No Surprises Act May Shrink In-Network Pay

A letter sent from one North Carolina insurer to its contracted in-network physicians laid bare the depth of the indirect consequences of the No Surprises Act. In other words, it came as a surprise.

In the letter from Blue Cross Blue Shield (BCBS) of North Carolina to Wake Emergency Physicians, PA, an independent physician group contracted with the insurer for more than 9 years, BCBS asked the group to accept 20% lower contracted rates for all services across the board, or leave the network.

In no uncertain terms, they gave their rationale behind this decision: the No Surprises Act.

In a letter to North Carolina legislators, the American College of Emergency Physicians (ACEP) wrote that Wake Emergency Physicians had received a similar letter from two other insurers, including one demanding a 40% rate decrease.

"I do feel they're completely using the leverage of this federal legislation to bully us," Jennifer Raley, MD, a managing partner for Wake Emergency Physicians, told MedPage Today.

Why Drive Doctors Out of Network?

To understand how a law designed to curb patients' out-of-network costs has become part of a negotiation over in-network rates, it's important to grasp the dynamics between providers and insurers for specialties in which doctors see more out-of-network patients. With the option of collecting the balance of a bill that insurance didn't fully cover, and a steady stream of patients guaranteed, emergency providers had less incentive to join a network. They could leverage that to negotiate for higher in-network rates from an insurer.

But without balance billing, physician groups argue that their leverage is gone -- and that affects doctors who are already in networks and don't engage in surprise billing. What they say was a fairly written No Surprises Act laid out the terms under which arbitration over out-of-network pricing would play out: independent arbitrators would consider equally an insurer's median in-network rate for a given service in a geographical area, or their Qualifying Payment Amount (QPA), in addition to the complexity of the procedure, the historical contracted rates for that service, and the expertise and experience of the doctor, in reaching a decision on payment.

Instead, physicians and their advocates have said, the rules were changed to disadvantage them in out-of-network arbitration, which in turn would affect their in-network contracts. Instead of considering all factors together, arbitrators would begin with the QPA, effectively defaulting to it. Specifically, the rules say the arbitrator "must select the offer closest to the [QPA] unless the certified IDR [independent dispute resolution] entity determines that credible information submitted by either party ... clearly demonstrates that the [QPA] is materially different from the appropriate out-of-network rate."

In other words, they argued, arbitration would favor the QPA and insurers because it requires a heavy burden of proof from providers to show why they deserve more than the median rate. This would result in lower payments, ultimately giving payers an undeserved bargaining chip. Insurers could threaten providers in their network with lower reimbursement rates, because if they leave the network and end up haggling over prices, they'll be met with the QPA.

The QPA may seem like a fair price, but physicians and their advocates have said it isn't. "Nobody gets to see how it's calculated, which is our issue with it," said Laura Wooster, MPH, senior vice president of advocacy and external affairs for ACEP.

QPA a Mystery

Insurers use small geographic areas called Metropolitan Statistical Areas, an industry standard, but "when you've had difficult relations with insurers in the past ... we know that QPA is supposed to be calculated on these geographic regions, but then, you know, are they doing that or not? It just leaves you dubious," said Wooster.

What's more, health insurance experts have said that is because of that lack of pricing transparency. The auditing protocol that the rules have in place, they asserted, is inadequate and vague -- "the Secretary or applicable State authority" is to review claims data from "not more than 25 group health plans" offered by insurers, although Raley said there is a process by which providers can report a QPA they believe is inaccurate, triggering an audit.

This "take it or leave it" approach was what physician groups feared, and nowhere is it more explicit than the letter to North Carolina physicians, which reads, "While the exact, final QPAs are not yet available pending upcoming finalization of the Rules to the No Surprises Act, the Interim Final Rules provide enough clarity to warrant a significant reduction in your contracted rate with Blue Cross NC." If they can't agree on lower in-network rates, "our plan is to terminate agreements where the resulting out-of-network QPA would reduce medical expenses," the letter stated.

"Within a month and a half of that rule coming out, that elevated the QPA, that they have it put in writing, was shocking. Just shocking that they say 'okay, take this rate cut while we negotiate a new rate,'" said Raley. "In my experience, that's unheard of." In the letter, the physician group was told that they were "identified as one of the outlier in-network providers with respect to rates."

But some experts have also said this is an expected part of negotiations between two entities that want to maximize money. "They can say whatever they want. The question is, what do they settle on?" said David Hyman, MD, JD, a professor of health law and policy at the Georgetown University Law Center. "I would not be surprised if insurers tell every person they deal with, 'We're paying you above the median.' But, of course, that's mathematically impossible," he added. "They're probably lying through their teeth much of the time. But you know, [in] commercial negotiation, there's no duty of truth telling."

Special Case for Emergency Medicine?

From the insurers' perspective, they've been paying emergency physicians too much for years. "There's quite good evidence that certain providers had payment rates that were way out of sync with what they would be in a normal market," said Hyman.

Glenn Melnick, PhD, a professor at University of Southern California Sol Price School of Public Policy, said that emergency physicians' leverage has allowed them to ask for higher rates over time.

"The letter from Blue Cross says, 'Look, these prices have been growing exclusively for many, many years. Now we have a mechanism to bring them back in line,'" Melnick told MedPage Today. "'Do we implement it quickly? With a shoe, with a deep cleaver, or more carefully and slowly, with a scalpel?' But it's going to be disruptive."

But from the providers' perspective, emergency medicine simply isn't the same as other specialties in the market.

"Emergency medicine is a very unique business that has challenges," said Raley, citing low self-pay rates and high percentages of patients who are uninsured or on Medicaid, which reimburses at lower rates. "So when we're talking about, is a rate fair or not? There's not one rate that's going to be fair across the entire country."

Ultimately, the contracted rates they agree upon will come down to which providers are more valuable to insurers. And, Melnick said, the out-of-network arbitration process will likely reveal how any particular QPA is calculated, as will in-network contract negotiations. "They'd [the insurers] have to prove to the arbitrator that the amounts that they offered are supported by their data," he added.

For now, Wake Emergency Physicians sees no need to take immediate action. "This letter we didn't feel personally required a response, because it wasn't an official demand," Raley said. But if threats like these end up driving down the prices for all emergency services, patients will suffer for it, she noted.

"We have less money to pay doctors and physician assistants and nurse practitioners. And so we'll have to cut our costs, and the biggest bulk of our costs is paying people," she said.

Less pay is exactly what emergency physicians don't want during a pandemic. And groups like the one Raley leads have higher costs because unlike other specialties, emergency work by nature means having to pay to keep more doctors on call in case a large accident or disaster strikes, along with other factors, like using specialized equipment.

What's more, Raley and Wooster said that insurers have nothing compelling them to pass along the savings they made cutting costs to patients in the form of lower premiums and out-of-pocket expenses. They could just pocket the difference.

There are, however, some safeguards against this kind of practice. According to Stephen Parente, PhD, MPH, a health economist and professor at the University of Minnesota, the Affordable Care Act caps the percentage of money earned by an insurance company that they can spend on administration, or turn around and put back into the company. "There is definitely a limitation on how much an insurer can profit on the market," he said.

Parente and other experts said this kind of threat from insurers may or may not play out similarly in other states and markets -- some of which may take more aggressive tactics than others. "The South is more bold," he noted.

In an emailed statement sent to MedPage Today, BCBS of North Carolina wrote, "As part of our ongoing efforts to make health care more affordable for our members, Blue Cross NC is working to negotiate more affordable rates with a number of provider practices whose current rates far exceed the average for their respective specialties and geographic locations."

"These providers make up less than 0.5% of the thousands of provider contracts in our network, and are the most expensive -- with some currently charging our members up to 500% more than what they charge Medicare patients," they added.

There is, however, hope for further price transparency outside of the No Surprises Act, which would shine more light on how insurers calculate their median costs, called Transparency in Coverage, based on an executive order that would require insurers to release their in-network payment data in a standardized format monthly starting in July, Parente said, acknowledging that it would be difficult to enforce.

Eventually, he said, the resulting database could lead to something akin to "Expedia for healthcare," allowing patients to choose the most affordable, best-quality care -- ideally free of the fallout of insurer-provider disputes over the No Surprises Act.

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