Arbitration in the No Surprises Act leads to higher prices

August 28, 2024

Source: Fiedler, et al Brookings Institution, July 31, 2024 LINK

The No Surprises Act (NSA) prohibits balance billing for plan members who receive emergency care or care from hospital-based specialists. However, the NSA did not set the prices that health plans would pay providers. Instead, NSA created a process whereby plans would determine Qualified Payment Amounts (QPAs) and providers would either have to accept these payments or go to Independent Dispute Resolution (IDR) to determine the appropriate payment amount.

The Brookings Institution reported late last month on research confirming that the NSA is not working as planned, and arbitrator decisions in favor of providers might mean that the NSA will raise rather than lower total health care spending. Brookings researchers examined the data released this Spring on disputes resolved in 2023. As depicted above, the researchers converted all prices to a multiple of Medicare allowable rates and compared IDR prices with previous in-network and out-of-network prices.

They found that for emergency services the average IDR finding was 400% of Medicare, and for imaging services the average IDR was 660% of Medicare. Imaging IDR prices were even higher than previous out-of-network prices.

The carriers rarely “won” in IDR. Provider “win” rates were 81% for emergency care, 89% for imaging (radiology), and 91% for pediatric and neonatal critical care.

Implications for employers:

-        While the NSA is protecting plan members from surprise balance bills, it appears not to be saving money for plans. To the contrary, provider appeals are leading to higher provider payment, and employers are likely paying for carrier administrative expenses associated with IDR.

-        This demonstrates that limited plan member liability without an effective way of limiting total payments can lead to increased medical costs.

-        Viewing medical claims as a percentage of Medicare can help untangle whether there are true “savings,” and can be more informative than looking at discounts, which vary depending on provider charges.

Thanks for reading.  You can find previous posts in the Employer Coverage archive

Please subscribe, “like” and suggest this newsletter to friends and colleagues. Thanks!

Tomorrow: Shorts and follow ups, including cannabis, tirzepatide, chelation and COVID-19 vaccinations