The No Surprises Act — A surprise nonetheless! 

The No Surprises Act was passed in December 2020 to enhance patient protections against balance billing related to air ambulance services, emergency medical care and certain out-of-network providers such as radiologists and pathologists who practice within an in-network facility. As with traditional out-of-network provider bills, the medical carriers typically reimburse the provider at a “usual and customary” payment rate. However, if the out-of-network provider feels the plan’s reimbursement amount is inadequate — absent the right to balance-bill the patient — the provider can initiate an Independent Dispute Resolution process, which renders a binding payment determination.

While the goal of protecting patients from “surprise” medical bills was laudable, the required process for adjudicating covered claims is yielding some unanticipated results. An analysis published in Health Affairs found that the number of IDR disputes has vastly exceeded expectations, the vast majority are being settled in favor of providers and settlement amounts are typically three to four times the in-network charge. Further, the study’s authors looked at the providers initiating IDR disputes and found that just five provider groups — most of them backed by private equity — initiated 59% of all IDR disputes in 2023 and 2024.

This is concerning from the broad perspective of healthcare affordability. As the authors state, “The high volume of IDR disputes is generating significant spending from administrative costs and higher payments for services. This higher spending will likely be reflected in higher overall health costs and consumer premiums in the future.” But there are also implications for individual organizations trying to manage their already stretched health benefits budgets. Recently, a Mercer client saw professional fees for a single outpatient spine surgery of approximately $320,000; typical in-network professional reimbursement ranges from $5,000 to $10,000. This is not an isolated example.

So what, if anything, can a plan sponsor do?

• Ask your medical carrier for your company-specific IDR report.
• Review the report and identify any areas that your medical carrier might remediate via a contracting approach. We have seen excessive IDR settlements going to an orthopedic group whose outpatient facility is in-network but whose providers are out of network, creating a contrived “no surprises” scenario that was exploited to the tune of hundreds of thousands of dollars.
• Confirm that your medical carrier is actively negotiating and offering a payment amount prior to the IDR process. Once IDR is initiated, confirm your carrier is actively participating in the process; failure to participate can lead to a default decision in the provider’s favor at the provider’s proposed payment amount.
• If your carrier’s IDR process appears lacking, suggest a “shared loss” program so that they share and have vested interest to vigorously represent you in the IDR process. Risk should be bidirectional.
• Negotiate out any aspect of “shared savings” that would result from the small percentage of cases that are decided in the carrier’s favor.
• Consider eliminating out-of-network coverage in areas where there is no provider shortage such as orthopedics.
• Collaborate with employer advocacy groups or other industry organizations to advocate for legislative and regulatory relief.

Mercer is working with medical carriers and advocacy groups to seek needed changes to bring more balance to the IDR process. It is unfortunate that a solution designed to protect members is creating another cost driver for already beleaguered plan sponsors. Perhaps at the end of the day, this unintended consequence of the “no surprises” legislation shouldn’t be that surprising.