Rule2021-14379
Requirements Related to Surprise Billing; Part I
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 13, 2021
Effective
September 13, 2021
Issuing agencies
Personnel Management OfficeTreasury DepartmentInternal Revenue ServiceLabor DepartmentEmployee Benefits Security AdministrationHealth and Human Services Department
Abstract
This document sets forth interim final rules implementing certain provisions of the No Surprises Act, which was enacted as part of the Consolidated Appropriations Act, 2021. These interim final rules amend and add provisions to existing rules under the Internal Revenue Code, the Employee Retirement Income Security Act, the Public Health Service Act, and the Federal Employees Health Benefits Act. These interim final rules implement provisions of the No Surprises Act that protect participants, beneficiaries, and enrollees in group health plans and group and individual health insurance coverage from surprise medical bills when they receive emergency services, non-emergency services from nonparticipating providers at participating facilities, and air ambulance services from nonparticipating providers of air ambulance services, under certain circumstances. In this rulemaking, the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury (collectively, the Departments) are issuing interim final rules with largely parallel provisions that apply to group health plans and health insurance issuers offering group or individual health insurance coverage. HHS is also issuing in this rulemaking additional interim final rules that apply to emergency departments of hospitals and independent freestanding emergency departments, health care providers and facilities, and providers of air ambulance services related to the protections against surprise billing. The Office of Personnel Management (OPM) is issuing in this rulemaking interim final rules that specify how certain provisions of the No Surprises Act apply to health benefits plans offered by carriers under the Federal Employees Health Benefits Act (FEHBA).
Full Text
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<title>Federal Register, Volume 86 Issue 131 (Tuesday, July 13, 2021)</title>
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[Federal Register Volume 86, Number 131 (Tuesday, July 13, 2021)]
[Rules and Regulations]
[Pages 36872-36985]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-14379]
Federal Register / Vol. 86 , No. 131 / Tuesday, July 13, 2021 / Rules
and Regulations
[[Page 36872]]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 890
RIN 3206-AO30
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD9951]
RIN 1545-BQ04
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB99
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 147, 149, and 156
[CMS-9909-IFC]
RIN 0938-AU63
Requirements Related to Surprise Billing; Part I
AGENCY: Office of Personnel Management; Internal Revenue Service,
Department of the Treasury; Employee Benefits Security Administration,
Department of Labor; Centers for Medicare & Medicaid Services,
Department of Health and Human Services.
ACTION: Interim final rules with request for comments.
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SUMMARY: This document sets forth interim final rules implementing
certain provisions of the No Surprises Act, which was enacted as part
of the Consolidated Appropriations Act, 2021. These interim final rules
amend and add provisions to existing rules under the Internal Revenue
Code, the Employee Retirement Income Security Act, the Public Health
Service Act, and the Federal Employees Health Benefits Act. These
interim final rules implement provisions of the No Surprises Act that
protect participants, beneficiaries, and enrollees in group health
plans and group and individual health insurance coverage from surprise
medical bills when they receive emergency services, non-emergency
services from nonparticipating providers at participating facilities,
and air ambulance services from nonparticipating providers of air
ambulance services, under certain circumstances. In this rulemaking,
the Department of Health and Human Services (HHS), the Department of
Labor (DOL), and the Department of the Treasury (collectively, the
Departments) are issuing interim final rules with largely parallel
provisions that apply to group health plans and health insurance
issuers offering group or individual health insurance coverage. HHS is
also issuing in this rulemaking additional interim final rules that
apply to emergency departments of hospitals and independent
freestanding emergency departments, health care providers and
facilities, and providers of air ambulance services related to the
protections against surprise billing. The Office of Personnel
Management (OPM) is issuing in this rulemaking interim final rules that
specify how certain provisions of the No Surprises Act apply to health
benefits plans offered by carriers under the Federal Employees Health
Benefits Act (FEHBA).
DATES: Effective date: These regulations are effective on September 13,
2021.
Applicability date: The regulations are generally applicable for
plan years (in the individual market, policy years) beginning on or
after January 1, 2022. The HHS-only regulations that apply to health
care providers, facilities, and providers of air ambulance services are
applicable beginning on January 1, 2022. The OPM-only regulations that
apply to health benefits plans are applicable to contract years
beginning on or after January 1, 2022.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on September 7, 2021.
ADDRESSES: Written comments may be submitted to the addresses specified
below. Any comment that is submitted will be shared among the
Departments and OPM. Please do not submit duplicates.
Comments will be made available to the public. Warning: Do not
include any personally identifiable information (such as name, address,
or other contact information) or confidential business information that
you do not want publicly disclosed. Comments are posted on the internet
exactly as received and can be retrieved by most internet search
engines. No deletions, modifications, or redactions will be made to the
comments received, as they are public records. Comments may be
submitted anonymously.
In commenting, refer to file code CMS-9909-IFC. Because of staff
and resource limitations, we cannot accept comments by facsimile (FAX)
transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by entering the file code in
the search window and then clicking on ``Comment''.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9909-IFC, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9909-IFC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Padma Babubhai Shah, Office of
Personnel Management, at 202-606-4056; Kari DiCecco, Internal Revenue
Service, Department of the Treasury, at 202-317-5500; Matt Litton or
David Sydlik, Employee Benefits Security Administration, Department of
Labor, at 202-693-8335; Lindsey Murtagh, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at 301-492-
4106. Customer Service Information: Information from OPM on health
benefits plans offered under the Federal Employees Health Benefits
(FEHB) Program can be found on the OPM website (<a href="http://www.opm.gov/healthcare-insurance/healthcare/">www.opm.gov/healthcare-insurance/healthcare/</a>). Individuals interested in obtaining information
from the DOL concerning employment-based health coverage laws may call
the Employee Benefits Security Administration (EBSA) Toll-Free Hotline
at 1-866-444-EBSA (3272) or visit the DOL's website (<a href="http://www.dol.gov/ebsa">www.dol.gov/ebsa</a>).
In addition, information from HHS on private health insurance coverage
and coverage provided by non-federal governmental group health plans
can be found on the Centers for Medicare & Medicaid Services (CMS)
website (<a href="http://www.cms.gov/cciio">www.cms.gov/cciio</a>), and information on health care reform can
be found at <a href="http://www.HealthCare.gov">www.HealthCare.gov</a>.
[[Page 36873]]
SUPPLEMENTARY INFORMATION: Inspection of Public Comments: Comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post comments received before the close of the comment period on the
following website as soon as possible after they have been received:
<a href="https://regulations.gov">https://regulations.gov</a>. Follow the search instructions on that website
to view public comments.
I. Background
A. Patient Protections and Requirements Related to Emergency Services
Under Section 2719A of the Public Health Service Act
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
was enacted on March 23, 2010 and the Health Care and Education
Reconciliation Act of 2010, Public Law 111-152, was enacted on March
30, 2010 (these statutes are collectively known as the ``Affordable
Care Act'' or ``ACA''). The Affordable Care Act reorganizes, amends,
and adds to the provisions of part A of title XXVII of the Public
Health Service Act (PHS Act) relating to group health plans and health
insurance issuers in the group and individual markets.\1\ The
Affordable Care Act adds section 715(a)(1) to the Employee Retirement
Income Security Act (ERISA) and section 9815(a)(1) to the Internal
Revenue Code (the Code) to incorporate the provisions of part A of
title XXVII of the PHS Act into ERISA and the Code, and make them
applicable to group health plans and health insurance issuers providing
health insurance coverage in connection with group health plans.
Sections 2701 through 2728 of the PHS Act are incorporated into ERISA
and the Code.
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\1\ The term ``group health plan'' includes both insured and
self-insured group health plans.
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Under section 2719A of the PHS Act, as added by the Affordable Care
Act and incorporated into ERISA and the Code, if a non-grandfathered
group health plan or health insurance issuer offering non-grandfathered
group or individual health insurance coverage provides any benefits
with respect to emergency services in an emergency department of a
hospital, the plan or issuer must cover emergency services without the
individual or the health care provider having to obtain prior
authorization (including when the emergency services are provided out-
of-network) and without regard to whether the health care provider
furnishing the emergency services is an in-network provider with
respect to the services. The emergency services must be provided
without regard to any other term or condition of the plan or health
insurance coverage other than the exclusion or coordination of
benefits, an affiliation or waiting period permitted under the Code,
ERISA, and the PHS Act, or applicable cost-sharing requirements. For a
plan or health insurance coverage with a network of providers that
provides benefits for emergency services, the plan or issuer may not
impose any administrative requirement or limitation on benefits for
out-of-network emergency services that is more restrictive than the
requirements or limitations that apply to in-network emergency
services. In addition, carriers offering FEHB plans must comply with
requirements described in section 2719A of the PHS Act in the same
manner as they apply to a plan or issuer.
For purposes of the requirements under section 2719A of the PHS
Act, emergency services mean, with respect to an emergency medical
condition, (1) a medical screening examination (as required under
section 1867 of the Social Security Act) that is within the capability
of the emergency department of a hospital, including ancillary services
routinely available to the emergency department to evaluate such
emergency medical condition, and (2) that is within the capabilities of
the staff and facilities available at the hospital, such further
medical examination and treatment as are required under section 1867 of
the Social Security Act to stabilize the patient.
Regulations implementing section 2719A of the PHS Act include these
consumer protections.\2\ Section 2719A of the PHS Act did not prohibit
balance billing. Balance billing refers to the practice of out-of-
network providers billing patients for the difference between (1) the
provider's billed charges, and (2) the amount collected from the plan
or issuer plus the amount collected from the patient in the form of
cost sharing (such as a copayment, coinsurance, or amounts paid toward
a deductible). To avoid the circumvention of the protections of section
2719A of the PHS Act, in the implementing regulations, the Departments
determined it was necessary that a reasonable amount be paid by a plan
or issuer before a patient becomes responsible for a balance billing
amount.\3\ Therefore, under the Departments' final regulations
published in the Federal Register on November 18, 2015 (Patient
Protections Final Rule), a plan or issuer satisfies the out-of-network
emergency care cost-sharing limitations in the statute if it provides
benefits for out-of-network emergency services in an amount at least
equal to the greatest of the following three amounts (adjusted for in-
network cost sharing): (1) The median amount negotiated with in-network
providers for the emergency service; (2) the amount for the emergency
service calculated using the same method the plan generally uses to
determine payments for out-of-network services (such as the usual,
customary, and reasonable (UCR) amount); or (3) the amount that would
be paid under Medicare Part A or Part B for the emergency service
(collectively, minimum payment standards).\4\ The Departments'
regulations clarify that the cost-sharing requirements create a minimum
payment requirement for the plan or issuer.\5\ The Departments also
clarified that the cost-sharing requirements do not prohibit a group
health plan or health insurance issuer from providing benefits with
respect to an emergency service that are greater than the amounts
specified in the regulations. However, those regulations address
balance billing with respect to only emergency services and, even in
that context, they serve only to minimize the amount of a balance bill
by requiring that plans and issuers must pay a reasonable amount for
emergency services before a patient becomes responsible for a balance
billing amount. Prior to the enactment of the No Surprises Act, these
minimum payment standards were the only federal consumer protections to
reduce potential amounts of balance billing for individuals enrolled in
group health plans and group and individual health insurance coverage.
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\2\ 26 CFR 54.9815-2719A(b); 29 CFR 2590.715-2719A(b); 45 CFR
147.138(b).
\3\ 75 FR 37188, 37194 (June 28, 2010); see also 80 FR 72192
(Nov. 18, 2015). Additional clarification of these rules was also
provided in 2018. See 83 FR 19431 (May 3, 2018).
\4\ 26 CFR 54.9815-2719A(b)(3); 29 CFR 2590.715-2719A(b)(3); 45
CFR 147.138(b)(3).
\5\ If state law prohibits balance billing, or in cases in which
a group health plan or health insurance issuer is contractually
responsible for balance billing amounts, plans and issuers are not
required to satisfy the minimum payment standards set forth in the
regulations, but may not impose any copayment or coinsurance
requirement for out-of-network emergency services that is higher
than the copayment or coinsurance requirement that would apply if
the services were provided in-network. See 26 CFR 54.9815-
2719A(b)(3)(iii); 29 CFR 2590.715-2719A(b)(3)(iii); 45 CFR
147.138(b)(3)(iii); FAQs about Affordable Care Act Implementation
(Part I), Q15 (Sept. 20, 2010), available at <a href="https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/aca-implementation-faqs">https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/aca-implementation-faqs</a>; <a href="http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html">www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html</a>.
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[[Page 36874]]
The No Surprises Act added section 9816 of the Code, section 716 of
ERISA, and section 2799A-1 of the PHS Act, which expand the patient
protections related to emergency services under section 2719A of the
PHS Act, in part, by providing additional consumer protections related
to balance billing.\6\ The No Surprises Act amended section 2719A of
the PHS Act to include a sunset provision effective for plan years
beginning on or after January 1, 2022, when the new protections under
the No Surprises Act take effect.
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\6\ These new protections apply regardless of whether the plan
or coverage is a grandfathered health plan under section 1251 of the
Affordable Care Act. The No Surprises Act also amended 5 U.S.C.
8902(p) to ensure that covered individuals enrolled in FEHB plans
receive these protections.
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Additionally, the No Surprises Act recodified the patient
protections regarding choice of health care professional from section
2719A(a), (c), and (d) of the PHS Act at new section 9822 of the Code,
section 722 of ERISA, and section 2799A-7 of the PHS Act. If a plan or
issuer requires or provides for designation by a participant,
beneficiary, or enrollee of a participating primary care provider,
these provisions permit individuals to designate any participating
primary care providers available to accept them, including
pediatricians, and prohibit the plan or issuer from requiring
authorization or referral for obstetrical or gynecological care.
B. Surprise Billing and the Need for Greater Consumer Protections
Most group health plans, and health insurance issuers offering
group or individual health insurance coverage, have a network of
providers and health care facilities (participating providers or
preferred providers) who agree by contract to accept a specific amount
for their services.\7\ By contrast, providers and facilities that are
not part of a plan or issuer's network (nonparticipating providers)
usually charge higher amounts than the contracted rates that plans and
issuers have negotiated with participating providers and facilities.
When a participant, beneficiary, or enrollee receives care from a
nonparticipating provider, the individual's plan or issuer may decline
to pay for the service or may pay an amount that is lower than the
provider's billed charges, and may subject the individual to greater
cost-sharing requirements than would have been charged had the services
been furnished by a participating provider. Prior to the No Surprises
Act, the nonparticipating provider could generally balance bill the
individual for the difference between the provider's billed charges and
the sum of the amount paid by the plan or issuer and the cost sharing
paid by the individual, unless otherwise prohibited by state law.
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\7\ These interim final rules refer to providers both in terms
of their participation (participating provider) and in terms of a
network (in-network provider). In both situations, the intent is to
refer to a provider that has a contractual relationship or other
arrangement with a plan or issuer to provide health care items and
services for participants, beneficiaries, and enrollees of the plan
or issuer.
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A balance bill may come as a surprise for the individual. A
surprise medical bill is an unexpected bill from a health care provider
or facility that occurs when a covered person receives medical services
from a provider or facility that, usually unknown to the participant,
beneficiary, or enrollee, is a nonparticipating provider or facility
with respect to the individual's coverage. Surprise billing occurs both
for emergency and non-emergency care. In an emergency, a person usually
goes (or is taken by emergency transport) to a nearby emergency
department. Even if they go to a participating hospital or facility for
emergency care, they may receive care from nonparticipating providers
working at that facility. For non-emergency care, a person may choose a
participating facility (and possibly even a participating provider),
but not know that at least one provider involved in their care (for
example, an anesthesiologist or radiologist) is a nonparticipating
provider. In either circumstance, the person might not be in a position
to choose the provider, or to ensure that the provider is a
participating provider. Therefore, in addition to a bill for their
cost-sharing amount, which tends to be higher for out-of-network
services, the person might receive a balance bill from the
nonparticipating provider or facility. This scenario also plays out
frequently for air ambulance services, where individuals generally do
not have the ability to select a provider of air ambulance services,
and, therefore, have little or no control over whether the provider is
in-network with their plan or coverage.
When individuals are unable to avoid nonparticipating providers, it
raises health care costs and exposes patients to financial risk.\8\ The
evidence suggests that the ability to balance bill is used as leverage
by some providers to obtain higher in-network payments, which results
in higher premiums, higher cost sharing for individuals, and increased
health care expenditures overall.\9\ Studies have shown that surprise
bills can be large. For example, a recent study found that physicians
collected, on average, 65 percent of the total charged amount for
emergency department visits that likely included surprise bills,
compared to 52 percent of the total charged amount for emergency
department visits that likely did not include surprise bills. The study
also found that nine percent of the individuals who likely received
surprise bills paid physicians an amount more than $400, which may
cause financial hardship to many individuals.\10\ In addition, out-of-
network cost sharing and payments for surprise bills usually do not
count towards an individual's deductible and maximum out-of-pocket
expenditure limits. Therefore, individuals with surprise bills may have
difficulty reaching those limits, even after a significant health care
event.
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\8\ Cooper Z et al., Out-of-Network Billing and Negotiated
Payments for Hospital-Based Physicians, Health Affairs 39, No. 1,
2020. doi: 10.1377/hlthaff.2019.00507.
\9\ See Cooper, Z. et al., Surprise! Out-Of-Network Billing For
Emergency Care in the United States, NBER Working Paper 23623,
20173623; Duffy, E. et al., Policies to Address Surprise Billing Can
Affect Health Insurance Premiums. The American Journal of Managed
Care 26.9 (2020): 401-404.; and Brown E.C.F., et al., The Unfinished
Business of Air Ambulance Bills, Health Affairs Blog (March 26,
2021), DOI: 10.1377/hblog20210323.911379, available at <a href="https://www.healthaffairs.org/do/10.1377/hblog20210323.911379/full/">https://www.healthaffairs.org/do/10.1377/hblog20210323.911379/full/</a>.
\10\ Biener, A. et al., Emergency Physicians Recover a Higher
Share of Charges From Out-Of-Network Care Than From In-Network Care,
Health Affairs 40, No, 4 (2021): 622-628.
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Another study using claims data from a large commercial issuer for
the period 2010-2016 found that over 39 percent of emergency department
visits to in-network hospitals resulted in an out-of-network bill, and
the incidence increased from 32.3 percent in 2010 to 42.8 percent in
2016. The average potential amount of surprise medical bills also
increased from $220 in 2010 to $628 in 2016. During the same period, 37
percent of inpatient admissions to in-network hospitals resulted in at
least one out-of-network bill, increasing from 26.3 percent in 2010 to
42 percent in 2016, and the average potential surprise medical bill
increased from $804 to $2,040.\11\
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\11\ Sun EC, Mello MM, Moshfegh J, Baker LC, Assessment of Out-
of-Network Billing for Privately Insured Patients Receiving Care in
In-Network Hospitals. JAMA Intern Med. 2019; 179(11):1543-1550
(2019). doi:10.1001/jamainternmed.2019.3451.
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Although some states have enacted laws to reduce or eliminate
balance billing, these efforts have created a patchwork of consumer
protections. Even within a state that has enacted such protections,
those protections typically apply only to individuals enrolled in
individual and group health insurance coverage, as ERISA generally
[[Page 36875]]
preempts state laws that regulate self-insured group health plans
sponsored by private employers. In addition, states are limited in
their ability to address surprise bills that involve an out-of-state
provider.
Surprise medical bills can lead to medical debt for individuals who
have difficulty paying their bills. The impact is most keenly felt by
those communities experiencing poverty and other social risk factors,
as surprise medical bills and medical debt can negatively affect
individuals' abilities to eliminate debt and create wealth, and
ultimately can affect a family for generations.\12\ A recent survey
reported that while 68 percent of respondents said that it was
difficult to pay a surprise bill, the likelihood of such difficulty was
higher for middle income respondents (77 percent) and African Americans
(74 percent). In addition, while 11 percent of survey respondents were
unable to pay the surprise bill, 21 percent of low income respondents,
19 percent of African Americans, and 17 percent of respondents in rural
areas were unable to do so.\13\ In addition, individuals are often
confused by medical bills. A 2016 survey found that 61 percent of
individuals are confused by medical bills, and for 49 percent of
individuals surveyed, the amount owed was a surprise.\14\ These
challenges are exacerbated for underserved communities, which are more
likely to experience poor communication, underlying mistrust of the
medical system, and lower levels of patient engagement than other
populations.\15\ Effective, culturally, and linguistically tailored
communication at appropriate literacy levels, coupled with policies
that address the social risk factors and other barriers underserved
communities face to accessing, trusting, and understanding health care
costs and coverage, can reduce disparities and promote health
equity.\16\
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\12\ Taylor, J. Racism, inequality, and health care for African
Americans. The Century Foundation: Report (December 19, 2019).
<a href="https://tcf.org/content/report/racism-inequality-health-care-african-americans/">https://tcf.org/content/report/racism-inequality-health-care-african-americans/</a>; Chavis, B. Op-Ed: Big insurance must help end
surprise medical billing. blackpressUSA (February 24, 2020).
\13\ Families USA, Surprise Medical Bills, Results from a
National Survey, November 2019. <a href="https://familiesusa.org/wp-content/uploads/2019/11/Surprise-Billing-National-Poll-Report-FINAL.pdf">https://familiesusa.org/wp-content/uploads/2019/11/Surprise-Billing-National-Poll-Report-FINAL.pdf</a>.
\14\ Gooch, Kelly. 61% of patients confused by medical bills,
survey finds. Becker's Hospital Review (July 14, 2016). <a href="https://www.beckershospitalreview.com/finance/61-of-patients-confused-by-medical-bills-survey-finds.html">https://www.beckershospitalreview.com/finance/61-of-patients-confused-by-medical-bills-survey-finds.html</a>.
\15\ See Butler S, Sherriff N. How poor communication
exacerbates health inequities and what to do about it. Brookings
Institution: Report (February 22, 2021). <a href="https://www.brookings.edu/research/how-poor-communication-exacerbates-health-inequities-and-what-to-do-about-it/">https://www.brookings.edu/research/how-poor-communication-exacerbates-health-inequities-and-what-to-do-about-it/</a>; Hamel, L., Lopes, L., Mu[ntilde]ana, C.,
Artiga, S., Brodie, M. Race, Health, and COVID-19: The Views and
Experiences of Black Americans. Kaiser Family Foundation (October
2020). <a href="https://files.kff.org/attachment/Report-Race-Health-and-COVID-19-The-Views-and-Experiences-of-Black-Americans.pdf">https://files.kff.org/attachment/Report-Race-Health-and-COVID-19-The-Views-and-Experiences-of-Black-Americans.pdf</a>; Shen
M.J., Peterson E.B., Costas-Mu[ntilde]iz R. et al. The Effects of
Race and Racial Concordance on Patient-Physician Communication: A
Systematic Review of the Literature. J. Racial and Ethnic Health
Disparities 5, 117-140 (2018). <a href="https://doi.org/10.1007/s40615-017-0350-4">https://doi.org/10.1007/s40615-017-0350-4</a>.
\16\ P[eacute]rez-Stable EJ, El-Toukhy S. Communicating with
diverse patients: How patient and clinician factors affect
disparities. Patient Educ Couns. 2018;101(12):2186-2194.
doi:10.1016/j.pec.2018.08.021; McNally, M. Confronting disparities
in access to healthcare for underserved populations. MedCity News
(February 22, 2021). <a href="https://medcitynews.com/2021/02/confronting-disparities-in-access-to-healthcare-for-underserved-populations-in-2021/">https://medcitynews.com/2021/02/confronting-disparities-in-access-to-healthcare-for-underserved-populations-in-2021/</a>.
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Communication among providers, plans, consumers, communities, and
consumer advocates must be consistent with and reinforce all relevant
consumer protections related to surprise bills. Such communication must
be accessible, linguistically tailored, and at an appropriate literacy
level. This includes compliance with requirements to provide effective
communication for individuals with disabilities under the Americans
with Disabilities Act of 1990,\17\ section 504 of the Rehabilitation
Act of 1973 \18\ and, where applicable, section 1557 of the Affordable
Care Act,\19\ as well as compliance with race, color, and national
origin protections under title VI of the Civil Rights Act of 1964 \20\
and section 1557 of the Affordable Care Act. Section 1557 prohibits
discrimination on the basis of race, color, national origin, sex
(including sexual orientation and gender identity), age, or disability
in covered health programs or activities, including requiring covered
entities to take reasonable steps to ensure meaningful access for
individuals with limited English proficiency.
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\17\ 42 U.S.C. 12101 et seq.
\18\ 29 U.S.C. 794 and 794d.
\19\ 42 U.S.C. 18116(a).
\20\ 42 U.S.C. 2000d.
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On January 20, 2021, President Biden issued Executive Order 13985,
``On Advancing Racial Equity and Support for Underserved Communities
Through the Federal Government,'' \21\ directing that as a policy
matter, the federal government should pursue a comprehensive approach
to advancing equity for all, including people of color and others who
have been historically underserved, marginalized, and adversely
affected by persistent poverty and inequality. Executive Order 13985
also directs HHS to assess whether, and to what extent, its programs
and policies perpetuate systemic barriers to opportunities and benefits
for people of color and other underserved groups. Consistent with
Executive Order 13985, regulations issued pursuant to the No Surprises
Act must ensure that communication from plans, issuers, providers,
facilities, and providers of air ambulance services recognizes these
inequities and upholds all relevant consumer protections. Regulations
issued pursuant to the No Surprises Act should ensure that all
individuals, particularly those from underserved and minority
communities, trust and believe information they receive related to
costs and network coverage. Regulations and policies should enable and
encourage regulated entities to address barriers to accessing care,
including mistrust of the health care system. They should also
encourage entities to communicate with individuals in a language they
can understand, in a respectful way that addresses cultural
differences, and at an appropriate literacy level. To ensure all
consumers, particularly those in minority and underserved communities,
are able to understand and benefit from these consumer protections,
deliberate attention must be paid to the unique barriers and challenges
underserved communities face in understanding and accessing health
care. The Departments seek comment from those who are members of,
advocate for, and work with underserved communities regarding the
impact of these interim final rules.
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\21\ 86 FR 7009 (Jan. 25, 2021).
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C. Preventing Surprise Medical Bills Under the Consolidated
Appropriations Act, 2021
On December 27, 2020, the Consolidated Appropriations Act, 2021
(CAA), which included the No Surprises Act, was signed into law. The No
Surprises Act provides federal protections against surprise billing and
limits out-of-network cost sharing under many of the circumstances in
which surprise bills arise most frequently.\22\
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\22\ Public Law 116-260.
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The CAA added provisions that apply to group health plans and
health insurance issuers in the group and individual market in a new
Part D of title XXVII of the PHS Act, and also added new provisions to
part 7 of ERISA, and subchapter B of chapter 100 of the Code. Section
102 of the No Surprises Act added section 9816 of the Code, section 716
of ERISA, and section 2799A-1 of the PHS Act, which contain limitations
on cost sharing, and requirements for initial payments for emergency
services and for non-emergency services provided by
[[Page 36876]]
nonparticipating providers at certain participating health care
facilities. Section 103 of the No Surprises Act amended section 9816 of
the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act to
establish an independent dispute resolution (IDR) process that allows
plans and issuers and nonparticipating providers and nonparticipating
emergency facilities to resolve disputes over out-of-network rates.
Section 105 of the No Surprises Act added section 9817 of the Code,
section 717 of ERISA, and section 2799A-2 of the PHS Act, which contain
limitations on cost sharing and requirements for initial payments to
nonparticipating providers of air ambulance services, and allow plans
and issuers and such providers of air ambulance services to access the
IDR process. The CAA also amended the FEHBA, as discussed in more
detail in section I.D. of this preamble.
The CAA provisions that apply to health care providers and
facilities and providers of air ambulance services, such as cost-
sharing requirements, prohibitions on balance billing for certain items
and services, and requirements related to disclosures about balance
billing protections, were added to title XXVII of the PHS Act in a new
part E.
The Departments are issuing regulations in several phases
implementing provisions of title I (No Surprises Act) and title II
(Transparency) of Division BB of the CAA. Later this year, the
Departments intend to issue regulations regarding the federal IDR
process (sections 103 and 105 of Division BB), patient protections
through transparency and the patient-provider dispute resolution
process (section 112), and price comparison tools (section 114). The
Departments also intend to undertake rulemaking this year to propose
the form and manner in which plans, issuers, and providers of air
ambulance services would report information regarding air ambulance
services (section 106). In addition, HHS intends to undertake
rulemaking to implement requirements on health insurance issuers
offering individual health insurance coverage or short-term, limited-
duration insurance to disclose and report information regarding direct
or indirect compensation provided to agents and brokers (section
202(c)), as well as provisions related to HHS enforcement of
requirements on issuers, non-federal governmental group health plans,
providers, facilities, and providers of air ambulance services.
The CAA also includes provisions regarding transparency in plan and
insurance identification cards (section 107), continuity of care
(section 113), accuracy of provider network directories (section 116),
and prohibition on gag clauses (section 201) that are applicable for
plan years beginning on or after January 1, 2022; and pharmacy benefit
and drug cost reporting (section 204) that is required by December 27,
2021. The Departments intend to undertake rulemaking to fully implement
these provisions, but rulemaking regarding some of these provisions
might not occur until after January 1, 2022. The Departments note that
any such rulemaking to fully implement these provisions will include a
prospective applicability date that provides plans, issuers, providers,
and facilities, as applicable, a reasonable amount of time to comply
with new or clarified requirements. Until rulemaking to fully implement
these provisions is finalized and effective, plans and issuers are
expected to implement the requirements using a good faith, reasonable
interpretation of the statute. The Departments intend to issue guidance
in the near future regarding their expectations related to good faith
compliance with these provisions.
D. Preventing Surprise Medical Bills for Federal Employees Health
Benefits Plans
The No Surprises Act also amended the FEHBA, 5 U.S.C. 8901 et seq.,
by adding a new subsection (p) to 5 U.S.C. 8902. Under this new
provision, each FEHB Program contract must require a carrier to comply
with provisions of sections 9816, 9817, and 9822 of the Code; sections
716, 717, and 722 of ERISA; and sections 2799A-1, 2799A-2, and 2799A-7
of the PHS Act (as applicable) in the same manner as they apply with
respect to a group health plan or health insurance issuer offering
group or individual health insurance coverage. Likewise, the provisions
of sections 2799B-1, 2799B-2, 2799B-3, and 2799B-5 of the PHS Act apply
to health care providers, facilities, and providers of air ambulance
services with respect to covered individuals in FEHB plans in the same
manner as they apply to participants, beneficiaries, or enrollees in
group health plans or coverage offered by health insurance issuers.
OPM is charged with administering the FEHB Program and maintains
oversight and enforcement authority with respect to FEHB health
benefits plans, which are federal governmental plans. Generally, under
5 U.S.C. 8902(p), each FEHB contract must require a carrier to comply
with certain PHS Act, ERISA, and Code requirements in the same manner
as they apply to a group health plan or health insurance issuer.
II. Executive Summary
These interim final rules implement provisions of the No Surprises
Act that: (1) Apply to group health plans, health insurance issuers
offering group or individual health insurance coverage, and carriers in
the FEHB Program to provide protections against balance billing and
out-of-network cost sharing with respect to emergency services, non-
emergency services furnished by nonparticipating providers at certain
participating health care facilities, and air ambulance services
furnished by nonparticipating providers of air ambulance services; (2)
prohibit nonparticipating providers, health care facilities, and
providers of air ambulance services from balance billing participants,
beneficiaries, and enrollees in certain situations, and permit these
providers and facilities to balance bill individuals if certain notice
and consent requirements in the No Surprises Act are satisfied; (3)
require certain health care facilities and providers to provide
disclosures of federal and state patient protections against balance
billing; (4) recodify certain patient protections that initially
appeared in the ACA and that the No Surprises Act applies to
grandfathered plans; and (5) set forth complaints processes with
respect to violations of the protections against balance billing and
out-of-network cost sharing under the No Surprises Act.
These interim final rules protect individuals from surprise medical
bills for emergency services, air ambulance services furnished by
nonparticipating providers, and non-emergency services furnished by
nonparticipating providers at participating facilities in certain
circumstances. Among other requirements, these interim final rules
require emergency services to be covered without any prior
authorization, without regard to whether the health care provider
furnishing the emergency services is a participating provider or a
participating emergency facility with respect to the services, and
without regard to any other term or condition of the plan or coverage
other than the exclusion or coordination of benefits or a permitted
affiliation or waiting period. Additionally, emergency services include
certain services in an emergency department of a hospital or an
independent freestanding emergency department, as well as post-
stabilization services in certain instances.
With respect to emergency services, air ambulance services
furnished by nonparticipating providers, and non-
[[Page 36877]]
emergency services furnished by nonparticipating providers at
participating facilities, these interim final rules limit cost sharing
for out-of-network services to in-network levels, require such cost
sharing to count toward any in-network deductibles and out-of-pocket
maximums, and prohibit balance billing, as required by the No Surprises
Act.
These interim final rules specify that cost-sharing amounts for
such services furnished by nonparticipating emergency facilities and
nonparticipating providers at participating facilities must be
calculated based on one of the following amounts: (1) An amount
determined by an applicable All-Payer Model Agreement under section
1115A of the Social Security Act; (2) if there is no such applicable
All-Payer Model Agreement, an amount determined by a specified state
law; or (3) if there is no such applicable All-Payer Model Agreement or
specified state law, the lesser of the billed charge or the plan's or
issuer's median contracted rate, referred to as the qualifying payment
amount (QPA). Cost-sharing amounts for air ambulance services provided
by nonparticipating providers must be calculated using the lesser of
the billed charge or the QPA, and the cost-sharing requirement that
would apply if such services were provided by a participating provider.
Under these interim final rules, balance billing for services
covered by the rules generally is prohibited, and the total amount to
be paid to the provider or facility, including any cost sharing, is
based on: (1) An amount determined by an applicable All-Payer Model
Agreement under section 1115A of the Social Security Act; (2) if there
is no such applicable All-Payer Model Agreement, an amount determined
by a specified state law; (3) if there is no such applicable All-Payer
Model Agreement or specified state law, an amount agreed upon by the
plan or issuer and the provider or facility; or (4) if none of those
three conditions apply, an amount determined by an IDR entity.
In general, under the No Surprises Act and these interim final
rules, the protections that limit cost sharing and prohibit balance
billing do not apply to certain post-stabilization services, or to
certain non-emergency services performed by nonparticipating providers
at participating health care facilities, if the provider or facility
provides notice to the participant, beneficiary, or enrollee, and
obtains the individual's consent to waive the balance billing
protections. However, providers and facilities may not provide such
notice or seek consent from individuals in certain circumstances where
surprise bills are likely to occur, such as for ancillary services
provided by nonparticipating providers in connection with non-emergency
care in a participating facility. In such circumstances, balance
billing is prohibited, and the other protections of the No Surprises
Act, such as in-network cost-sharing requirements, continue to apply.
Neither the No Surprises Act, nor these interim final rules,
universally protect individuals from every high or unexpected medical
bill. For example, an individual may be enrolled in a group health plan
or health insurance coverage that provides little or no coverage for
their particular health care condition or the items and services
necessary to treat that condition. In addition, balance billing
continues to be permitted, unless prohibited by state law or contract,
in circumstances where these interim final rules do not apply, such as
for non-emergency items or services provided at facilities that are not
included within the definition of health care facility in these interim
final rules. Nonetheless, the No Surprises Act and these interim final
rules provide relief from some of the more common scenarios where a
participant, beneficiary, or enrollee might otherwise be faced with
high and unexpected medical costs.
These interim final rules establish a complaints process for
receiving and resolving complaints related to these new balance billing
protections.
These interim final rules also implement the requirement of the No
Surprises Act that certain health care providers and facilities make
publicly available, post on a public website, and provide a one-page
notice to individuals regarding: (1) The requirements and prohibitions
applicable to the provider or facility under sections 2799B-1 and
2799B-2 of the PHS Act and their implementing regulations; (2) any
applicable state balance billing requirements; and (3) how to contact
appropriate state and federal agencies if the individual believes the
provider or facility has violated the requirements described in the
notice.
Section 116 of the No Surprises Act also added section 9820(c) of
the Code, section 720(c) of ERISA, and section 2799A-5(c) of the PHS
Act, which include similar disclosure requirements applicable to plans
and issuers. In general, under these provisions, plans and issuers must
make publicly available, post on a public website of the plan or
issuer, and include on each explanation of benefits for an item or
service with respect to which the requirements under section 9816 of
the Code, section 716 of ERISA, and section 2799A-1 of the PHS Act
apply, information on the requirements applied under these
aforementioned sections, as applicable; on the requirements and
prohibitions applied under sections 2799B-1 and 2799B-2 of the PHS Act;
on other applicable state laws on out-of-network balance billing; and
on contacting appropriate state and federal agencies in the case that
an individual believes that such a provider or facility has violated
the prohibition against balance billing. These disclosure requirements
are applicable for plan years beginning on or after January 1, 2022. To
reduce burden and facilitate compliance with these disclosure
requirements, the Departments are concurrently issuing a model
disclosure notice that health care providers, facilities, group health
plans, and health insurance issuers may, but are not required to, use
to satisfy the disclosure requirements regarding the balance billing
protections. The Departments will consider use of the model notice in
accordance with the accompanying instructions to be good faith
compliance with the disclosure requirements of section 9820(c) of the
Code, section 720(c) of ERISA, and section 2799A-5(c) of the PHS Act,
if all other applicable requirements are met. In addition, HHS will
consider use of the model notice in accordance with the accompanying
instructions to be good faith compliance with the disclosure
requirements of section 2799B-3 of the PHS Act and 45 CFR 149.430, if
all other applicable PHS Act requirements are met. The Departments may
address the requirements under section 9820(c) of the Code, section
720(c) of ERISA, and section 2799A-5(c) of the PHS Act, as added by the
No Surprises Act, in more detail in future guidance or rulemaking.
Until further guidance is issued, plans and issuers are expected to
implement the requirements of section 9820(c) of the Code, section
720(c) of ERISA, and section 2799A-5(c) of the PHS Act using a good
faith, reasonable interpretation of the law. The Departments will take
into account the statutory applicability date and the timeframe for
implementation when determining good faith compliance with the law.
These interim final rules generally apply to group health plans and
health insurance issuers offering group or individual health insurance
coverage (including grandfathered health plans) with respect to plan
years (in the individual market, policy years) beginning on or after
January 1, 2022, as
[[Page 36878]]
well as to health care providers and facilities, and providers of air
ambulance services beginning on January 1, 2022.
In the OPM interim final rules included in this rulemaking, OPM
adopts all provisions of the Departments' interim final rules that
address the sections of the Code, ERISA, and the PHS Act that are
referenced in 5 U.S.C. 8902(p). In the OPM interim final rules, OPM
defines terms unique to the FEHB Program, adapts some of the
Departments' rules as necessary to properly integrate with the existing
FEHB Program regulatory and contractual structure, sets forth the
circumstances in which OPM will enforce these rules against FEHB
carriers, and sets forth the types of court actions involving the FEHB
Program that may be brought against OPM with respect to the No
Surprises Act.
In effectuating compliance with 5 U.S.C. 8902(p), FEHB contract
terms that relate to the nature, provision, or extent of coverage or
benefits (including payments with respect to benefits) supersede and
preempt state law or local law, or any regulation issued thereunder,
which relates to health insurance or plans.\23\ OPM contracts with FEHB
carriers may include terms that adopt state law as governing for a
particular purpose.
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\23\ 5 U.S.C. 8902(m)(1); see Coventry Health Care of Missouri,
Inc. v. Nevils, 137 S. Ct. 1190 (2017).
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III. Overview of the Interim Final Rules--Departments of HHS, Labor,
and the Treasury
A. Definitions
The provisions of the Code, ERISA, and the PHS Act added by the No
Surprises Act, as well as these interim final rules, include defined
terms that are specific to the requirements and implementation of the
law. Definitions of these key terms are described throughout this
preamble. These terms help define the scope of the balance billing
protections and how cost-sharing amounts and payment levels are
determined.
The Departments note that these interim final rules define the term
``physician or health care provider'' to mean a physician or other
health care provider who is acting within the scope of practice of that
provider's license or certification under applicable state law, but the
definition specifically excludes providers of air ambulance services.
The Departments recognize that, although the No Surprises Act does not
define ``provider,'' it uses the term in a manner that includes
providers of air ambulance services in some provisions. For example,
the No Surprises Act added section 2799B-4 of the PHS Act, which
specifically includes providers of air ambulance services when
referencing providers. However, certain other provisions in the No
Surprises Act apply only to providers of air ambulance services, or
apply to health care providers generally, but by their terms are
inapplicable to providers of air ambulance services. As an example of
the latter, the No Surprises Act added section 2799B-2 of the PHS Act,
which generally prohibits balance billing by nonparticipating health
care providers furnishing non-emergency services at participating
health care facilities. Although this provision does not explicitly
exclude providers of air ambulance services, providers of air ambulance
services would not furnish non-emergency services at participating
health care facilities. Therefore, the provision does not apply to
providers of air ambulance services (such providers are, however,
prohibited from balance billing under section 2799B-5 of the PHS Act).
Similarly, section 2799B-3 of the PHS Act, which requires a health care
provider to inform individuals of the requirements and prohibitions on
such health care provider in sections 2799B-1 and 2799B-2 of the PHS
Act (neither of which apply to providers of air ambulance services),
does not by its terms apply to providers of air ambulance services.
Therefore, these interim final rules define ``physician or health care
provider'' to exclude providers of air ambulance services, in order to
help clarify which provisions of the No Surprises Act and interim final
rules apply to providers of air ambulance services. In instances where
provisions under the No Surprises Act, as implemented in these interim
final rules, apply to providers of air ambulance services, the
provisions explicitly reference air ambulance providers. Conversely,
where providers of air ambulance services are not explicitly mentioned,
the provisions do not apply.
The Departments seek comment on the terms defined in these interim
final rules, including the appropriateness and usability of the
definitions, and whether additional terms should be defined in future
rulemaking.
B. Preventing Surprise Medical Bills
1. Scope of the New Surprise Billing Protections
i. Emergency Services
Under section 9816(a) of the Code, section 716(a) of ERISA, and
section 2799A-1(a) of the PHS Act, and these interim final rules, if a
group health plan, or a health insurance issuer offering group or
individual health insurance coverage, provides or covers any benefits
with respect to services in an emergency department of a hospital or
with respect to emergency services in an independent freestanding
emergency department, the plan or issuer must cover emergency services
as defined in these interim final rules and such coverage must be
provided in accordance with these interim final rules.
A plan or issuer providing coverage of emergency services must do
so without the individual or the health care provider having to obtain
prior authorization (including when the emergency services are provided
out-of-network) and without regard to whether the health care provider
furnishing the emergency services is a participating provider or a
participating emergency facility with respect to the services. The
emergency services must be provided without regard to any other term or
condition of the plan or coverage other than the exclusion or
coordination of benefits (to the extent not inconsistent with benefits
for an emergency medical condition as defined in these interim final
rules), an affiliation or waiting period as permitted under the Code,
ERISA, or the PHS Act, or applicable cost-sharing requirements. For a
plan or health insurance coverage with a network of providers that
provides benefits for emergency services, the plan or issuer may not
impose any administrative requirement or limitation on coverage for
emergency services received from nonparticipating providers or
nonparticipating emergency facilities that is more restrictive than the
requirements or limitations that apply to emergency services received
from participating providers or participating emergency facilities. In
addition, such plan or health insurance coverage must comply with the
requirements regarding cost sharing, payment amounts, and processes for
resolving billing disputes described elsewhere in this preamble.
The terms ``emergency medical condition,'' ``emergency services,''
and ``to stabilize'' generally have the meaning given to them under the
Emergency Medical Treatment and Labor Act (EMTALA), section 1867 of the
Social Security Act.\24\ Emergency services include: (1) An appropriate
medical screening examination that is within the capability of the
emergency department of a hospital or of an independent freestanding
emergency department, including ancillary services
[[Page 36879]]
routinely available to the emergency department, to evaluate whether an
emergency medical condition exists; and (2) such further medical
examination and treatment as may be required to stabilize the
individual (regardless of the department of the hospital in which the
further medical examination and treatment is furnished) within the
capabilities of the staff and facilities available at the hospital or
the independent freestanding emergency department.
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\24\ 42 U.S.C. 1395dd.
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Under section 2719A of the PHS Act, emergency services were defined
to include: (1) A medical screening examination (as required under
section 1867 of the Social Security Act) that is within the capability
of the emergency department of a hospital, including ancillary services
routinely available to the emergency department to evaluate such
emergency medical condition; and (2) such further medical examination
and treatment as are required under section 1867 of the Social Security
Act to stabilize the patient within the capabilities of the staff and
facilities available at the hospital. HHS has previously interpreted
the obligations on hospitals under EMTALA to provide medical
examination and stabilization services to end when a patient is
formally admitted in good faith.\25\ Section 9816(a) of the Code,
section 716(a) of ERISA, and section 2799A-1(a) of the PHS Act expand
the definition of emergency services (as compared to section 2719A of
the PHS Act) to include stabilization services ``regardless of the
department of the hospital in which the further medical examination and
treatment is furnished.'' Therefore, the definition of emergency
services in these interim final rules includes pre-stabilization
services that are provided after the patient is moved out of the
emergency department and admitted to a hospital, and these services
will be subject to the protections of the No Surprises Act.
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\25\ 42 CFR 489.24(a)(1)(ii); 68 FR 53221-53264 (Sept. 9, 2003);
73 FR 48654-48668 (Aug. 19, 2008).
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Section 102 of the No Surprises Act further broadens the definition
of emergency services to include emergency services provided at an
independent freestanding emergency department. An independent
freestanding emergency department is a health care facility (not
limited to those described in the definition of health care facility at
section 9816(b)(2)(A)(ii) of the Code, section 716(b)(2)(A)(ii) of
ERISA, and section 2799A-1(b)(2)(A)(ii) of the PHS Act, as applicable)
that provides emergency services, and is geographically separate and
distinct from a hospital, and separately licensed as such by a state.
The definition of ``independent freestanding emergency department'' is
intended to include any health care facility that is geographically
separate and distinct from a hospital, and that is licensed by a state
to provide emergency services, even if the facility is not licensed
under the term ``independent freestanding emergency department.''
Regulation of health care facilities varies by state. In
particular, state regulation of urgent care centers varies
significantly, and is evolving as these types of centers become more
common.\26\ If under state licensure laws, urgent care centers are
permitted to provide emergency services, then urgent care centers in
that state that are geographically separate and distinct from a
hospital would fall within the definition of independent freestanding
emergency department for purposes of these interim final rules. In
contrast, if state licensure of urgent care centers does not permit
such facilities to provide emergency services as defined in these
interim final rules, then urgent care centers in that state would not
be treated as independent freestanding emergency departments for
purposes of these interim final rules. Finally, the definition of
emergency services also includes additional post-stabilization
services, as discussed in section III.B.1.ii of this preamble.
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\26\ Association of State and Territorial Health Officials. As
Urgent Care Centers Increase, Licensing Authority Falling Under
State Health Agencies, (Oct. 11, 2018) available at <a href="https://www.astho.org/StatePublicHealth/As-Urgent-Care-Centers-Increase-Licensing-Authority-Falling-Under-State-Health-Agencies/10-11-18/">https://www.astho.org/StatePublicHealth/As-Urgent-Care-Centers-Increase-Licensing-Authority-Falling-Under-State-Health-Agencies/10-11-18/</a>.
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The term ``emergency medical condition'' means a medical condition
manifesting itself by acute symptoms of sufficient severity (including
severe pain) such that a prudent layperson, who possesses an average
knowledge of health and medicine, could reasonably expect the absence
of immediate medical attention to result in a condition described in
EMTALA, including (1) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or her unborn
child) in serious jeopardy, (2) serious impairment to bodily functions,
or (3) serious dysfunction of any bodily organ or part.\27\ This
definition includes mental health conditions and substance use
disorders.
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\27\ See 42 U.S.C. 1395dd(e)(1)(A).
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The Departments are aware that some plans and issuers currently
deny coverage of certain services provided in the emergency department
of a hospital by determining whether an episode of care involves an
emergency medical condition based solely on final diagnosis codes, such
as International Classification of Diseases, Tenth Revision, Clinical
Modification (ICD-10-CM) codes . In addition, some plans and issuers
might automatically deny coverage based on a list of final diagnosis
codes initially, without regard to the individual's presenting symptoms
or any additional review. Following an initial denial, plans and
issuers might then provide for complete consideration of the claim, and
apply the prudent layperson standard, only as part of an appeals
process if the participant, beneficiary, or enrollee appeals. These
practices are inconsistent with the emergency services requirements of
the No Surprises Act and the ACA.\28\ This is true even if the process
for complete consideration of the claim following an initial denial is
not designated as a formal appeal. Instead, the determination of
whether the prudent layperson standard is met must be made on a case-
by-case basis before an initial denial of an emergency services claim.
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\28\ See also Am. Coll. of Emergency Physicians v. Blue Cross &
Blue Shield of Georgia, No. 20-11511, 2020 WL 6165852 (11th Cir.
Oct. 22, 2020) (per curiam) (reversing dismissal of plaintiffs' ACA
and ERISA claims alleging defendants violated prudent layperson
standard where review process was based upon physician review of
medical records and diagnostic codes; prudent layperson standard
ignores a patient's final diagnosis and instead asks whether a
person with average medical knowledge would reasonably think they
need emergency services to address their symptoms).
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These interim final rules make clear that if a group health plan,
or a health insurance issuer offering group or individual health
insurance coverage, provides or covers any benefits with respect to
services in an emergency department of a hospital or with respect to
emergency services in an independent freestanding emergency department,
the plan or issuer must cover emergency services without limiting what
constitutes an emergency medical condition (as defined in these interim
final rules) solely on the basis of diagnosis codes. When a plan or
issuer denies coverage, in whole or in part, for a claim for payment of
a service rendered in the emergency department of a hospital or
independent freestanding emergency department, including services
rendered during observation or surgical services, the determination of
whether the prudent layperson standard has been met must be based on
all pertinent documentation and be focused on the presenting symptoms
(and not solely on the final diagnosis). This determination must take
into account that the legal standard
[[Page 36880]]
regarding the decision to seek emergency services is based on whether a
prudent layperson (rather than a medical professional) would reasonably
consider the situation to be an emergency.\29\ In covering emergency
services, plans and issuers must also ensure that they do not restrict
the coverage of emergency services by imposing a time limit between the
onset of symptoms and the presentation of the participant, beneficiary,
or enrollee at the emergency department. Similarly, plans and issuers
also may not restrict the coverage of emergency services because the
patient did not experience a sudden onset of the condition.
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\29\ However, nothing in the statute or these interim final
rules prevents a plan or issuer from approving coverage for
emergency services solely on the basis of diagnosis codes, or from
taking diagnostic codes into account when deciding payment for a
claim for emergency services, provided a denial of coverage is not
based solely on diagnosis codes.
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The Departments are also aware that some plans and issuers that
generally provide coverage for emergency services have nonetheless
denied benefits for such services based on other general plan
exclusions. For example, the Departments are aware of some plans and
issuers denying claims for emergency services provided to dependent
women who are pregnant, based on a general plan exclusion for dependent
maternity care. As explained previously, both the coverage of emergency
services rules issued under section 2719A of the PHS Act and the new
emergency services requirements included in these interim final rules
provide, in part, that if a plan or issuer provides or covers any
benefits with respect to services in an emergency department of a
hospital (or under these interim final rules, in an independent
freestanding emergency department), emergency services must be provided
``without regard to any other term or condition of the plan or coverage
(other than the exclusion or coordination of benefits . . . ).'' The
Departments clarify that this provision does not permit plans and
issuers to exclude benefits for items and services that would otherwise
constitute benefits for an emergency medical condition as defined under
these interim final rules. This provision does not permit plans and
issuers that cover emergency services to deny benefits for a
participant, beneficiary, or enrollee with an emergency medical
condition that receives emergency services, based on a general plan
exclusion that would apply to items and services other than emergency
services.
ii. Post-Stabilization Services
Under section 9816(a)(3)(C)(ii) of the Code, section
716(a)(3)(C)(ii) of ERISA, and section 2799A-1(a)(3)(C)(ii) of the PHS
Act, emergency services include any additional items and services that
are covered under a plan or coverage and furnished by a
nonparticipating provider or nonparticipating emergency facility
(regardless of the department of the hospital in which such items and
services are furnished) after a participant, beneficiary, or enrollee
is stabilized and as part of outpatient observation or an inpatient or
outpatient stay with respect to the visit in which the other emergency
services are furnished. Such additional items and services (referred to
in this preamble as post-stabilization services) are considered
emergency services subject to surprise billing protections unless the
conditions enumerated in section 9816(a)(3)(C)(ii)(II)(aa)-(cc) of the
Code, section 716(a)(3)(C)(ii)(II)(aa)-(cc) of ERISA, or section 2799A-
1(a)(3)(C)(ii)(II)(aa)-(cc) of the PHS Act, as applicable, are met, as
well as such other conditions as specified by the Departments under
paragraph (dd) of the respective sections. Therefore, these interim
final rules provide that post-stabilization services are emergency
services unless all of the following conditions are met.
First, the attending emergency physician or treating provider must
determine that the participant, beneficiary, or enrollee is able to
travel using nonmedical transportation or nonemergency medical
transportation to an available participating provider or facility
located within a reasonable travel distance, taking into consideration
the individual's medical condition. The HHS interim final rules codify
this requirement at 45 CFR 149.410(b)(1). For this purpose, a treating
provider is a physician or health care provider who has evaluated the
individual. It is generally expected that a treating provider with
medical training and experience related to the individual's specific
medical condition will determine if the individual is able to travel
using nonmedical transportation or nonemergency medical transportation
to an available participating provider or facility located within a
reasonable travel distance. This determination is based on all the
relevant facts and circumstances and the individual should be involved
in the decision-making process, if possible. The determination by the
attending emergency physician or treating provider is binding on the
facility for purposes of this requirement. This requirement is based on
the Departments' understanding that such provider is in the best
position to make this determination.
For individuals receiving care in or near their plan's or issuer's
covered service area, as well as individuals with coverage that uses a
national network of providers and facilities, the statutory criterion
would generally be sufficient to ensure that an individual can freely
choose, based on their medical condition, to receive post-stabilization
services at a participating facility or participating provider. The
additional requirement in these interim final rules that the individual
be able to travel to an available participating provider or facility
located within a reasonable travel distance, taking into consideration
the individual's medical condition, is necessary and appropriate to
carry out the provision of the No Surprises Act, as the requirement is
intended to address the common situations in which an individual has
received emergency services in a geographic region far from where any
participating providers or facilities are located. In cases where the
individual cannot travel using nonmedical transportation or
nonemergency medical transportation, or cases where there are no
participating facilities or participating providers located within a
reasonable travel distance, taking into account the individual's
medical condition, the Departments are of the view that individuals are
unable to provide consent freely and, therefore, balance billing
protections continue to apply.
In addition, the Departments recognize that an individual's
transportation options may vary based on the individual's location,
social risk, and other risk factors. In cases of underserved and
geographically isolated communities and those with social risk factors
related to income and transportation options, individuals may face
additional barriers to obtaining post-stabilization services without a
disruption in care. For example, individuals may not have the ability
to pay for a taxi, may not have access to a car, may not be able to
safely take public transit due to their medical condition, or may not
have public transit options available. In these cases, the net effect
would be the same: The individual would face unreasonable travel
burdens that could prevent them from being able to consent freely to a
waiver of the otherwise applicable balance billing protections. The
Departments expect the attending emergency physician or treating
provider to consider such factors when
[[Page 36881]]
assessing the individual's ability to travel to a participating
provider or facility. The Departments seek comment on the definition of
``reasonable travel distance'' and whether specific standards or
examples should be provided regarding what constitutes an unreasonable
travel burden. For example, should reasonable travel distance take into
account only mileage, or also other factors, such as traffic or other
route conditions that might make traveling difficult, time consuming,
or hazardous?
In contrast to situations where a participant, beneficiary, or
enrollee is able to travel using nonmedical transportation or
nonemergency medical transportation following stabilization, in the
event that the individual requires medical transportation to travel,
including transportation by either ground or air ambulance vehicle, the
individual is not in a condition to receive notice or provide consent.
Therefore, the surprise billing protections continue to apply to post-
stabilization services provided in connection with the visit for which
the individual received emergency services.
Second, the provider or facility furnishing post-stabilization
services must satisfy the notice and consent criteria of section 2799B-
2(d) of the PHS Act with respect to such items and services (which are
implemented in HHS-only interim final rules at 45 CFR 149.410(b)(2),
and incorporate by reference the criteria for notice and consent in 45
CFR 149.420(c) through (g)).
Third, the individual (or the individual's authorized
representative) must be in a condition to receive the information in
the notice described in section 2799B-2 of the PHS Act (which is also
implemented in 45 CFR 149.410(b)(3)) and to provide informed consent
under such section, in accordance with applicable state law. Whether an
individual is in a condition to receive the information in the notice
is determined by the attending physician or treating provider using
appropriate medical judgment. It is generally expected that an
attending physician or treating provider with medical training and
experience related to the individual's specific medical condition will
make this determination based on all the relevant facts and
circumstances. In addition to applying any requirements under state
law, such medical professionals should apply the same principles as
they would when determining if a patient is able to provide informed
consent for treatment.\30\ They should assess whether an individual is
capable of understanding the information provided in the notice and the
implications of consenting. Consideration must be given to the
individual's state of mind after receiving the emergency services and
the individual's emotional state at the time of consent. For example,
consideration must be given to the effect of any alcohol or drug use by
the individual, including the use or administration of prescribed
medications, as well as to any pain the individual is experiencing, and
the impact of those factors on the patient's state of mind. If the
individual is experiencing a mental or behavioral health episode or
displaying symptoms of a mental or behavioral health disorder, or is
impaired by a substance abuse disorder, consideration should also be
given as to whether the individual's condition impairs their ability to
receive the information in the notice and provide informed consent. In
addition, consideration must be given to cultural and contextual
factors that may affect the informed decision-making and consent
process for members of underserved communities, including lack of trust
arising from historical inequities, misinformation about the informed
consent process, or barriers to comprehension of the information given
through the informed consent process and after the informed consent
document is signed.\31\ These barriers may include accessibility,
language, and literacy barriers. In addition, the informed consent must
be obtained in a way that adheres to all civil rights protections cited
within this rulemaking, ensuring that all individuals including those
from underserved, underrepresented communities, with limited English
proficiency, and with disabilities, are able to understand and freely
make informed decisions.
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\30\ Ethics guidance for physicians, published by the American
Medical Association, states that physicians should ``[a]ssess the
patient's ability to understand relevant medical information and the
implications of treatment alternatives and to make an independent,
voluntary decision'' as part of the process of seeking informed
consent. American Medical Association, Code of Medical Ethics
Opinion 2.1.1, available at <a href="https://www.ama-assn.org/system/files/2019-06/code-of-medical-ethics-chapter-2.pdf">https://www.ama-assn.org/system/files/2019-06/code-of-medical-ethics-chapter-2.pdf</a> (last visited April 5,
2021). See also Gostin, LO. Public Health Law, 217-218 (2000)
(discussing the four elements of the doctrine of informed consent:
Information, competency, voluntariness, and specificity).
\31\ For a discussion of strategies to improve informed consent
processes for minority communities, see Quinn, S.C., et al.
Improving Informed Consent with Minority Participants: Results from
Researcher and Community Surveys, Journal of Empirical Research on
Human Research Ethics, 7(5): 44-55 (Dec. 2012).
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Consent must be made voluntarily, meaning the individual must be
able to consent freely, without undue influence, fraud, or duress. If
post-stabilization services must be provided quickly after the
emergency services are provided, it may be challenging for the
individual or their authorized representative to have adequate time to
make a clear-minded decision regarding consent. Consent obtained
through a threat of restraint or immediacy of the need for treatment is
not voluntary. In addition, the emergency physician or treating
provider should consider whether the individual has reasonable options
regarding post-stabilization services, transport, or service provider
or facility. The Departments are of the view that the post-
stabilization notice and consent procedures should generally be applied
in limited circumstances, where the individual knowingly and
purposefully seeks care from a nonparticipating provider or facility
(such as deciding to go under the care of a specific provider or
facility that the individual is familiar or comfortable with), and that
the process should not be permitted to circumvent the consumer
protections in the No Surprises Act.
Fourth, the provider or facility must satisfy any additional
requirements or prohibitions as may be imposed under applicable state
law. These interim final rules include this criterion recognizing that
some state laws do not permit exceptions to state balance billing
protections, such as allowing individuals to consent to waive
protections. Thus, states may impose stricter standards by which post-
stabilization services will be exempted from the surprise billing
protections under these interim final rules, or states might not permit
exceptions at all. This requirement is codified in the HHS interim
final rules at 45 CFR 149.410(b)(5).
The No Surprises Act authorizes the Departments to specify other
conditions that must be satisfied for post-stabilization services to be
excepted from the definition of emergency services for purposes of the
No Surprises Act. The Departments solicit comments on the conditions
described earlier in this section. The Departments also seek comment on
whether there are any additional conditions that would be appropriate
to designate under the definition of emergency services, such as
conditions relating to coordinating care transitions to participating
providers and facilities. The Departments also solicit comments on
[[Page 36882]]
what guidelines, beyond state laws regarding informed consent, may be
needed to determine when an individual is in a condition to receive the
written notice and provide consent. For example, are standards needed
to account for individuals who are experiencing severe pain,
intoxication, incapacitation, or dementia after being stabilized
following an emergency medical condition?
iii. Non-Emergency Services Performed by Nonparticipating Providers at
Participating Health Care Facilities
Section 9816(b) of the Code, section 716(b) of ERISA, section
2799A-1(b) of the PHS Act, and these interim final rules, apply
surprise billing protections in the case of non-emergency services
furnished by nonparticipating providers during a visit by a
participant, beneficiary, or enrollee at a participating health care
facility, unless the notice and consent requirements, as specified in
these interim final rules, have been met.
Specifically, if a group health plan, or a health insurance issuer
offering group or individual health insurance coverage, provides or
covers benefits with respect to items and services (other than
emergency services to which section 9816(a) of the Code, section 716(a)
of ERISA, or section 2799A-1(a) of the PHS Act applies), the plan or
issuer must cover such items and services furnished to a participant,
beneficiary, or enrollee of the plan or coverage by a nonparticipating
provider with respect to a visit at a participating health care
facility in accordance with these interim final rules, including the
requirements regarding cost sharing, payment amounts, and processes for
resolving billing disputes described elsewhere in this preamble.
iv. Health Care Facilities
These interim final rules, consistent with section 9816(b)(2)(A) of
the Code, section 716(b)(2)(A) of ERISA, and section 2799A-1(b)(2)(A)
of the PHS Act, define a participating health care facility, in the
context of non-emergency services, as a health care facility that has a
contractual relationship directly or indirectly with a group health
plan or health insurance issuer offering group or individual health
insurance coverage setting forth the terms and conditions on which a
relevant item or service is provided to a participant, beneficiary, or
enrollee under the plan or coverage, respectively. These interim final
rules also specify that a single case agreement between a health care
facility and a plan or issuer, used to address unique situations in
which a participant, beneficiary, or enrollee requires services that
typically occur out-of-network constitutes a contractual relationship
for purposes of this definition, and is limited to the parties to the
agreement with respect to the particular individual involved. Thus,
when non-emergency services are furnished by a nonparticipating
provider at a health care facility that has a single case agreement in
place with respect to the individual being treated, as opposed to an
agreement or contract that would apply to all the plan's or issuer's
participants, beneficiaries, or enrollees, those non-emergency services
would be subject to the protections described in 26 CFR 54.9816-5T, 29
CFR 2590.716-5, and 45 CFR 149.120, as applicable, and the
corresponding requirements on providers at 45 CFR 149.420. The
Departments are of the view that it is reasonable that an individual
would expect items and services delivered at a health care facility
that has a single case agreement in place with respect to the
individual's care to be delivered on an in-network basis. Thus, these
interim final rules apply the same protections in this circumstance as
would apply at health care facilities that participate in the plan or
issuer's network.\32\ The facility is considered a participating
facility only with respect to items and services furnished to the
individual whose care is covered by the single case agreement.
Similarly, these interim final rules define a participating emergency
facility to include a facility that has a single case agreement in
place with a plan or issuer with respect to a specific individual's
care. The Departments seek comment on this approach.
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\32\ In contrast, as discussed in section III.B.2.vi of this
preamble, these interim final rules do not include negotiated rates
under single-case agreements in the methodology for calculating the
qualifying payment amount.
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For this purpose, a health care facility described in the statute
is each of the following, in the context of non-emergency services: (1)
A hospital (as defined in 1861(e) of the Social Security Act); (2) a
hospital outpatient department; (3) a critical access hospital (as
defined in section 1861(mm)(1) of the Social Security Act); or (4) an
ambulatory surgical center described in section 1833(i)(1)(A) of the
Social Security Act.
In addition, section 9816(b)(2)(A)(ii)(V) of the Code, section
716(b)(2)(A)(ii)(V) of ERISA, and section 2799A-1(b)(2)(A)(ii)(V) of
the PHS Act authorize the Departments to designate additional
facilities as health care facilities. The Departments solicit comments
on other facilities that would be appropriate to designate as health
care facilities. The Departments are interested in comments identifying
types of facilities in which surprise bills frequently arise, and are
particularly interested in comments regarding whether urgent care
centers or retail clinics should be designated as health care
facilities for purposes of these interim final rules.
The Departments recognize that state regulation of urgent care
centers varies significantly, as does the type of services they are
permitted to provide under state law. Under these interim final rules,
emergency services provided at urgent care centers that are licensed in
a manner that brings them within the definition of independent
freestanding emergency department would be subject to cost-sharing and
balance billing protections, among others. However, given significant
variation in state law definitions, urgent care centers are not
included within the definition of health care facilities, in the
context of non-emergency services. Thus, in cases where non-emergency
services are furnished at participating urgent care centers by
nonparticipating providers, those services would not receive the
protections under these interim final rules. However, the Departments
are of the view that it is possible that individuals may be using
urgent care centers (regardless of how they are licensed) in a similar
way to how they use independent freestanding emergency departments, in
which case it may be appropriate to designate urgent care centers as
health care facilities. The Departments seek comment on the degree to
which individuals may be using urgent care centers in a similar way to
how they use independent freestanding emergency departments. The
Departments seek data on how frequently surprise bills arise in the
context of urgent care centers. The Departments also seek comment on
whether plans and issuers generally contract separately with urgent
care centers and the providers who work at the centers, and how
frequently contracting practices result in nonparticipating providers
furnishing services at participating urgent care centers. The
Departments also seek comment on potential definitions of the term
urgent care center.
v. Items and Services Within the Scope of a Visit
In addition to items and services furnished by a provider at the
facility, a ``visit'' to a participating health care facility includes
the furnishing of equipment and devices, telemedicine services, imaging
services, laboratory services, and preoperative and
[[Page 36883]]
postoperative services, regardless of whether the provider furnishing
such items or services is at the facility. These services are not
limited based on whether the provider furnishing the services is
physically located at the facility. For example, if a sample is
collected during an individual's hospital visit and sent to an off-site
laboratory, the laboratory services would be considered to be part of
the individual's visit to a participating health care facility, if
laboratory services are covered by the plan or coverage. Similarly, if
an individual receives a consultation with a specialist via
telemedicine during a visit to a participating hospital, those
telemedicine services would be considered part of the individual's
visit to a participating health care facility. The statutory definition
of ``visit'' also provides authority for the Departments to specify
other items and services. The Departments solicit comments regarding
other items and services that would be appropriate to include within
the scope of a visit for purposes of these interim final rules.
The No Surprises Act and these interim final rules provide for
exceptions to the balance billing prohibitions and cost-sharing
requirements if the participant, beneficiary, or enrollee is provided a
compliant written notice and consents to receive such services from a
nonparticipating provider at a participating health care facility.
However, these exceptions do not apply with respect to certain
ancillary services (in the context of non-emergency services) and other
services under certain conditions, as discussed later in this preamble.
vi. Air Ambulance Services
Section 105 of the No Surprises Act added section 9817 of the Code,
section 717 of ERISA, and section 2799A-2 of the PHS Act to address
surprise air ambulance bills. These provisions apply in the case of a
participant, beneficiary, or enrollee who receives services from a
nonparticipating provider of air ambulance services, meaning medical
transport by a rotary-wing air ambulance, as defined in 42 CFR 414.605,
or fixed-wing air ambulance, as defined in 42 CFR 414.605. These
interim final rules apply these provisions where a plan or coverage
generally has a network of participating providers and provides or
covers any benefits for air ambulance services, even if the plan or
coverage does not have in its network any providers of air ambulance
services. With respect to air ambulance services furnished by
nonparticipating providers (including inter-facility transports), plans
and issuers must comply with the requirements regarding cost sharing,
payment amounts, and processes for resolving billing disputes described
elsewhere in this preamble, if such services would be covered if
provided by a participating provider with respect to such plan or
coverage.
2. Determination of the Cost-Sharing Amount and Payment Amount to
Providers and Facilities
i. In General
Under section 9816(a) of the Code, section 716(a) of ERISA, section
2799A-1(a) of the PHS Act, and these interim final rules, if a plan or
issuer provides or covers any benefits with respect to services in an
emergency department of a hospital or with respect to emergency
services in an independent freestanding emergency department, the cost-
sharing requirement for such services performed by a nonparticipating
provider or nonparticipating emergency facility must not be greater
than the requirement that would apply if such services were provided by
a participating provider or a participating emergency facility.
Additionally, if a plan or issuer provides or covers any benefits for
non-emergency items and services furnished by a nonparticipating
provider with respect to a visit at a participating health care
facility, unless the provider has satisfied certain notice and consent
criteria with respect to such items and services, the plan or issuer
may not impose a cost-sharing requirement for such items and services
that is greater than the cost-sharing requirement that would apply had
such items or services been furnished by a participating provider.
Similarly, if a plan or issuer provides or covers benefits for air
ambulance services, the plan or issuer must cover such services from a
nonparticipating provider in such a manner that the cost-sharing
requirement with respect to such services must be the same requirement
that would apply if such services were provided by a participating
provider. For example, if a plan or issuer imposes a 20 percent
coinsurance rate for emergency services from participating providers or
participating emergency facilities, the plan or issuer may not impose a
coinsurance rate on emergency services from nonparticipating providers
or facilities that exceeds 20 percent. Stakeholders have reported that
network participation rates are low among providers of air ambulance
services. In instances where a plan or issuer does not have an
established cost-sharing requirement that applies specifically to
participating providers, the plan or issuer must calculate the cost-
sharing amount using the generally applicable cost-sharing requirement
for the relevant item or service under the plan or coverage.
Under sections 9816(a) and (b) and 9817(a) of the Code, sections
716(a) and (b) and 717(a) of ERISA, sections 2799A-1(a) and (b) and
2799A-2(a) of the PHS Act, and these interim final rules, any cost-
sharing payments for emergency services, non-emergency services
furnished by a nonparticipating provider in a participating health care
facility, and air ambulance services furnished by a nonparticipating
provider must be counted toward any in-network deductible or out-of-
pocket maximums applied under the plan or coverage (including the
annual limitation on cost sharing under section 2707(b) of the PHS Act)
(as applicable), respectively (and these in-network deductibles and
out-of-pocket maximums must be applied) in the same manner as if such
cost-sharing payments were made with respect to services furnished by a
participating provider or facility.
ii. Cost-Sharing Amount
Section 9816(a)(1)(C)(iii) of the Code, section 716(a)(1)(C)(iii)
of ERISA, section 2799A-1(a)(1)(C)(iii) of the PHS Act, and these
interim final rules also specify that for emergency services furnished
by a nonparticipating emergency facility, and for non-emergency
services furnished by nonparticipating providers in a participating
health care facility, cost sharing is generally calculated as if the
total amount that would have been charged for the services by a
participating emergency facility or participating provider were equal
to the recognized amount for such services, as defined by the statute
and in these interim final rules.
The ``recognized amount'' is: (1) An amount determined by an
applicable All-Payer Model Agreement under section 1115A of the Social
Security Act; (2) if there is no applicable All-Payer Model Agreement,
an amount determined by a specified state law; or (3) if there is no
applicable All-Payer Model Agreement or specified state law, the lesser
of the amount billed by the provider or facility or the QPA, which
under these interim final rules generally is the median of the
contracted rates of the plan or issuer for the item or service in the
geographic region.
By requiring plans and issuers to calculate the cost-sharing amount
using the recognized amount, rather than the
[[Page 36884]]
amount the plan or issuer ultimately pays the nonparticipating provider
or nonparticipating emergency facility for the furnished items or
services, the No Surprises Act and these interim final rules limit the
effect of provider-payer disputes about payment amounts on participant,
beneficiary, or enrollee cost sharing. Under the statute and these
interim final rules, the provider or facility and plan or issuer
separately determine the total payment amount for the furnished items
or services, but that amount generally does not affect the cost-sharing
amount the individual must pay.
The Departments are aware that there may be some instances where a
nonparticipating health care provider or facility might bill a plan or
issuer for an item or service that is subject to these surprise billing
protections in an amount less than the QPA. For example, this might be
a relatively common occurrence for items whose patent expires after
2019, in instances where the QPA is based off the median of the
contracted rates from 2019. In these instances, assuming the plan or
issuer would not pay more than the billed charge, calculating cost
sharing based on the QPA would require a participant, beneficiary, or
enrollee to pay a higher percentage in cost sharing than if the items
or services had been furnished by a participating provider. However,
section 9816(a)(1)(C)(ii) of the Code, section 716(a)(1)(C)(ii) of
ERISA, and section 2799A-1(a)(1)(C)(ii) of the PHS Act expressly
prohibit plans and issuers from applying a cost-sharing requirement
that is greater than the requirement that would apply if such services
were provided by a participating provider or a participating emergency
facility. Therefore, under these interim final rules, in circumstances
where a specified state law or All-Payer Model Agreement does not apply
to determine the cost-sharing amount, cost sharing must be based on the
lesser of the QPA or the amount billed by the provider for the item or
service. The different methods for determining the recognized amount
are discussed in separate sections of this section III.B.2 of this
preamble.
With respect to air ambulance services furnished by
nonparticipating providers, the recognized amount is not used for
purposes of determining cost sharing. Rather, the statute specifies
that the cost-sharing requirement with respect to such services must be
the same requirement that would apply if such services were provided by
a participating provider, and any coinsurance or deductible must be
based on rates that would apply for such services if they were
furnished by a participating provider. These interim final rules
require that plans and issuers base any coinsurance and deductible for
air ambulance services provided by a nonparticipating provider on the
lesser of the QPA or the billed amount. The Departments have concluded
that this policy is consistent with the statute's general intent to
protect participants, beneficiaries, and enrollees from excessive
bills, and to remove the individuals as much as possible from disputes
between plans and issuers and providers of air ambulance services. In
addition, using the QPA is one method of ensuring that any coinsurance
or deductible is based on rates that would apply for the services if
they were furnished by a participating provider, given that the QPA is
generally based on median contracted rates, as opposed to rates charged
by nonparticipating providers, and is one basis used for determining
the cost-sharing amount in the context of emergency services and items
and services furnished by nonparticipating providers at participating
health care facilities.
As discussed in this preamble, the Airline Deregulation Act of 1978
(ADA) broadly preempts state laws that relate to air ambulance
providers, and the Departments are unaware of any instances in which an
All-Payer Model Agreement or a specified state law might apply. In
addition, since an All-Payer Model Agreement or a specified state law
would not need to follow an approach based on rates that would apply
for such services if they were furnished by a participating provider
(for example, Medicare rates could be used instead), it is the
Departments' view that Congress did not intend to apply the concept of
the recognized amount to nonparticipating providers of air ambulance
services. The Departments seek comment on any potential alternate
approaches for calculating the cost-sharing amount for air ambulance
services furnished by nonparticipating providers of air ambulance
services.
iii. Out-of-Network Rate
In addition to establishing requirements related to cost sharing,
the No Surprises Act and these interim final rules also establish
requirements related to the total amount paid by a plan or issuer for
items and services subject to these provisions, referred to as the out-
of-network rate. The plan or issuer must make a total payment equal to
one of the following amounts, less any cost sharing from the
participant, beneficiary, or enrollee: (1) An amount determined by an
applicable All-Payer Model Agreement under section 1115A of the Social
Security Act; (2) if there is no such applicable All-Payer Model
Agreement, an amount determined by a specified state law; (3) in the
absence of an applicable All-Payer Model Agreement or specified state
law, if the plan or issuer and the provider or facility have agreed on
a payment amount, the agreed on amount; or (4) if none of those three
conditions apply, and the parties enter into the IDR process and do not
agree on a payment amount before the date when the IDR entity makes a
determination of the amount, the amount determined by the IDR entity.
These four approaches for determining the out-of-network rate are
discussed more fully later in this preamble.
The requirements related to cost sharing and to the out-of-network
rate apply when a group health plan or coverage provides or covers
benefits for services subject to these provisions. The Departments
interpret this to mean that the requirements apply when a plan or
issuer provides coverage for such items and services, pursuant to the
terms of the plan or coverage, even in cases where an individual has
not satisfied their deductible.\33\ Because the cost-sharing amount is
calculated using the recognized amount (or for air ambulance services
the lesser of the QPA or the billed amount) that is calculated
separately from the determination of the out-of-network rate, these
requirements may result in circumstances where a plan or issuer must
make payment prior to an individual meeting their deductible.
Specifically, where the surprise billing protections apply, and the
out-of-network rate exceeds the amount upon which cost sharing is
based, a plan or issuer must pay the provider or facility the
difference between the out-of-network rate and the cost-sharing amount
(the latter of which in this case would equal the recognized amount, or
the lesser of the QPA or the billed amount), even in cases where an
individual has not satisfied their deductible, as illustrated in the
following example.
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\33\ Absent the balance billing protections under the No
Surprises Act and these interim final rules, the plan or issuer
would not generally be expected to make a payment to the provider or
facility prior to an individual satisfying the deductible.
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Example. An individual is enrolled in a high deductible health plan
with a $1,500 deductible and has not yet accumulated any costs towards
the deductible at the time the individual receives emergency services
at an out-of-network facility. The plan determines that the recognized
amount for the services is $1,000. Because the
[[Page 36885]]
individual has not satisfied the deductible, the individual's cost-
sharing amount is $1,000, which accumulates towards the deductible. The
out-of-network rate is subsequently determined to be $1,500. Under the
requirements of the statute and these interim final rules, the plan is
required to pay the difference between the out-of-network rate and the
cost-sharing amount. Therefore, the plan pays $500 for the emergency
services, even though the individual has not satisfied the deductible.
The individual's out-of-pocket costs are limited to the amount of cost-
sharing originally calculated using the recognized amount (that is,
$1,000).
Although such a payment would generally cause a high deductible
health plan to lose its status as a high deductible health plan, the No
Surprises Act added section 223(c)(2)(F) to the Code to specify that a
plan shall not fail to be treated as a high deductible health plan by
reason of providing benefits for medical care in accordance with
section 9816 or 9817 of the Code, section 716 or 717 of ERISA, or
section 2799A-1 or 2799A-2 of the PHS Act (the provisions added by the
No Surprises Act related to surprise medical and air ambulance bills),
or any state law providing similar protections to individuals, prior to
the satisfaction of the deductible.\34\
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\34\ See section IV.A.5 of this preamble for a discussion of
HHS-only interim final rules addressing catastrophic plans'
compliance with these requirements.
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iv. Specified State Law
Under section 9816(a)(3)(I) of the Code, section 716(a)(3)(I) of
ERISA, section 2799A-1(a)(3)(I) of the PHS Act, and these interim final
rules, a specified state law is a state law that provides a method for
determining the total amount payable under a group health plan or group
or individual health insurance coverage to the extent the state law
applies. This includes instances where the Departments have interpreted
this term to include state laws where the state law applies because the
state has allowed a plan that is not otherwise subject to applicable
state law an opportunity to opt in to a program established under state
law, subject to section 514 of ERISA, for an item or service furnished
by a nonparticipating provider or nonparticipating emergency facility.
In cases where a specified state law applies, the recognized amount
(the amount upon which cost sharing is based) and out-of-network rate
for emergency and non-emergency services subject to the surprise
billing protections is calculated based on such specified state law.
In order for a state law to determine the recognized amount or out-
of-network rate, any such law must apply to: (1) The plan, issuer, or
coverage involved, including where a state law applies because the
state has allowed a plan that is not otherwise subject to applicable
state law an opportunity to opt in, subject to section 514 of ERISA;
(2) the nonparticipating provider or nonparticipating emergency
facility involved (and in the case of state out-of-network rate laws,
the nonparticipating provider of air ambulance services involved); and
(3) the item or service involved. In instances where a state law does
not satisfy all of these criteria, the state law does not apply to
determine the recognized amount or out-of-network rate. For example,
where a particular state surprise billing law that governs the
recognized amount and out-of-network rate applies to a particular plan
or coverage but does not apply to nonparticipating neonatologists, who
provide a specified ancillary service under section 2799B-2(b)(2) of
the PHS Act, the consumer protections under federal law would determine
the recognized amount and out-of-network rate with respect to
neonatology services while the state law would apply with respect to
other provider specialties covered under that state law. Similarly,
where a state's surprise billing laws apply only to health maintenance
organizations (HMOs), federal protections against surprise billing
would govern with respect to other types of coverage while the state
protections would apply to HMOs for purposes of determining the
recognized amount and out-of-network rate.
The same definition of ``out-of-network rate''--including the
reference to specified state laws--applies to air ambulance services as
to other services. The Departments note, however, that the ADA states
in relevant part: ``. . . a State, political subdivision of a State, or
political authority of at least 2 States may not enact or enforce a
law, regulation, or other provision having the force and effect of law
related to a price, route, or service of an air carrier that may
provide air transportation under this subpart.'' \35\ Assuming that a
provider of air ambulance services is an ``air carrier'' covered by
this provision, as is typical,\36\ the provision preempts state laws
that would limit the amount of payment that the provider of air
ambulance services would otherwise be entitled to receive.\37\ Given
the applicability of the ADA, the Departments are not aware of any
state laws that would meet the criteria to set the out-of-network rate
for nonparticipating providers of air ambulance services when providing
services subject to the protections in the No Surprises Act.
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\35\ 49 U.S.C. 41713(b).
\36\ An air ambulance provider is a covered ``air carrier'' if
it has economic authority from the Department of Transportation to
provide interstate air transportation. Most air ambulance providers
have such authority under the provisions of 14 CFR part 298. See,
e.g., Scarlett v. Air Methods Corp., 922 F.3d 1053 (10th Cir. 2019);
Air Evac EMS v. Cheatham, 910 F.3d 751 (4th Cir. 2018).
\37\ See, e.g., Guardian Flight LLC v. Godfread, 991 F.3d 916,
921 (8th Cir. 2021) (holding that ADA preempted state law
prohibiting out-of-network air ambulance providers from balance
billing and requiring them to accept amounts paid by insurers);
Bailey v. Rocky Mountain Holdings, LLC, 889 F.3d 1259, 1269-72 (11th
Cir. 2018) (holding that ADA preempted state law that prohibited air
ambulance providers from collecting more than amount specified in
fee schedule).
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The Departments also seek comment on whether health insurance
issuers, health care providers, or health care facilities, in instances
where they are not otherwise subject to a specified state law that
provides for a method for determining the total amount payable under a
group health plan or group or individual health insurance coverage,
should have an opportunity, for purposes of these interim final rules,
to opt in to a program established under state law, with respect to an
item or service furnished by a nonparticipating provider or
nonparticipating emergency facility. The Departments seek comment on
whether this approach would allow for more flexibility for state laws
to apply when, for example, by their terms, they apply to the health
insurance issuer and item and service in question, but not to the
provider; whether an issuer, provider, or facility would still be
subject to any specified state laws in their ``home'' state if they opt
in to a program established under another state's law; and whether an
issuer, provider, or facility should be permitted to opt in on an
episodic basis. The Departments are concerned that allowing providers
and facilities to opt in to a program established under state law could
increase health care prices if providers and facilities selectively opt
in to state programs that favor providers and facilities in the
determination of the out-of-network rate. The Departments seek comment
on the potential impact of expanding the ability to opt in to a state
program to providers and facilities. The Departments specifically seek
comment from health insurance issuers, health care providers, or health
care facilities located within or serving
[[Page 36886]]
underserved and rural communities, and other communities facing a
shortage of providers on the impact of these provisions on services,
coverage, and payment for and within medically underserved, rural, and
urban communities.
a. State Law Interaction With ERISA
Under the general preemption clause of section 514(a) of ERISA,
state laws are preempted to the extent that they ``relate'' to employee
benefit plans subject to title I of ERISA. There are, however, a number
of exceptions to this broad preemption provision. Section 514(b)(2)(A),
referred to as the ``savings clause,'' provides in pertinent part that
``nothing in this title (title I of ERISA) shall be construed to exempt
or relieve any person from any law of any State which regulates
insurance. . . .'' Additionally, the preemption provisions of section
731 of ERISA (implemented in 29 CFR 2590.731(a)) apply so that the
requirements of part 7 of ERISA are not to be ``construed to supersede
any provision of state law which establishes, implements, or continues
in effect any standard or requirement solely relating to issuers in
connection with group health insurance coverage except to the extent
that such standard or requirement prevents the application of a
`requirement' of a federal standard.'' The conference report
accompanying the Health Insurance Portability and Accountability Act of
1996 (HIPAA), which applied this preemption standard to state laws with
respect to its title I health insurance reform provisions, indicates
that this preemption is intended to be the ``narrowest'' preemption of
states' laws.\38\ States may therefore continue to apply state law
requirements to issuers except to the extent they prevent the
application of ERISA requirements. Additionally, states have
significant latitude to impose requirements on issuers that are more
restrictive than the federal law. State laws that impose comparable or
additional requirements on health insurance issuers would generally
constitute a ``specified state law'' notwithstanding section 514 of
ERISA and would continue to apply.
---------------------------------------------------------------------------
\38\ See House Conf. Rep. No. 104-736, at 205, reprinted in 1996
U.S. Code Cong. & Admin. News 2018.
---------------------------------------------------------------------------
While section 514(b)(2)(A) saves from ERISA preemption state laws
regulating insurance, section 514(b)(2)(B) of ERISA, referred to as the
``deemer clause,'' provides that a state law ``purporting to regulate
insurance'' generally cannot deem an employee benefit plan to be an
insurance company (or in the business of insurance) for the purpose of
regulating such a plan as an insurance company (section 514(b)(6)(A)
creates a partial exception to the deemer clause for employee welfare
benefit plans that are also multiple employer welfare arrangements
(MEWAs)). Thus, to the extent that a state law has a ``reference to''
or an impermissible connection with ERISA plans (such as laws that
govern the payment of benefits), these laws are preempted, to the
extent they apply to self-insured plans sponsored by private
employers.\39\ However, section 514 of ERISA does not prevent states
from expanding access to a state program and allowing self-insured,
ERISA-covered plans to choose to voluntarily comply with it. For
example, the Departments allowed such plans to comply with their
obligations for external review under section 2719 of the PHS Act by
voluntarily opting in to the state external review process.\40\
Similarly, these interim final rules allow self-insured plans
(including non-federal governmental plans) to voluntarily opt in to
state law that provides for a method for determining the cost-sharing
amount or total amount payable under such a plan, where a state has
chosen to expand access to such plans, to satisfy their obligations
under section 9816(a)-(d) of the Code, section 716(a)-(d) of ERISA, and
section 2799A-1(a)-(d) of the PHS Act. A group health plan that opts in
to such a state law must do so for all items and services to which the
state law applies. Under these interim final rules, a self-insured plan
that has chosen to opt in to a state law must prominently display in
its plan materials describing the coverage of out-of-network services a
statement that the plan has opted in to a specified state law, identify
the relevant state (or states), and include a general description of
the items and services provided by nonparticipating facilities and
providers that are covered by the specified state law.
---------------------------------------------------------------------------
\39\ See Gobeille v. Liberty Mutual Ins. Co. 577 U.S. 312
(2015); Egelhoff v. Egelhoff, 532 U.S. 141 (2001).
\40\ See, e.g., Technical Release 2010-01; 76 FR 37208, 37211
fn. 13 (June 24, 2011).
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b. Examples Involving Specified State Laws
The following examples illustrate how state laws may or may not
apply. In each example, assume there is no applicable All-Payer Model
Agreement that would determine the recognized amount or out-of-network
rate.
Example 1. (i) Facts. A health insurance issuer licensed in State A
covers a specific non-emergency service that is provided to an enrollee
by a nonparticipating provider in a participating health care facility,
both of which are also licensed in State A. State A has a law that
prohibits balance billing for non-emergency services provided to
individuals by nonparticipating providers in a participating health
care facility, and provides for a method for determining the cost-
sharing amount and total amount payable. The state law applies to
health insurance issuers and providers licensed in State A. The state
law also applies to the type of service provided.
(ii) Conclusion. In this Example 1, State A's law would apply to
determine the recognized amount and the out-of-network rate.
Example 2. (i) Facts. Same facts as Example 1, except that the
nonparticipating provider and participating health care facility are
located and licensed in State B. State A's law does not apply to the
provider, because the provider is licensed and located in State B.
(ii) Conclusion. In this Example 2, State A's law would not apply
to determine the recognized amount and out-of-network rate. Instead,
the lesser of the billed amount or QPA would apply to determine the
recognized amount, and either an amount determined through agreement
between the provider and issuer or an amount determined by an IDR
entity would apply to determine the out-of-network rate.
Example 3. (i) Facts. An individual receives emergency services at
a nonparticipating hospital located in State A. The emergency services
furnished include post-stabilization services, as described in 26 CFR
54.9816-4T(c)(2)(ii), 29 CFR 2590.716-4(c)(2)(ii), and 45 CFR
149.110(c)(2)(ii). The individual's coverage is through a health
insurance issuer licensed in State A, and the coverage includes
benefits with respect to services in an emergency department of a
hospital. State A has a law that prohibits balance billing for
emergency services provided to an individual at a nonparticipating
hospital located in State A and provides a method for determining the
cost-sharing amount and total amount payable in such cases. The law
applies to issuers licensed in State A. However, State A's law has a
definition of emergency services that does not include post-
stabilization services.
(ii) Conclusion. In this Example 3, State A's law would apply to
determine the cost-sharing amount and out-of-network rate for the
emergency services, as defined under State A's law. State A's
[[Page 36887]]
law would not apply for purposes of determining the cost-sharing amount
and out-of-network rate for the post-stabilization services. Instead,
the lesser of the QPA or billed amount would apply to determine the
recognized amount, and either an amount determined through agreement
between the hospital and issuer or an amount determined by an IDR
entity would apply to determine the out-of-network rate, with respect
to post-stabilization services.
Example 4. (i) Facts. A self-insured plan, subject to ERISA, covers
a specific non-emergency service that is provided to a participant by a
nonparticipating provider in a participating health care facility, both
of which are licensed in State A. State A has a law that prohibits
balance billing for non-emergency services provided to individuals by
nonparticipating providers in a participating health care facility, and
provides for a method for determining the cost-sharing amount and total
amount payable. The law applies to health insurance issuers and
providers licensed in State A, and provides that plans that are not
otherwise subject to the law may opt in. The law also applies to the
type of service provided. The self-insured plan has opted in.
(ii) Conclusion. In this Example 4, State A's law would apply to
determine the recognized amount and the out-of-network rate.
The Departments are of the view that it would be uncommon for laws
of more than one state to each apply to the same health insurance
issuer, and to the same provider for a particular item or service.
Therefore, the Departments do not foresee many instances where there
might be a question as to which state's law applies to determine the
recognized amount or out-of-network rate. However, in such uncommon
scenarios, one approach might be for the states involved to make that
decision. Another approach might be that the law enacted by the state
in which the service is provided would apply. Yet another approach
would be for the QPA to apply to determine the recognized amount, and
either a negotiated amount or an amount determined by an IDR entity to
apply to determine the out-of-network rate. The Departments seek
comment on these and any other approaches for resolving this choice-of-
law question. The Departments also seek comment on how states have
handled such questions prior to the enactment of the No Surprises Act,
should these types of conflicts exist.
The Departments are of the view that Congress intended that where
state law provides a method for determining the total amount payable
under a plan or coverage, the state law regarding balance billing would
govern, rather than the alternative method for determining the out-of-
network rate under the No Surprises Act. The Departments interpret the
statutory phrase ``a State law that provides for a method for
determining the total amount payable under such a plan, coverage, or
issuer, respectively'' broadly as referring not only to state laws that
set a mathematical formula for determining the out-of-network rate, or
that set a predetermined amount for an out-of-network item or service.
Rather, the Departments interpret that language to also include, for
example, state laws that require or permit a plan or issuer and a
provider or facility to negotiate, and then to engage in a state
arbitration process to determine the out-of-network rate. Such state
laws provide a process for determining the total amount payable, and in
such instances, the timeframes and processes under such a state law
related to negotiations and arbitration would apply, as opposed to the
timeframes and IDR process under the No Surprises Act.
In addition, the Departments are of the view that Congress did not
intend for the No Surprises Act to preempt provisions in state balance
billing laws that address issues beyond how to calculate the cost-
sharing amount and out-of-network rate. To the extent state laws do not
prevent the application of a federal requirement or prohibition on
balance billing, the Departments are of the view that such state laws
are consistent with the statutory framework of the No Surprises Act and
would not be preempted.\41\ This view extends to any state law that
provides balance billing protections beyond what these interim final
rules provide. In fact, Congress specifically indicated that such state
balance billing laws may continue in effect along with the balance
billing protections set forth in the statute, by requiring in new
section 2799B-3 of the PHS Act that providers must disclose to
participants, beneficiaries, and enrollees information about federal
balance billing protections, plus any other protections that apply
under state law. A more detailed discussion of the disclosure
requirements appears in section IV.A.3 of this preamble, which
discusses the provisions codified in 45 CFR 149.430.
---------------------------------------------------------------------------
\41\ Section 731(a) of ERISA and section 2724(a) of the PHS Act.
As noted above, the HIPAA conference report indicates that this
preemption standard is intended to be the ``narrowest'' preemption
of states' laws. See House Conf. Rep. No. 104-736, at 205, reprinted
in 1996 U.S. Code Cong. & Admin. News 2018.
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v. All-Payer Model Agreements
As described earlier, in instances where an All-Payer Model
Agreement is applicable, the recognized amount (the amount upon which
cost sharing is based with respect to items and services furnished by
nonparticipating emergency facilities, and nonparticipating providers
of nonemergency items and services in participating facilities) and the
out-of-network rate are determined using the amount that the state
approves under the All-Payer Model Agreement for such items or
services.
An All-Payer Model Agreement is an agreement between the Centers
for Medicare & Medicaid Services (CMS) and a state to test and operate
systems of all-payer payment reform for the medical care of residents
of the state, under the authority granted under section 1115A the
Social Security Act. Under the terms of section 1115A of the Social
Security Act, such Agreements may waive specific provisions of titles
XI and XVIII and of sections 1902(a)(1), 1902(a)(13),
1903(m)(2)(A)(iii), and 1934 (other than subsections (b)(1)(A) and
(c)(5) of such section) as may be necessary solely for the purposes of
testing the Model. All-Payer Model Agreements can vary significantly by
state, including in using different approaches for approving payment
amounts for items or services covered by the Agreements. The
Departments are of the view that it is important to maximally preserve
states' abilities to test all-payer payment reform through these
Agreements, including their abilities to do so using varied approaches
to setting payment amounts. These interim final rules defer to the
state to determine the circumstances under which, and how, it will
approve an amount for an item or service under a payment system
established by an All-Payer Model Agreement. Participating in an all-
payer model governed by an All-Payer Model Agreement may be voluntary
or mandatory for a given payer; the system of all-payer payment reform
may apply statewide or only in certain regions, such as rural regions;
and payments under the system of all-payer payment reform may apply
only to certain providers or facilities and certain items and
services.\42\ To account
[[Page 36888]]
for potential variations among All-Payer Model Agreements, the
Departments are proposing to take a similar approach that these interim
final rules establish with respect to state laws. Specifically, in
order for an All-Payer Model Agreement to determine the recognized
amount or out-of-network rate, any such Agreement must apply to the
coverage involved; to the nonparticipating provider or nonparticipating
emergency facility involved (and in the case of the out-of-network
rate, to the nonparticipating provider of air ambulance services
involved); and to the item or service involved. In instances where an
All-Payer Model Agreement does not satisfy all of these criteria, the
Agreement does not apply to determine the recognized amount or out-of-
network rate, and, unless a specified state law applies, the recognized
amount would be determined by the QPA (or the billed charge if less
than the QPA), and the out-of-network rate would be the amount
determined through agreement between the provider or facility and plan
or issuer or the IDR process.
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\42\ See, e.g., CMS. Vermont All-Payer ACO Model, (updated Apr.
8, 2020) available at <a href="https://innovation.cms.gov/innovation-models/vermont-all-payer-aco-model">https://innovation.cms.gov/innovation-models/vermont-all-payer-aco-model</a>; CMS. Pennsylvania Rural Health Model,
(updated Jan. 1, 2021) available at <a href="https://innovation.cms.gov/innovation-models/pa-rural-health-model">https://innovation.cms.gov/innovation-models/pa-rural-health-model</a>; CMS. Maryland Total Cost of
Care Model available at <a href="https://innovation.cms.gov/innovation-models/md-tccm">https://innovation.cms.gov/innovation-models/md-tccm</a>.
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Under these interim final rules, an All-Payer Model Agreement is
treated as applicable to a given provider or facility and plan or
issuer if the terms of the Agreement, or any agreements described in
that Agreement, are binding upon the provider, facility, plan, or
issuer, which may occur through different mechanisms. For example,
under the All-Payer Model Agreement for the Maryland Total Cost of Care
Model and under the Maryland state all-payer law, all payers (including
group health plans and health insurance issuers offering group or
individual health insurance coverage) pay the amount determined under
the Agreement with respect to hospital services covered by the
Agreement.\43\ However, the Agreement generally does not apply to the
amount paid to a provider, such as a physician, who furnishes services
at a hospital. In Maryland, therefore, the recognized amount and out-
of-network rate would be set by the All-Payer Model Agreement for all
plans and issuers for hospital charges covered under the Agreement.
But, the All-Payer Model Agreement would generally not be used to set
the recognized amount or out-of-network rate with respect to a
nonparticipating provider's charges, unless the All-Payer Model
Agreement, or any agreements described in that Agreement, specify the
payment amount in a particular instance.
---------------------------------------------------------------------------
\43\ See CMS. Maryland Total Cost of Care Model, (updated Oct.
22, 2020) available at <a href="https://innovation.cms.gov/innovation-models/md-tccm">https://innovation.cms.gov/innovation-models/md-tccm</a>. Under Maryland law, hospitals regulated by the Maryland
Health Services Cost Review Commission (HSCRC) must charge payers
the rates set the by HSCRC, and payers, including group health plans
and issuers offering individual or group health insurance, must pay
the rates set by HSCRC. Maryland Code, Health-General Article
Sec. Sec. 19-212 and 19-219(a)(3) and (b)(2)(i) and Maryland Code,
Insurance Article Sec. 15-604.
---------------------------------------------------------------------------
Although under state law plans and issuers in Maryland do not have
discretion regarding whether to participate in the all-payer rate
setting system under the Maryland Total Cost of Care Model,
participation in other state-based models governed by All-Payer Model
Agreements is voluntary. For example, under the All-Payer Model
Agreement for the Vermont All-Payer Accountable Care Organization (ACO)
Model, participation by providers, facilities, group health plans, and
health insurance issuers is voluntary.\44\ To the extent that both the
provider or facility and plan or issuer has opted to participate in the
Vermont All-Payer ACO Model and the Vermont All-Payer Model Agreement,
or an agreement described in that Agreement, applies to a specific item
or service, then that All-Payer Model Agreement would determine the
recognized amount and out-of-network rate. But, for example, if a plan
has opted to participate, but the provider furnishing the service has
not, then the All-Payer Model Agreement would not be used to determine
either the recognized amount or out-of-network rate. Instead, if a
state law is applicable, the state law would apply. If no state law is
applicable, then the recognized amount would be determined using the
QPA,\45\ and the out-of-network rate would be the amount agreed upon by
the parties or determined through the IDR process established in the No
Surprises Act, as discussed further elsewhere in this preamble.
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\44\ <a href="https://innovation.cms.gov/innovation-models/vermont-all-payer-aco-model">https://innovation.cms.gov/innovation-models/vermont-all-payer-aco-model</a>.
\45\ See prior explanation regarding the requirement that when
the surprise billing protections apply, in the event the billed
charge is less than the recognized amount, cost sharing would be
based on the billed charge.
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vi. Methodology for Calculating the Qualifying Payment Amount
The No Surprises Act directs the Departments to establish through
rulemaking the methodology that a group health plan or health insurance
issuer offering group or individual health insurance coverage must use
to determine the qualifying payment amount (QPA). As discussed earlier
in this preamble, the No Surprises Act and these interim final rules
require cost-sharing requirements imposed by plans and issuers in
connection with emergency services furnished by a nonparticipating
emergency facility or nonparticipating provider, or in connection with
non-emergency services performed by nonparticipating providers at
certain participating facilities to be based on the lesser of the
billed charge or the QPA where an All-Payer Model Agreement under
section 1115A of the Social Security Act or a specified state law does
not apply. In addition, IDR entities are directed by statute to
consider the QPA when selecting between the offer submitted by a plan
or issuer and the offer submitted by a facility or provider in order to
determine the total payment for emergency services furnished by a
nonparticipating emergency facility or nonparticipating provider, or
non-emergency services performed by nonparticipating providers at
certain participating facilities that are items and services subject to
the IDR process.
In general, under section 9816(a)(3)(E) of the Code, section
716(a)(3)(E) of ERISA, and section 2799A-1(a)(3)(E) of the PHS Act, for
a given item or service, the QPA is the median of the contracted rates
recognized by the plan or issuer on January 31, 2019, for the same or
similar item or service that is provided by a provider in the same or
similar specialty and provided in a geographic region in which the item
or service is furnished, increased for inflation. The median contracted
rate is determined with respect to all group health plans of the plan
sponsor or all group or individual health insurance coverage offered by
the health insurance issuer that are offered in the same insurance
market, consistent with the methodology established by the Departments.
The No Surprises Act specifies an alternative methodology for
determining the QPA in cases where a plan or issuer has insufficient
information to calculate a median contracted rate for an item or
service. The statute, however, envisions that these alternative
methodologies, such as use of a third-party database, will be used in
only limited circumstances where the plan or issuer cannot rely on its
contracted rates as a reflection of the market dynamics in a geographic
region. Consistent with this statutory goal, these interim final rules
generally seek to ensure that plans and issuers can meet the
sufficient-information standard when determining the QPA and that use
of alternative methodologies is minimized wherever possible.
The Departments seek comment on all aspects of the methodology
established
[[Page 36889]]
in these interim final rules for determining the QPA. In particular,
the Departments seek comment on whether there are any considerations or
factors that are not sufficiently accounted for in the methodology
established in these interim final rules; the impact of the methodology
on cost sharing, payment amounts, and provider network participation;
and whether there are areas where commenters believe additional
rulemaking or guidance is necessary. The Departments also seek comment
as to the impact of large consolidated health care systems on
contracted rates, and the impact of such contracted rates on prices and
the QPA. The Departments are concerned that the contracting practices
of such health care systems could inflate the QPA, and seek comment on
whether adjustments to the QPA methodology are needed.
a. Median Contracted Rate
These interim final rules establish the methodology that plans and
issuers must use to calculate the median of contracted rates. The plan
or issuer will generally then apply an inflation adjustment to
determine the QPA for items and services furnished in the relevant
year.
In general, the median contracted rate for an item or service is
calculated by arranging in order from least to greatest the contracted
rates of all plans of the plan sponsor (or of the administering entity,
if applicable) or all coverage offered by the issuer in the same
insurance market for the same or similar item or service that is
provided by a provider in the same or similar specialty or facility of
the same or similar facility type and provided in the geographic region
in which the item or service is furnished, and selecting the middle
number. These interim final rules define each of the relevant terms, as
discussed in more detail in this section of the preamble.
In determining the median contracted rate, the amount negotiated
under each contract is treated as a separate amount. For example,
assume the contracted rates for all plans of a sponsor in the same
insurance market for a particular item or service provided by a
provider in the same or similar specialty in a specified geographic
region are $475, $490, and $510. The median contracted rate for this
service is $490. If there are an even number of contracted rates, the
median contracted rate is the average of the middle two contracted
rates. If, in the previous example, there were a fourth contracted rate
in the amount of $515, the median contracted rate would be the average
of the two middle amounts ($490 and $510), or $500 (($490+$510)2). If
the same amount is paid under two or more separate contracts, each
contract is counted separately. Thus, in the previous example, if there
were a fifth contracted rate also in the amount of $515, the median
contracted rate would be $510, since there are two contracted rates
below that amount ($475 and $490) and two contracted rates above that
amount ($515 and $515).
Contracted Rate
The interim final rules define a ``contracted rate'' as the total
amount (including cost sharing) that a group health plan or health
insurance issuer has contractually agreed to pay a participating
provider, facility, or provider of air ambulance services for covered
items and services, whether directly or indirectly, including through a
third-party administrator or pharmacy benefit manager.\46\
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\46\ This definition is substantially similar to the definition
of ``negotiated rate'' used for purposes of the transparency in
coverage regulations at 26 CFR 54.9815-2715A1(a)(2)(xvi), 29 CFR
2590.715-2715A1(a)(2)(xvi), and 45 CFR 147.210(a)(2)(xvi).
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The No Surprises Act envisions that each contracted rate for a
given item or service be treated as a single data point when
calculating a median contracted rate. Therefore, if a plan or issuer
has a contract with a provider group or facility, the rate negotiated
with that provider group or facility under the contract is treated as a
single contracted rate, if the same rate applies to all providers of
such provider group or facility under the single contract. Likewise,
the rate negotiated under a contract constitutes a single contracted
rate regardless of the number of claims paid at that contracted rate.
However, if a plan or issuer has a contract with multiple providers,
with separate negotiated rates with each particular provider for a
given item or service, each unique contracted rate constitutes a single
contracted rate for purposes of determining the median contracted
rate.\47\ Further, if a plan or issuer has separate contracts with
individual providers, the contracted rate under each such contract
constitutes a single contracted rate (even if the same amount is paid
to other providers under separate contracts).
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\47\ If a plan or issuer has a contract with multiple providers,
with separate negotiated rates with several subgroups of providers,
each unique contracted rate will generally constitute a single
contracted rate for purposes of determining the median contracted
rate. However, as discussed later in this section of the preamble,
these interim final rules specify that if a plan or issuer has
contracted rates that vary based on provider specialty for a service
code, the median contracted rate is calculated separately for each
provider specialty, as applicable. In such cases, the QPA for the
particular item or service would take into account only the
contracted rates for the applicable provider specialty, and would
disregard other unique contracted rates under the same contract.
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The Departments understand that some plans or issuers may rent
provider networks or otherwise contract with third parties to manage
provider networks. In these situations, contracted rates between
providers and the entity responsible for managing the provider network
on behalf of a plan or issuer would be treated as the plan's or
issuer's contracted rates for purposes of calculating the QPA. The
Departments seek comment on whether additional guidance or special
rules are needed regarding how to define a contract in this situation.
The Departments also understand that plans and issuers sometimes
enter into special agreements with providers and facilities that
generally are not otherwise contracted to participate in any of the
networks of the plan or issuer. For example, a plan or issuer may
negotiate an ad hoc arrangement with a nonparticipating provider or
facility to supplement the network of the plan or coverage for a
specific participant, beneficiary, or enrollee in unique circumstances.
These interim final rules specify that solely for purposes of the
definition of contracted rate, a single case agreement, letter of
agreement, or other similar arrangement between a plan or issuer and a
provider, facility, or provider of air ambulance services does not
constitute a contract, and the rate paid under such an agreement should
not be counted among the plan's or issuer's contracted rates. The term
``contracted rate'' refers only to the rate negotiated with providers
and facilities that are contracted to participate in any of the
networks of the plan or issuer under generally applicable terms of the
plan or coverage and excludes rates negotiated with other providers and
facilities. The Departments are of the view that this definition most
closely aligns with the statutory intent of ensuring that the QPA
reflects market rates under typical contract negotiations.\48\
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\48\ In contrast, as discussed earlier in this preamble, these
interim final rules specify that a single case agreement constitutes
a contractual relationship for purposes of the definition of
participating health care facility and participating emergency
facility. The Departments are of the view that it is reasonable that
an individual would expect items and services delivered at a health
care facility that has a single case agreement in place with respect
to the individual's care to be delivered on an in-network basis, and
therefore, that the balance billing protections should apply.
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Insurance Market
In calculating the median contracted rate for a given item or
service, the plan
[[Page 36890]]
or issuer must take into account the contracted rates under all group
health plans of the sponsor or all group or individual health insurance
coverage offered by the issuer that are offered in the same insurance
market.\49\ The term ``insurance market'' for purposes of these interim
final rules means one of the following: The individual market, small
group market, or large group market (each as defined under section
2791(e) of the PHS Act). The relevant insurance market is determined
irrespective of the state. For example, in calculating the QPA for an
item or service furnished to an enrollee in individual health insurance
coverage, an issuer must take into account the contracted rates with
providers or facilities in the applicable geographic region across the
issuer's individual market offerings, inclusive of contracted rates for
all individual health insurance coverage offered by the issuer in all
states in which the issuer offers coverage in the individual market.
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\49\ The term ``health insurance issuer'' has the meaning given
the term in section 2791(b) of the PHS Act, which, in relevant part,
defines a health insurance issuer as an entity that is licensed to
engage in the business of insurance in a state. Thus, an issuer is
the licensed entity and the contracted rates of separate licensees
under the same holding company are not taken into account.
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With respect to self-insured group health plans, these interim
final rules define the term ``insurance market'' to mean all self-
insured group health plans (other than account-based plans and plans
that consist solely of excepted benefits) of the plan sponsor, or at
the option of the plan sponsor, all self-insured group health plans
administered by the same entity (including a third-party administrator
contracted by the plan), to the extent otherwise permitted by law, that
is responsible for calculating the QPA on behalf of the plan. The
Departments understand that many self-insured group health plans are
administered by entities other than the plan sponsor (such as a third-
party administrator contracted by the plan) that would be responsible
for calculating the QPA on behalf of the sponsor. To reduce the burden
imposed on sponsors of self-insured group health plans, these interim
final rules permit sponsors of self-insured group health plans to allow
their third-party administrators to determine the QPA for the sponsor
by calculating the median contracted rate using the contracted rates
recognized by all self-insured group health plans administered by the
third-party administrator (not only those of the particular plan
sponsor). Under this approach, the Departments anticipate there will be
fewer instances where a self-insured group health plan sponsor will
lack sufficient information to calculate a median contracted rate for
an item or service.
The Departments seek comment on the definition of insurance market
with respect to self-insured group health plans and whether any
contractual or other issues may prevent an entity, such as a third-
party administrator, from using contracted rates from the different
self-insured plans it administers to calculate the QPA for a particular
self-insured group health plan. DOL also seeks comment on the ability
of self-insured group health plan fiduciaries to monitor the
calculation of the QPA by the administering entities for compliance
with the applicable requirements (for example, by ensuring the entities
are using the correct contracted rates).
The Departments have determined that including rates negotiated
under other more limited forms of coverage, such as excepted benefits,
short-term, limited-duration insurance, and account-based plans,
including health reimbursement arrangements, could skew the calculation
of the median contracted rate, and these forms of coverage should not
be included in the definition of the applicable insurance market.
Furthermore, the definition of ``qualifying payment amount'' under
section 2799A-1(a)(3)(E)(i)(I) of the PHS Act refers to individual
health insurance coverage, and the term individual health insurance
coverage, as defined under section 2791(b)(5) of the PHS Act, excludes
short-term, limited-duration insurance.\50\ Therefore, under these
interim final rules, when referring to coverage offered by an issuer
within the same insurance market for purposes of determining the QPA,
the individual market excludes short-term, limited-duration insurance
(as defined in 26 CFR 54.9801-2, 29 CFR 2590.701-2, and 45 CFR
144.103). In addition, under these interim final rules, all markets
exclude coverage that consists solely of excepted benefits (as
described in section 9832 of the Code, section 733 of ERISA, and
section 2791 of the PHS Act). While excepted benefits can be offered in
the individual or group markets, they are exempt from the federal
insurance market reforms,\51\ and Congress amended the statutory
exemption for these products to include the additional coverage
provisions established under new Part D of title XXVII of the PHS
Act.\52\ Account-based plans, including health reimbursement
arrangements as described in 26 CFR 54.9815-2711(d)(6)(i), 29 CFR
2590.715-2711(d)(6)(i), and 45 CFR 147.126(d)(6)(i), make
reimbursements subject to a maximum fixed dollar amount for a period,
such that the benefit design of these coverage options makes concepts
related to surprise billing and choice of health care professionals
inapplicable. Therefore, under these interim final rules, for purposes
of calculating the QPA, all group markets similarly exclude coverage
provided under account-based plans.
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\50\ Since short-term, limited duration insurance is not
individual health insurance coverage, it is also generally not
subject to the federal individual market reforms. See, e.g., 81 FR
75316 at 75317 (Oct. 31, 2016) and 83 FR 38212 at 38213 (Aug. 3,
2018).
\51\ Section 9831 of the Code, section 732 of ERISA, and
sections 2722 and 2763 of the PHS Act.
\52\ These amendments add the phrase ``and Part D'' to section
2722(b), (c)(1), (c)(2), and (c)(3) of the PHS Act.
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The Departments also clarify that any plan or coverage that is not
a ``group health plan'' or ``group or individual health insurance
coverage'' offered by a ``health insurance issuer,'' as those terms are
defined in the Code, ERISA, and the PHS Act, such as a Medicare
Advantage or Medicaid managed care organization plan, must also not be
included in any insurance market for purposes of determining the QPA.
This approach is consistent with the statutory requirement that the
median contracted rate is determined with respect to all ``group health
plans'' of the sponsor or all ``group or individual health insurance
coverage'' offered by a health insurance issuer in the same insurance
market.
Same or Similar Item or Service
Section 9816(a)(3)(E) of the Code, section 716(a)(3)(E) of ERISA,
section 2799A-1(a)(3)(E) of the PHS Act, and these interim final rules
provide that a plan or issuer must calculate the median contracted rate
for an item or service using contracted rates for the same or similar
item or service. Under the interim final rules, the term ``same or
similar item or service'' means a health care item or service billed
under the same service code, or a comparable code under a different
procedural code system. Service code means the code that describes an
item or service, including a Current Procedural Terminology (CPT),
Healthcare Common Procedure Coding System (HCPCS), or Diagnosis-Related
Group (DRG) code. A service code is a unique identifier, typically
consisting of a string of numeric digits or alphanumeric characters,
that corresponds to a standardized description, which is used
[[Page 36891]]
to identify with specificity the item or service that was furnished to
a patient. Different codes may be assigned to the same general service
on the basis of certain variations in the provider's method or
approach, the complexity of the procedure or medical decision-making,
and patient acuity level. Payers, providers, and facilities understand
these service codes and commonly use them for billing and paying claims
(including for both individual items and services, and for items and
services provided under a bundled payment arrangement). Thus, defining
``same or similar item or service'' by service code will make it easier
for plans and issuers to calculate the QPA, and for providers and
facilities to understand the QPA.
These interim final rules include specific requirements to account
for modifiers (when applicable), which are codes applied to the service
code that provide a more specific description of the furnished item or
service and that may adjust the payment rate or affect the processing
or payment of the code billed. For example, modifiers include hospital
revenue codes, which indicate the department or place in the hospital
in which a procedure or treatment is performed, as well as codes
indicating whether services or procedures were performed by certain
types of providers, such as physician assistants, nurse practitioners,
certified registered nurse anesthetists, or assistant surgeons. In
addition, modifiers can be used to indicate that the work required to
provide a service in a particular instance was significantly greater--
or significantly less--than the service typically requires. The
Departments are of the view that it is important that the QPA
methodology account for modifiers that affect payment rates under
contracts with participating providers and facilities.
Under the methodology established in these interim final rules,
plans and issuers must calculate separate median contracted rates for
CPT code modifiers that distinguish the professional services component
(``26'') from the technical component (``TC''). This will result in
separate median contracted rates being calculated for services when
billed by a facility versus a provider. In addition, where a plan's or
issuer's contracted rates otherwise vary based on applying a modifier
code, the plan or issuer must calculate a separate median contracted
rate for each such service code-modifier combination. Modifiers that do
not cause contracted rates to vary must not be taken into account when
calculating the median contracted rate. These rules are intended to
ensure that if a plan or issuer adjusts contracted rates with
participating providers and facilities based on modifier codes, those
payment adjustments are appropriately reflected in the median
contracted rate.
Provider in the Same or Similar Specialty
These interim final rules specify that if a plan or issuer has
contracted rates for a service code that vary based on provider
specialty, the median contracted rate is calculated separately for each
provider specialty, as applicable. These interim final rules define
``provider in the same or similar specialty'' as the practice specialty
of a provider, as identified by the plan or issuer consistent with the
plan's or issuer's usual business practice. This definition is intended
to provide plans or issuers with the flexibility necessary to calculate
the median contracted rate, relying on their contracting practices with
participating providers. If a plan's or issuer's usual business
practice for identifying a provider's practice specialty differs for
contracting purposes and other business needs, the plan or issuer
should use the method of identifying the practice specialty that it
uses for contracting purposes.
The Departments considered requiring a plan or issuer to calculate
separate median contracted rates for every provider specialty, but
concluded that this approach would lead to more instances in which the
plan or issuer would not have sufficient information to calculate the
QPAs using its contracted rates. In addition, the Departments
understand that not all plans or issuers vary contracted rates by
provider specialty, in which case requiring plans and issuers to
calculate separate median contracted rates for each provider specialty
would increase the burden associated with calculating the QPA without
adding specificity to the QPA. Given that the No Surprises Act
generally relies on using contracted rates to determine the QPA, the
Departments conclude that plans and issuers should be required to
calculate median contracted rates separately by provider specialty only
where the plan or issuer otherwise varies its contracted rates based on
provider specialty.
With respect to air ambulance services, all providers of air
ambulance services (including inter-facility transports) are considered
to be a single provider specialty for purposes of these interim final
rules. The Departments understand that contracted rates may vary
depending on whether the air ambulance services are provided using a
fixed-wing or rotary-wing aircraft. However, these distinctions based
on vehicle type are accounted for in the QPA methodology established
under these interim final rules through the use of service codes that
are specific to fixed-wing or rotary-wing aircraft. Therefore, the
Departments anticipate that median contracted rates for fixed-wing and
rotary-wing aircraft would be determined separately based on the
requirement under these interim final rules that median contracted
rates be based on the contracted rates for the same or similar item or
service, and concluded that it would be redundant to require plans and
issuers to also calculate separate median contracted rates on the basis
of vehicle type.
The Departments also understand that hospital-based air ambulance
providers sometimes have lower contracted rates than independent, non-
hospital-based air ambulance providers. The Departments, however, are
of the view that because participants, beneficiaries, and enrollees
frequently do not have the ability to choose their air ambulance
provider, they should not be required to pay higher cost-sharing
amounts (such as coinsurance or a deductible) solely because the air
ambulance provider assigned to them has negotiated higher contracted
rates in order to cover its higher costs, or because it has a different
revenue model, than other types of air ambulance providers. This
approach is consistent with the approach these interim final rules take
with respect to facilities, discussed in the following section of this
preamble, which also generally does not provide for separate median
contracted rates to be calculated based on characteristics of a
particular facility. The Departments have concluded that this
interpretation is consistent with the statute's intent to protect
individuals from surprise medical bills.
Facility of the Same or Similar Facility Type
If a plan or issuer has contracted rates for emergency services
that vary based on the type of facility (that is, whether a facility is
an emergency department of a hospital or an independent freestanding
emergency department), the median contracted rate is calculated
separately for each such facility type. Plans and issuers subject to
the protections in the No Surprises Act are required to cover emergency
services at both types of facilities. However, the Departments are
aware that plans and issuers have not typically contracted with
independent freestanding emergency departments, which may be a
reflection of independent freestanding emergency departments'
historical ability (prior to the enactment of the No Surprises Act) to
charge higher rates for
[[Page 36892]]
services furnished on an out-of-network basis, and to balance bill
enrollees when the charges were denied in part or in full.\53\ The
Departments are also aware that there may be appreciable differences in
the case-mix and level of patient acuity between these types of
facilities.\54\ Therefore, where a plan or issuer has established
contracts with both hospital emergency departments and independent
freestanding emergency departments, and its contracts vary the payment
rate based on the facility type, the median contracted rate is to be
calculated separately for each facility type. The Departments are of
the view that this approach will maintain the ability of plans and
issuers to develop QPAs that are appropriate to the different types of
emergency facilities specified by statute. The Departments seek comment
on this approach, and whether it would be more appropriate for plans
and issuers to always calculate separate QPAs for hospital emergency
departments and independent freestanding emergency departments
regardless of whether the plan or issuer varies the payment rate based
on facility type, or whether a plan or issuer should never calculate
separate QPAs for hospital emergency departments and independent
freestanding emergency departments.
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\53\ See Medicare Payment Advisory Commission, Report to the
Congress: Medicare and the Health Care Delivery System, ch. 8,
Stand-alone Emergency Departments, June 2017, available at <a href="http://www.medpac.gov/docs/default-source/reports/jun17_ch8.pdf">http://www.medpac.gov/docs/default-source/reports/jun17_ch8.pdf</a> (last
visited June 19, 2021).
\54\ See id.
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However, these interim final rules do not allow plans or issuers to
separately calculate a median contracted rate based on other
characteristics of facilities that might cause contracted rates to
vary, such as whether a hospital is an academic medical center or
teaching hospital. Given that participants, beneficiaries, and
enrollees with emergency medical conditions typically go (or are taken)
to the nearest or most convenient emergency department, the Departments
are of the view that, individuals generally should not be required to
pay higher cost sharing (such as coinsurance or a deductible) based on
features of the emergency facility that may have a bearing on its
contracted rate with plans and issuers, but which are unrelated or
incidental to the facility's role as a provider of emergency services.
Geographic Regions
Under the No Surprises Act, plans and issuers must calculate the
median contracted rate for an item or service using contracted rates
for the same or similar item or service provided in the geographic
region in which the item or service is furnished. The No Surprises Act
directs the Departments, in consultation with the National Association
of Insurance Commissioners (NAIC), to establish through rulemaking the
geographic regions to be applied when determining the QPA, taking into
account access to items and services in rural and underserved areas,
including health professional shortage areas, as defined in section 332
of the PHS Act.\55\
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\55\ Under section 332 of the PHS Act, a health professional
shortage area is (A) an area in an urban or rural area (which need
not conform to the geographic boundaries of a political subdivision
and which is a rational area for the delivery of health services)
which the Secretary of HHS determines has a health manpower shortage
and which is not reasonably accessible to an adequately served area,
(B) a population group which the Secretary determines has such a
shortage, or (C) a public or nonprofit private medical facility or
other public facility which the Secretary determines has such a
shortage. All Federally qualified health centers and rural health
clinics, as defined in section 1861(aa) of the Social Security Act
(42 U.S.C. 1395x(aa)), that meet the requirements of section 254g of
title 42 shall be automatically designated as having such a
shortage.
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In consulting on the geographic regions to be applied under the No
Surprises Act, the NAIC recommended that geographic regions correspond
to the applicable rating area used for purposes of the individual
market and small group market rating rules under section 2701 of the
PHS Act, implemented at 45 CFR 147.102, while allowing states the
flexibility to establish alternative geographic regions. However, some
states define rating area by county, resulting in large numbers of
rating areas in a state, some of which might include very few, if any,
facilities and providers. Therefore, adopting the rating area
definitions as the standard for geographic regions could lead to a
large number of geographic regions for which a plan or issuer would
have to calculate separate median contracted rates, a large number of
geographic regions without sufficient information, as well as a large
number of geographic regions in which the median contracted rate is
influenced by outliers.
After consultation with the NAIC, the Departments are establishing
geographic regions under these interim final rules that reflect
differences in health care costs based on whether care is provided in
urban or rural areas. The Departments are of the view that these
geographic regions take into account access to items and services in
rural and underserved areas, including health professional shortage
areas, as defined at section 332 of the PHS Act. The Departments intend
to monitor the effect of these geographic regions and periodically
update such regions, as appropriate, taking into account the findings
of the report submitted under section 109(a) of the No Surprises Act,
which addresses, among other things, access to health care items and
services in rural areas and health professional shortage areas.
In defining ``geographic regions,'' the Departments have sought not
only to minimize instances in which a plan or issuer lacks sufficient
information to calculate the median of contracted rates in any
particular geographic region, but also to limit the instances in which
a plan or issuer has only the minimum amount of information to meet the
sufficient information standard, as discussed later in this preamble.
Using larger geographic regions, for which plans and issuers are likely
to have more information, is expected to reduce the likelihood that the
median of contracted rates would be skewed by contracts under which the
parties have agreed to particularly high or low payment amounts.
Under these interim final rules, for items and services other than
air ambulance services, a geographic region is generally defined as one
region for each metropolitan statistical area (MSA) in a state and one
region consisting of all other portions of the state. The delineations
for MSAs are described by the U.S. Office of Management and Budget
(OMB) and published by the U.S. Census Bureau.\56\ MSAs encompass at
least one urbanized area with a population of 50,000 or more people,
plus adjacent territory that has a high degree of social and economic
integration with the core as measured by commuting ties. MSAs are
always established along county boundaries, but may include counties
from more than one state. Under this definition, MSAs that cross state
boundaries are divided between the respective states, with all the
counties in a particular MSA in each state counted as a geographic
region.
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\56\ OMB Bulletin No. 20-01. ``Revised Delineations of
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas, and Guidance on Uses of the Delineations
of These Areas'' (Mar. 6, 2020), available at <a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>.
U.S. Census Bureau, Delineation Files, available at <a href="https://www.census.gov/geographies/reference-files/time-series/demo/metro-micro/delineation-files.html">https://www.census.gov/geographies/reference-files/time-series/demo/metro-micro/delineation-files.html</a>.
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However, under this definition, if a plan or issuer does not have
sufficient information to calculate the median of contracted rates for
an item or service provided in an MSA, the plan or issuer must consider
all MSAs in the state to be a single region when calculating the median
of contracted rates for the item
[[Page 36893]]
or service provided in that MSA. In such cases, all MSAs in the state
will constitute one geographic region, and all other portions of the
state will continue to constitute a different region. If after applying
these broader regions, a plan or issuer continues to have insufficient
information to calculate the median of contracted rates, geographic
regions will be based on Census divisions, with one region consisting
of all MSAs in the Census division, and one region consisting of all
other portions of the Census division. There are nine Census divisions,
as published by the U.S. Census Bureau.\57\ This approach will help to
reduce instances in which a plan or issuer cannot rely on its own
contracted rates to determine the QPA in cases where the plan or issuer
is not limited to operating within a single state but instead has
provider contracts in a multi-state region.
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\57\ U.S. Department of Commerce Economics and Statistics
Administration, U.S. Census Bureau, available at <a href="https://www2.census.gov/geo/pdfs/maps-data/maps/reference/us_regdiv.pdf">https://www2.census.gov/geo/pdfs/maps-data/maps/reference/us_regdiv.pdf</a>.
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These interim final rules establish alternate geographic regions
with respect to air ambulance services. Given the nature of air
ambulance services, the infrequency with which they are provided
relative to the other types of items and services subject to the No
Surprises Act, and the lower prevalence of participating providers of
air ambulance services, the Departments have determined not to apply a
definition of geographic regions based on MSAs, as narrow regions would
result in more instances of insufficient information.
Thus, for air ambulance services, a geographic region means one
region consisting of all MSAs in the state, and one region consisting
of all other portions of the state. If a plan or issuer does not have
sufficient information to calculate the median of the contracted rates
for an air ambulance service using that definition of a geographic
region, these interim final rules apply broader regions based on Census
divisions--that is, one region consisting of all MSAs in each Census
division and one region consisting of all other portions of the Census
division. Because air ambulance services can be furnished over large
distances, these interim final rules provide that the geographic region
to be applied for air ambulance services is determined based on the
point of pick-up, meaning the location of the individual at the time
the individual is placed on board the air ambulance. This approach is
generally consistent with prevailing market practices among both
private and public payers.
Non-Fee-for-Service Contractual Arrangements
The No Surprises Act provides that rulemaking to establish the
methodology used to determine the QPA must take into account payments
that are made by a plan or issuer that are not on a fee-for-service
basis. The Departments are aware that many types of alternative
reimbursement models exist that are not standard fee-for-service
arrangements. For example, under a bundled payment arrangement, plans
and issuers may reimburse a provider for multiple items and services
under a single billing code. Other payers have capitation arrangements,
under which a provider or panel of providers is paid a fixed amount per
member per month.
The Departments understand that when a plan or issuer has a fully-
or partially-capitated payment arrangement, the plan or issuer also
typically has an internal methodology used to value claims for those
payments made on a capitated basis. For example, a plan or issuer with
capitation arrangements may have an underlying fee schedule that is
used to calculate an individual's cost sharing. The Departments are of
the view that, when a plan or issuer has an underlying fee schedule
used to determine cost sharing under non-fee-for-service contracts, it
is reasonable for the plan or issuer to use the same methodology to
assign a value to the item or service for purposes of determining the
QPA. This approach is used by plans and issuers in other similar
contexts, including when providing data for the risk adjustment program
\58\ and when making publicly available in-network rates under the
transparency in coverage regulations.\59\
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\58\ See 45 CFR 153.710(c) (requiring an issuer of a risk
adjustment covered plan or a reinsurance-eligible plan in a state in
which HHS is operating the risk adjustment or reinsurance program,
as applicable, that does not generate individual enrollee claims in
the normal course of business to derive the costs of all applicable
provider encounters using its principal internal methodology for
purposes of pricing those encounters).
\59\ See 26 CFR 54.9815-2715A3(b)(1)(C); 29 CFR 2590.715-
2715A3(b)(1)(C); 45 CFR 147.212(b)(1)(C) (requiring plans and
issuers that use underlying fee schedule rates for calculating cost
sharing to make publicly available on an internet website the
underlying fee schedule rates for all covered items and services).
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Therefore, in the case of these alternative payment models, such as
bundled and fully or partially capitated arrangements, where payment
made by a plan or issuer is not fully on a fee-for-service basis, these
interim final rules provide that the plan or issuer must calculate a
median contracted rate for each item or service using the underlying
fee schedule rates for the relevant items and services, if underlying
fee schedule rates are available. The term ``underlying fee schedule
rate'' means the rate for a covered item or service from a particular
participating provider, providers, or facility that a group health plan
or health insurance issuer uses to determine a participant's,
beneficiary's, or enrollee's cost-sharing liability for the item or
service, when that rate is different from the contracted rate.\60\ If
there is no underlying fee schedule rate for an item or service, these
interim final rules provide that the plan or issuer must calculate the
median contracted rate using a derived amount, which, consistent with
the definition in the transparency in coverage regulations, is the
price that a plan or issuer assigns an item or service for the purpose
of internal accounting, reconciliation with providers, or for the
purpose of submitting data in accordance with the requirements of 45
CFR 153.710(c).
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\60\ This definition is substantially similar to the definition
of ``underlying fee schedule rate'' in the transparency in coverage
regulations at 26 CFR 54.9815-2715A1(a)(2)(xxii), 29 CFR 2590.715-
2715A1(a)(2)(xxii), and 45 CFR 147.210(a)(2)(xxii).
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The Departments considered alternative approaches to account for
non-fee-for-service contractual arrangements, such as requiring plans
and issuers to calculate median contracted rates for service bundles,
or allowing plans or issuers to disregard certain types of non-fee-for-
service contracts for purposes of calculating the median contracted
rate. However, the approach specified in these interim final rules will
ensure that the median contracted rate calculation accounts for a range
of different contractual arrangements, including instances where a plan
or issuer uses different types of contracting models with different
providers and facilities. Using an underlying fee schedule or derived
amount will allow plans or issuers to, in essence, convert each of
their non-fee-for-service contracts into fee-for-service arrangements
for purposes of calculating the median contracted rate. By avoiding
instances where plans or issuers might have been required to disregard
some of their contracts, this approach minimizes the number of
instances in which a plan or issuer would not have sufficient
information to calculate a median contracted rate and ensures that
arrangements that pay for value over service volume are reflected in
the QPA. In addition, this approach will result in the calculation of a
QPA that aligns with a service code (or service-code modifier
[[Page 36894]]
combination). The Departments anticipate this result will be helpful to
nonparticipating providers and facilities in understanding how much
cost sharing they are permitted to charge for a given item or service,
and as they negotiate with the plan or issuer to determine the out-of-
network rate.
It is the Departments' understanding that under certain capitated
and bundled payment arrangements, providers' payments may be reconciled
retrospectively to account for utilization, value adjustments, or other
weighting factors that can affect the final payment to a provider. In
addition, payers and providers may agree to certain incentive payments
during the contracting process to promote the provision of higher-
quality, lower-cost health care to participants, beneficiaries, or
enrollees over time. These interim final rules specify that when
calculating median contracted rates, plans and issuers must exclude
risk sharing, bonus, or penalty, and other incentive-based and
retrospective payments or payment adjustments. The Departments are of
the view that excluding these payments and payment adjustments from the
median contracted rates used to determine cost sharing for items and
services furnished by nonparticipating providers or facilities is
consistent with how cost sharing is typically calculated for in-network
items and services, where the cost-sharing amount is customarily
determined at or near the time an item or service is furnished, and is
not subject to adjustment based on changes in the amount ultimately
paid to the provider or facility as a result of any incentives or
reconciliation process.
b. Indexing
The No Surprises Act provides that, in instances when the median
contracted rate is determined as of January 31, 2019, the QPA for items
and services furnished during 2022 is calculated by increasing the
median contracted rate by the percentage increase in the consumer price
index for all urban consumers (U.S. city average) (CPI-U) over 2019,
the percentage increase over 2020, and the percentage increase over
2021. The No Surprises Act further provides that the QPA for 2022 is
then adjusted annually for items and services furnished during 2023 or
a subsequent year. Therefore, the increase for any year is the CPI-U
for the year, as so defined, divided by the CPI-U for the prior year.
The combined percentage increase for 2019, 2020, and 2021 to determine
the amount for 2022 is the product of the CPI-U increases for 2019,
2020, and 2021 multiplied together. For any year, the factor will be
the quotient of CPI-U for the current year divided by the CPI-U for the
prior year. For example, for an item or service provided in 2023, the
2023 QPA is the 2022 QPA multiplied by the CPI-U 2022/CPI-U 2021.
These interim final rules provide specifications for calculating
the percentage increase in CPI-U to ensure that all plans and issuers
adjust the percentage in a uniform manner. In order to ensure that
uniformity, these interim final rules provide that plans and issuers
will calculate the increases using the factors determined by the
Treasury Department and the IRS, and published in guidance by the IRS.
In determining the factors, these interim final rules provide that the
percentage increase for any year is calculated by using the CPI-U
published by the Bureau of Labor Statistics of the DOL. For this
purpose, the CPI-U for each calendar year is the average of the CPI-U
as of the close of the 12-month period ending on August 31 of the
calendar year, rounded to 10 decimal places. This allows the
Departments to provide the percentage increase factor before January 1
of each applicable year with sufficient time to adjust the QPAs for the
year.
c. Special Rules for Unit-Based Services
These interim final rules provide special rules for calculating the
QPA for items or services for which a plan or issuer generally
determines the reimbursement level for the same or similar items or
services by multiplying the contracted rate by another unit, such as
time or mileage. In these cases, indexing the median contracted rate to
calculate the QPA would result in an amount that does not reflect the
other units that are generally considered when calculating the in-
network payment amount. Therefore, when reimbursement levels are
determined using this approach, these interim final rules specify that
the QPA is calculated by determining the median contracted rate used
for that item or service, indexing that median amount in accordance
with the otherwise applicable rules regarding indexing, and then
applying the pertinent multipliers. These interim final rules also
include specific instructions for calculating the QPA for anesthesia
services and for certain service codes for air ambulance services.
Anesthesia Services
Payers generally calculate payment amounts for anesthesia services
by multiplying the negotiated rate for the anesthesia conversion factor
that has been negotiated between the payer and the provider (expressed
in dollars per unit) by (1) the base unit for the anesthesia service
code, (2) the time unit, and (3) the physical status modifier unit. The
base unit, time unit, and physical status modifier unit are specific to
the individual receiving the anesthesia services. These units are not
expressed in dollars per unit, nor do they vary by contract. The base
units for an anesthesia service code are the American Society of
Anesthesiologists Relative Value Guide base units for that service
code. The time unit represents the length of time during which the
anesthesia services were furnished, and for purposes of the QPA
methodology, is measured in 15-minute increments or a fraction thereof.
The physical status modifier on a claim is a standard modifier
describing the physical status of the patient and is used to
distinguish between the various levels of complexity of the anesthesia
services provided, and is expressed as a unit with a value between zero
(0) and three (3).
These interim final rules include a methodology for calculating the
QPA for these anesthesiology services that reflects the manner in which
providers are generally paid for these services. To calculate the QPA
for anesthesia services furnished during 2022, these interim final
rules require the plan or issuer to, first, take the median contracted
rate for the anesthesia conversion factor (determined in accordance
with the methodology for calculating median contracted rates for
service code-modifier combinations) for the same or similar item or
service as of January 31, 2019, and increase that amount to account for
changes in the CPI-U, using the methodology described earlier in this
section of the preamble. This amount is referred to as the indexed
median contract rate. The plan or issuer must then multiply this
indexed median contracted rate for the anesthesia conversion factor by
the sum of the base unit (using the value specified in the most
recently published edition (as of the date of service) of the American
Society of Anesthesiologists Relative Value Guide), time unit, and
physical status modifier units of the participant, beneficiary, or
enrollee to whom anesthesia services are furnished to determine the
QPA.
To calculate the QPA for anesthesia services furnished during 2023
or a subsequent year, the plan or issuer must use the indexed median
contracted rate for the anesthesia conversion factor, and adjust that
amount by the percentage increase in the CPI-U over the previous year
using the methodology described earlier in this section of the
preamble.
[[Page 36895]]
The plan or issuer must then multiply that amount by the sum of the
base unit (using the value specified in the most recently published
edition (as of the date of service) of the American Society of
Anesthesiologists Relative Value Guide), time unit, and physical status
modifier units for the participant, beneficiary, or enrollee to whom
anesthesia services are furnished to determine the QPA.
Air Ambulance Services
Payers often reimburse for air ambulance services in part by using
air mileage service codes (A0435 and A0436) and reimbursement levels
that reflect the number of miles an individual is transported by the
air ambulance, which are referred to as loaded miles. Payment amounts
are calculated by multiplying the negotiated rate for the service code,
referred to in this rule as the air mileage rate, by the number of
loaded miles. These interim final rules include a methodology for
calculating the QPA for these air mileage service codes that reflects
the manner in which providers are generally paid for the service codes.
To calculate the QPA for the portion of air ambulance services
billed using the air mileage service codes that are furnished during
2022, the plan or issuer must first increase the median contracted
rate, in accordance with 26 CFR 54.9816-6T(c)(1)(i), 29 CFR 2590.716-
6(c)(1)(i), or 45 CFR 149.140(c)(1)(i), as applicable. This amount is
referred to as the indexed median air mileage rate. The plan or issuer
must then multiply the indexed median air mileage rate by the number of
loaded miles provided to the participant, beneficiary, or enrollee to
determine the QPA.
To calculate the QPA for air ambulance services billed using the
air mileage service codes (A0435 and A0436) that are furnished during
2023 or a subsequent year, the plan or issuer must increase the indexed
median air mileage rate, determined for such services furnished in the
immediately preceding year, using the methodology described in 26 CFR
54.9816-6T(c)(1)(ii), 29 CFR 2590.716-6(c)(1)(ii), or 45 CFR
149.140(c)(1)(ii), as applicable. The plan or issuer must then multiply
the indexed median air mileage rate by the number of loaded miles
provided to the participant, beneficiary, or enrollee to determine the
QPA.
d. Cases With Insufficient Information
Section 9816(a)(3)(E)(iii) of the Code, section 716(a)(3)(E)(iii)
of ERISA, and section 2799A-1(a)(3)(E)(iii) of the PHS Act, as added by
the No Surprises Act, specify an alternative process to determine the
QPA in cases where a group health plan or health insurance issuer
offering group or individual health insurance coverage lacks sufficient
information to calculate the median of contracted rates in 2019, as
well as for newly covered items or services in the first coverage year
after 2019.
Definition of Sufficient Information
Under these interim final rules, a plan or issuer is considered to
have sufficient information to calculate the median of contracted rates
if the plan or issuer has at least three contracted rates on January
31, 2019, to calculate the median of the contracted rates in accordance
with the methodology in these interim final rules. In the Departments'
view, while a median contracted rate could be calculated with a smaller
number of contracts, requiring a minimum of three contracted rates is
supported by the statute's direction to calculate a median, rather than
a mean. Furthermore, the Departments have determined that three
contracted rates for a particular item or service in a geographic
region represents the minimum number of contracts necessary to
reasonably reflect typical market negotiations while reducing the
potential for outlier rates to unduly influence the calculation of the
QPA.
Under section 9816(a)(3)(E)(iii) of the Code, section
716(a)(3)(E)(iii) of ERISA, section 2799A-1(a)(3)(E)(iii) of the PHS
Act, and these interim final rules, where a plan or issuer that
initially does not have sufficient information to calculate the median
contracted rate based on January 31, 2019 contracted rates (or for new
plans and coverage or new service codes, as discussed in more detail in
this section of the preamble) later gains sufficient information, the
plan or issuer must calculate the QPA using the median contracted rate
for the first sufficient information year. The first sufficient
information year is defined as: (1) In the case of an item or service
for which a plan or issuer does not have sufficient information to
calculate the median of contracted rates in 2019, the first year after
2022 for which the plan or issuer has sufficient information to
calculate the median of contracted rates in the year immediately
preceding that first year after 2022; and (2) in the case of a newly
covered item or service, the first year after the first coverage year
for such item or service with respect to such plan or coverage for
which the plan or issuer has sufficient information to calculate the
median of the contracted rates in the year immediately preceding that
first year.
In cases in which contracted rates for a year after 2019 must be
used to calculate the median contracted rate, a plan or issuer will be
considered to have sufficient information to calculate the median
contracted rate for a year if, with respect to that year, both of the
following conditions are met: (1) The plan or issuer has at least three
contracted rates on January 31 of the year immediately preceding that
year to calculate the median of the contracted rates in accordance with
the methodology in these interim final rules; and (2) the contracted
rates account (or are reasonably expected to account) for at least 25
percent of the total number of claims paid for that item or service for
that year with respect to all plans of the sponsor (or of the
administering entity, if applicable) or all coverage offered by the
issuer that are offered in the same insurance market.
The requirement that a plan or issuer have at least three
contracted rates for a particular item or service in a geographic
region is the same as the requirement that applies when determining
whether there is sufficient information to calculate a median
contracted rate for items and services furnished during 2022 using the
median of contracted rates as of January 31, 2019. The 25 percent
minimum claims volume requirement, however, applies where only
contracted rates for years after 2019 are used to determine whether a
plan or issuer has sufficient information to calculate the median
contracted rate in the first sufficient information year. While the
Departments are not concerned about manipulation of the QPA in the
majority of cases where the median contracted rate is based on 2019
contracted rates, the Departments recognize the potential for plans and
issuers to engage in selective contracting practices that artificially
change the median contracted rate in cases where subsequent year
contracted rates are used to determine the QPA. Therefore, this
requirement will help to ensure that when contracted rates for years
after 2019 are used to calculate a median contracted rate, those
network contracts represent a reasonable proportion of a plan's or
issuer's total claims and are not designed to manipulate the QPA.
Eligible Databases
In cases in which a plan or issuer does not have ``sufficient
information'' to calculate a median contracted rate, the No Surprises
Act directs the plan or issuer to determine the QPA through use of any
database that is determined, in accordance with rulemaking issued by
the Departments, to not have any
[[Page 36896]]
conflicts of interest and to have sufficient information reflecting
allowed amounts paid to a health care provider or facility for relevant
services furnished in the applicable geographic region (such as a state
all-payer claims database).
These interim final rules establish standards for databases,
referred to as eligible databases, that may be used to determine the
QPA. State all-payer claims databases are categorically eligible under
these interim final rules because they are specifically identified as
not having any conflicts of interest and as having sufficient
information reflecting allowed amounts in section 9816(a)(3)(E)(iii)(I)
of the Code, section 716(a)(3)(E)(iii)(I) of ERISA, and section 2799-
1(a)(3)(E)(iii)(I) of the PHS Act. Other third-party databases may also
be eligible, provided all of the following conditions are satisfied.
First, the database or the organization maintaining the database
cannot be affiliated with, or owned or controlled by, any health
insurance issuer, or a health care provider, facility, or provider of
air ambulance services, or any member of the same controlled group as,
or under common control with, any such entity. For example, if a
majority of the members on the governing board of a database or the
organization maintaining the database are associated with a health
insurance issuer, the database would be considered to have a conflict
of interest under these interim final rules, since it is controlled by
the issuer. As another example, if an issuer owns 40 percent of the
stock of the organization that maintains a database, and its subsidiary
owns an additional 20 percent of the stock of the organization that
maintains the database, the database would be considered to have a
conflict of interest under these interim final rules, since it is
effectively controlled by the issuer. As a third example, if an issuer
and the organization that maintains a database are both subsidiaries of
the same parent organization, the database would be considered to have
a conflict of interest under these interim final rules, since it is
affiliated with the issuer. In the Departments' view, this standard is
critical to ensuring the independence of any database used to determine
the QPA. The Departments solicit comment on whether a database should
not be affiliated with, or owned or controlled by, other entities, such
as plan sponsors or third-party administrators, in order to avoid a
conflict of interest. The Departments also seek comment on whether to
establish a specific threshold that a party's minority ownership
interest must meet or exceed in order to create a conflict of interest
for purposes of these interim final rules.
For purposes of applying the controlled group rules to eligible
databases, a controlled group means a group of two or more persons that
is treated as a single employer under Code sections 52(a), 52(b),
414(m), or 414(o). The Treasury Department and the IRS are considering
whether further guidance is needed under section 52(a) or (b) of the
Code to address either organizations exempt from tax under section
501(a) of the Code or nonprofit organizations that, although not exempt
from tax under section 501(a) of the Code, do not have members or
shareholders that are entitled to receive distributions of the
organization's income or assets (including upon dissolution) or that
otherwise retain equity interests similar to those generally held by
owners of for-profit entities. Until further guidance is issued, those
two types of organizations may either rely on a reasonable, good-faith
application of section 52(a) and (b) of the Code (taking into account
the reasons for which the controlle
[…truncated; see source link]Indexed from Federal Register on July 13, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.