A possible state IDR escape hatch for self-funded plans 

The movie Star Wars: A New Hope would have lasted all of 10 minutes had C-3PO and R2-D2 not used an escape pod. A later attempt to escape the Death Star, however, landed three heroes in a trash compactor. A way out for health plans’ ongoing struggles with the independent dispute resolution process under the No Surprises Act has emerged in some states.

The NSA took effect in 2022 to protect consumers from surprise medical bills and implement an arbitration process that has proven costly for payors. The NSA’s required baseball-style arbitration for determining reimbursement rates has been heavily criticized by payors. Over 20 states have laws protecting consumers in fully insured plans from surprise billing, either through a specified state law or an All-Payer Model Agreement. Federal law prevents these bifurcated states from addressing air ambulance services, which are within the scope for the NSA. State programs may be limited to emergency services, whereas NSA is broader, and the method for resolving payment disputes may differ through a set formula, arbitration, or a blend of both. In Star Wars parlance, a state opt-in may be self-funder payors’ “only hope,” echoing Princess Leia’s plea to Obi-Wan Kenobi.

Here is a summary of self-funded plan opt-in states:

• Georgia. The Surprise Billing Consumer Protection Act protects patients from surprise bills for mental health emergencies treated outside of a hospital but otherwise largely mirrors the NSA, with an arbitrator picking between the two proposed payment amounts. A basic election form is all the law requires to opt-in. Over 20 self-funded plans have opted in.
  
  
• Maine. Like the NSA, this state’s dispute resolution process requires the arbitrator to choose between either the payor’s reimbursement amount or the provider’s fee and otherwise comply with published rules. The law requires an annual election to the Bureau of Insurance. Only two self-funded plans have opted in.
  
  
• Nevada. Interestingly, this state requires OON providers and facilities to accept 100%–115% of the payor’s contracted rate if in effect within 24 months of the date of service, depending on when the contract was terminated. Otherwise, the arbitrator picks one of the two reimbursement offers. Self-funded plans can opt in by submitting an election form to the Nevada Division of Insurance. Here are some FAQs.
  
  
• New Jersey. For fully insured plans, the 2018 law requires the arbitrator to select either of the two submitted amounts. Self-funded plans that elect must so indicate on ID cards. A state department of banking and insurance bulletin details the process. Here are some FAQs. Over 200 self-funded plans have opted in.
  
  
• Oregon. The law is limited to ground ambulance services which are beyond the NSA’s scope. The payment rate is based on either the established local rate, or in the absence of a local rate, 325% of the Medicare rate. Self-funded plans can opt-in annually, or elect automatic renewal. Over 50 self-funded plans have opted in.
  
  
• Texas. Under the law, reimbursement rates for ground ambulance, through September 1, 2027, and OON emergency medical services are capped at 325% of Medicare. Reimbursement disputes for other covered services are subject to either mediation or arbitration, in which case a reasonable reimbursement rate is determined based on a variety of factors, including a benchmarking database and whichever proposed amount is closer is selected. Self-funded plans can opt into the same process applicable to fully insured plans. Almost 400 self-funded plans have opted in.
  
  
• Virginia. State law, which predates the NSA’s effective date, requires arbitrators to choose between the competing payment amounts, using a designated data set for determining commercially reasonable payments. Self-funded plans can opt in with an annual attestation. Over 500 self-funded plans have opted in.
  
  
• Washington. This state’s law includes short-term behavioral health crisis centers and ground ambulance services within its scope. Generally, arbitrators select the provider’s or plan’s reimbursement amount for a covered service based on which one is “commercially reasonable.” Through 2027, ground ambulance reimbursements are set at 325% of Medicare or the billed charges, whichever is less. Self-funded plans can opt in with a simple on-line election form. Almost 400 self-funded plans have opted in.

Is there risk to a self-funded plan electing to play by state rules? Perhaps. To some extent, plan administration and reporting will come under the purview of state regulators, a prospect self-funded plans usually try to avoid. A specific plan’s experience may not match expectations. Fees differ. Discussion with trusted advisors — especially the third-party administrator tasked with claims administration — is recommended before making a bold move akin to the rebel attack from Yavin 4.

Ultimately, the question self-funded plan sponsors must answer is whether the state IDR escape hatch leads to Tatooine — or a trash compactor.