the prohibition on surprise billing; (2) withdraws the bill within 30 days of the violation; and (3) reimburses the plan or enrollee in an amount equal to the difference between the billed amount and the amount allowed to be billed under federal law, plus any interest at a rate determined by the HHS Secretary.⁵⁵ The HHS Secretary also may establish a hardship exemption to the penalties.⁵⁶

The federal enforcement framework also provides mechanisms for relevant agencies to be notified of violations. Under the law, states may notify the Secretaries of HHS, Labor, and the Treasury, as applicable, of instances of provider violations of the prohibitions on surprise billing, any enforcement actions taken against providers, and the disposition of any such enforcement actions.⁵⁷ Additionally, the HHS Secretary and the Secretary of Labor must establish a process to receive complaints from consumers and ERISA plan participants, respectively, relating to alleged violations of the provider provisions.⁵⁸ The Secretary of Labor must establish a process to transmit such complaints to states or to the HHS Secretary for potential enforcement actions.⁵⁹

Upon receiving a notice from a state or the HHS Secretary of violations of the prohibitions on surprise billing, the Secretary of Labor also must identify any patterns of such violations as they relate to plans subject to ERISA and conduct an investigation pursuant to ERISA Section 504 to determine whether any person has violated any ERISA provision.⁶⁰ In addition, the Secretary of Labor must coordinate with states and the HHS Secretary, as needed, to ensure correction of such violations retrospectively and prospectively.⁶¹

How Do Federal Surprise Billing Requirements Interact with State Surprise Billing Laws?

As of February 2021, more than half of the states had enacted laws to address some form of surprise billing.⁶² The state policies differ in various respects but generally encompass—like the federal law—certain requirements and prohibitions on both insurers and providers.⁶³ To the extent these state policies apply to insurers, however, they generally do not apply to self-funded plans subject to ERISA.⁶⁴ This regulatory landscape means the federal surprise billing requirements generally apply as is in two circumstances where there is an absence of relevant state law: (1) the federal law's insurer provisions apply uniformly to self-funded plans, which state law generally does not regulate, and (2) both the federal law's insurer and provider provisions apply in states that choose not to enact their own surprise billing laws.

In cases where a state maintains surprise billing requirements, the interaction of federal and state requirements may be governed by principles of federal preemption. In general, under the Constitution's Supremacy Clause, federal law preempts—or supersedes—conflicting state law.⁶⁵ At the same time, because congressional purpose is the "ultimate touchstone" of the preemption analysis,⁶⁶ federal law can specify the scope and extent of its preemptive force through express preemption provisions.⁶⁷

The federal surprise billing law specifies its preemptive scope in two ways. First, the law expressly preserves certain areas of state law. The insurer provisions specify that the amount fully insured plans must pay providers for certain out-of-network services will continue to be governed by state law in states that have prescribed a payment methodology.⁶⁸ The law also specifies that its requirements on maintaining accurate, up-to-date provider directories do not preempt any state law relating to health care provider directories.⁶⁹

Second, and more generally, the federal law adopts, or applies a provision similar to, the preemption provision under Section 2724(a) of the PHSA.⁷⁰ Under the federal surprise billing preemption provisions, state laws are preempted by the federal law only if the state laws impose "such standard or requirement" (in the case of fully insured plans) or "such requirement or prohibition" (in the case of providers) that "prevents the application" of a federal requirement or prohibition.⁷¹ This generally means that federal provisions set the floor on surprise billing regulation, and existing state laws—to the extent they impose the same or additional standards, requirements, or prohibitions on fully insured plans and providers as the federal law—are generally preserved, unless the additional standards, requirements, or prohibitions "prevent[] the application" of a federal provision.⁷² Few courts have interpreted this preemption language, which may be susceptible to different constructions as to its scope.

This preemption language, for instance, may be construed narrowly to generally permit state laws that are more protective of consumers. The conference report accompanying the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191), which enacted PHSA Section 2724(a) and related preemption provisions, could support this construction. Regarding these preemption provisions, the conferees stated they "intend[ed] the narrowest preemption," such that "[s]tate laws which are broader than federal requirements would not prevent the application of federal requirements."⁷³ As an example, the conferees noted that while HIPAA's guaranteed availability requirement would apply only in the small-group market, such that each insurer offering health insurance coverage in that market must accept every small employer with 2 to 50 employees in the state that applied for coverage and must accept for enrollment under such coverage every eligible individual who applied for enrollment, states may require guaranteed availability of coverage for groups of more than 50 employees, or for groups of 1. Based on these remarks, a few courts have commented that relevant terms of these preemption provisions "appear to permit state laws that are, generally speaking, more favorable to [consumers]."⁷⁴

The relevant preemption language and conference report remarks, however, also could be viewed as consistent with a broader construction. Under such a construction, while more consumer-protective state provisions would be permitted, they could be preempted as "preventing the application" of federal law to the extent compliance with such a state provision would make it impossible to comply with a federal provision or would interfere with the method by which the federal statute was designed to achieve its policy goal.⁷⁵

The potentially different interpretations of the preemption language may be particularly relevant for some federal surprise billing requirements. For example, as identified above in Table 4, the federal provider provisions prohibit out-of-network providers from billing patients more than in-network cost-sharing amounts for certain ancillary services delivered at or ordered from an in-network facility but permit the providers to balance bill patients for non-ancillary services if the providers satisfy certain notice-and-consent requirements.⁷⁶ Under the notice-and-consent process, an out-of-network provider generally must provide, at least 72 hours before the date of service, a written notice to the patient that provides various information, including the provider's out-of-network status, a good-faith estimate of the amount the provider may charge the patient, and a list of in-network providers at the facility that could provide the service.⁷⁷ The consent signed by patients must acknowledge that they have been provided with the written notice and were informed that payment of any billed charges may not accrue toward their plan deductibles or any limits on cost sharing.⁷⁸

Many state surprise billing laws include comparable notice-and-consent requirements. For some of these state provisions, their interaction with federal provisions is likely the same under both interpretations of the preemption language discussed above. For instance, where the state provisions are coextensive with the federal provisions, or impose additional requirements that do not interfere with the federal provisions, the state provisions likely are preserved under both constructions. Some state laws, for instance, include certain additional specifications or procedures for the notice-and-consent process to protect consumers, such as prohibiting the notice from being obtained by representatives of the in-network facility or prohibiting the provider from collecting more than the estimated amount without obtaining a separate written consent.⁷⁹ State provisions that offer less protection to consumers, by contrast, likely are preempted under both constructions. State laws that allow notice to be given less than 72 hours before the date of service,⁸⁰ for instance, likely "prevent the application" of federal minimum timing requirements. Similarly, state laws that more broadly allow providers to balance bill for ancillary services if the providers follow specified notice-and-consent procedures likely "prevent the application" of the federal prohibition.⁸¹

Some state provisions that are more protective of consumers, however, might "prevent the application" of the federal provisions only under a broader construction of the preemption language. For example, state laws that more broadly prohibit balance billing for out-of-network services beyond ancillary services likely are considered more protective of consumers and thus likely are preserved under a narrow construction. However, such state provisions, to the extent they apply to non-ancillary services, may "prevent the application" of the federal notice-and-consent requirements by prohibiting what the federal provisions permit.⁸² Thus, under a broader construction of the preemption language, such state prohibitions might be preempted as they apply to non-ancillary services because they conflict with the federal notice-and-consent process.⁸³

HHS may further specify the federal surprise billing law's preemptive scope through regulations.⁸⁴

Appendix A. Implementation Requirements of the Surprise Billing Protections in the No Surprises Act

This appendix contains a table of CRS-identified deadlines and deliverables included in the No Surprises Act (Title I of Division BB of the Consolidated Appropriations Act, 2021 [P.L. 116-260]). The table includes four columns: (1) the required activity; (2) the deadline for such activity (if applicable); (3) the citation within the legislative text, including the page number; and (4) the statutory citation of the required activity (if applicable). The requirements in the table are listed in the order of their presence in the No Surprises Act. In some instances, requirements are mirrored across some combination of the Public Health Service Act (PHSA), Employee Retirement Income Security Act of 1974 (ERISA), and Internal Revenue Code (IRC). For items mirrored across statutes, CRS combined the mirrored requirements into one row in the table and included statutory citations for the mirrored language.

The table includes the provisions that require secretarial activity (including, but not limited to, federal rulemaking, public reporting, and reporting to Congress) and similar activity by other government entities (e.g., comptroller general). Anytime a Secretary (or other government entity) is required to do something relating to the implementation of a provision, CRS noted the required activity in the table below. Instances where permissive authority was provided in regard to the implementation of a provision are excluded from the table. Enforcement provisions are similarly excluded.

Some provisions include explicit deadlines for secretarial activity. For example, Section 103 of the No Surprises Act requires the Secretary of Health and Human Services (HHS), the Secretary of Labor, and the Secretary of the Treasury to establish, through rulemaking, an independent dispute resolution process no later than one year after the date of enactment (i.e., one year after December 27, 2020). When explicit deadlines are included within the legislative text, these deadlines are noted within each row. Other provisions call for the federal government to take some action but do not mention an explicit timing. For example, Section 104 of the No Surprises Act requires the HHS Secretary to, through rulemaking, establish a process to receive specified consumer complaints but does not mention a timing element for when the rulemaking needs to be issued. Where the provisions did not mention explicit timing, the deadline column indicates "No specified deadline."

Appendix B. Other Provisions of the No Surprises Act

Federal surprise billing requirements were established as part of the No Surprises Act, which was included as Title I of Division BB of the Consolidated Appropriations Act, 2021 (P.L. 116-260). The No Surprises Act also included other provisions that relate to the topic of surprise billing but do not directly relate to the requirements on insurers and providers regarding the cost of, and payment for, services provided in surprise billing situations. Some of these other provisions that have not been discussed or referenced in the body of this report are summarized below, by topic area in alphabetical order.⁸⁵

Air Ambulance Reporting Requirements

The No Surprises Act required insurers and providers to submit information on air ambulance services to the federal government.

Requirements on Insurers

The act required insurers to report specified information to the Secretaries of Health and Human Services (HHS), Labor, and the Treasury for two consecutive years.⁸⁶ The first year of this requirement applies to plan years occurring during the first calendar year that begins after the HHS Secretary, in consultation with the Secretary of Transportation, issues rules regarding the air ambulance reporting requirements.

Requirements on Providers

The act required air ambulance providers to report specified information to the Secretaries of HHS and Transportation for two consecutive years.⁸⁷ The Secretary of Transportation may use this information to determine whether air ambulance providers have engaged in unfair and deceptive practices and methods of competition.⁸⁸ The first year of this requirement applies to plan years occurring during the first calendar year that begins after the HHS Secretary, in consultation with the Secretary of Transportation, issues rules regarding the air ambulance reporting requirements.

All-Payer Claims Databases

The No Surprises Act established a grant program to help states create or improve all-payer claims databases.⁸⁹ Grants awarded under the program would be for $2.5 million and would be available to the state for three years. (Portions of the grant awards would be distributed to the states in each year.) Once the database is established, non-state entities would be allowed to request access to all-payer claims database data for specified purposes (e.g., research, quality improvement, cost containment).

To be eligible for grant funding under this program, states must submit an application to the HHS Secretary.⁹⁰ As part of this application, states must indicate how they will ensure uniform data collection and the privacy and security of the data.

The No Surprises Act authorized the appropriation of $50 million for each of FY2022 and FY2023 and $25 million for FY2024. Amounts are authorized to remain available until expended.

Appropriations

The No Surprises Act included $500 million in appropriations for FY2021 through FY2024.⁹¹ The funds were appropriated to the Secretaries of HHS, Labor, and the Treasury for specified implementation purposes regarding the No Surprises Act and Title II of Division BB of the Consolidated Appropriations Act, 2021 (P.L. 116-260).

External Review Process in Cases of Certain Surprise Medical Bills

The No Surprises Act required insurers to implement an external review process for coverage determinations and claims.⁹² The external review process must meet applicable state or federal standards.

The No Surprises Act specified that the external review process applies to any adverse determinations made by insurers with respect to specified surprise billing situations (including whether a specific service is a surprise billing service).⁹³ This requirement will apply not later than January 1, 2022.

General Informational Requirements to Assist Consumers

The No Surprises Act imposed requirements on insurers and providers regarding the provision of various pieces of information to consumers. These requirements were in addition to the informational protections that are directly related to specific surprise billing situations (see "Informational Protections") and are more general in nature.

Requirements on Insurers

The act required insurers to make publicly available, post on a website, and include in each plan an explanation of benefits, information on federal balance billing prohibitions in certain surprise billing situations, applicable state law balance billing prohibitions, and specified surprise billing requirements.⁹⁴ In addition, it required insurers to include information on contacting appropriate state and federal agencies if a consumer believes a provider has violated any of the aforementioned requirements. This requirement will apply to plan years beginning on or after January 1, 2022.

The No Surprises Act also required insurers to include the following information on any physical or electronic plan documents or insurance cards: the plan's deductible, the plan's out-of-pocket maximum, and a telephone number and website where individuals can receive consumer assistance information.⁹⁵ This requirement will apply to plan years beginning on or after January 1, 2022.

In addition, the act required insurers to maintain a price comparison tool, which consumers would be able to access via telephone and a website, to compare the amount of cost sharing they would be responsible for if they received certain services from various providers.⁹⁶ This requirement will apply to plan years beginning on or after January 1, 2022.

Requirements on Providers

The No Surprises Act required providers to make publicly available a one-page notice that provides, in clear and understandable language, information on specified surprise billing requirements.⁹⁷ In addition, the notice must contain information on which state and federal agencies consumers may contact if they believe a provider has violated such a requirement. The notice must be provided to consumers with private health insurance and posted on a public website (if applicable). This requirement will apply not later than January 1, 2022.

Health Savings Accounts and Surprise Billing Requirements

A health savings account (HSA) is a tax-advantaged account that individuals can use to pay for unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by insurance).⁹⁸ Individuals are eligible to establish and contribute to an HSA if they have coverage under an HSA-qualified high-deductible health plan (HDHP), do not have disqualifying coverage, and cannot be claimed as a dependent on another person's tax return.

To be HSA qualified, a health plan must meet several tests: it must have a deductible above a certain minimum level, it must limit out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and it may cover only preventive care services and (for plan years beginning on or before December 31, 2021) telehealth services before the deductible is met. If the plan covered any other services before the deductible is met, the plan would not be considered an HSA-eligible HDHP.

The No Surprises Act allowed HSA-qualified HDHPs to cover specified surprise billing services before the deductible is met and still be considered HSA-qualified.⁹⁹ Relatedly, the act specified that individuals will not be disqualified from being HSA-eligible merely because they receive coverage of specified surprise billing services before their deductibles are met. These requirements will apply to plan years beginning on or after January 1, 2022.

Appendix C. Summary of the Applicability of Various Requirements in Different Surprise Billing Situations

The following table summarizes the applicability of various federal surprise billing requirements across different situations, as discussed in this report.