Since last year, certain providers (e.g., anesthesiologists, radiologists, surgeons, etc.) in Michigan have had to navigate Michigan’s Surprise Medical Billing Law (“Michigan Act”). Starting January 1, 2022, those same providers have also had to comply with the Federal No Surprises Act (“Federal Act”). Generally, both statutes prevent nonparticipating providers from balance billing patients when the patient’s insurance company pays less than the nonparticipating provider’s usual and customary charge. The Federal Act defines “nonparticipating providers” as those who do not have a contractual relationship with a plan/insurance company.
Although the two statutes largely apply to the same providers, those providers need to pay attention to which law applies and take steps to carefully abide by the rate setting process unique to each. Generally speaking, both laws apply to situations where the patient is not able to control whether their treatment team consists of participating or nonparticipating providers.
Michigan’s Surprise Medical Billing Law
The Michigan Act typically applies to three types of treatment rendered by nonparticipating providers:
(1) Treatment of all emergency patients;
(2) Services to non-emergency patients in participating hospitals where the patient does not have the opportunity to choose a participating provider (or the patient has not been provided with prior disclosure); and
(3) Treatment of patients admitted to a hospital within 72 hours after receiving treatment in that hospital’s emergency department.
Assuming the Michigan Act applies, nonparticipating providers are required to submit a claim to the patient’s insurance company, and the providers are required to accept as payment in full the greater of the following:
(1) Median rate negotiated by providers in that region and specialty who choose to sign network participation contracts with that carrier, or
(2) 150% of the Medicare fee for service rate. The Michigan Act prohibits providers from attempting to collect any amount from the patient, other than in-network coinsurance, copayment, or deductibles.
If the provider believes the payment amount was incorrectly calculated, the statute sets forth an appeal process conducted by the Department of Insurance and Financial Services. If the services involve a complicating factor, the provider can submit a request to the insurance carrier, and if approved, it can result in an additional 25% payment.
Federal No Surprises Act
The Federal Act went into effect on January 1, 2022, and to date, three sets of interim final rules have been issued. Like the Michigan Act, the Federal Act generally applies to nonparticipating providers rendering emergency services. It also applies to many non-emergency services provided at participating health facilities by nonparticipating providers. Although exceptions in the Federal Act apply where certain notice and consent criteria are met, those exceptions do not apply to ancillary services, including those related to emergency medicine, pathology, anesthesiology, and many diagnostic services.
Under the Federal Act, an insurance company must pay nonparticipating providers the out-of-network rate, which is determined through an independent dispute resolution (“IDR”) process. Regulations state that the process begins with a 30-day period during which the provider and plan attempt to reach an agreement. If negotiations fail, either party has four days to initiate an IDR process, which involves a baseball-style arbitration. Each side submits a proposed reimbursement amount to an arbitrator who picks one of the two submissions. Under the current regulations, the arbitrator’s primary consideration is the “qualifying payment amount” (the median contracted rate for the same service in the same specialty). Arbitrators are prohibited from considering the provider’s usual and customary charge and from considering Medicare rates. At least one consulting company known to the authors is developing a database to help make these determinations.
The Federal Act contains many other requirements, such as providing good faith estimates, that are beyond the scope of this article.
Which Law and Which Rate Setting Method Applies?
The Federal IDR process only applies to determine the rate where there is no “specified State law” in effect. A “specified State law” is a law that provides a method for determining the total amount payable to a nonparticipating provider. In other words, if the state has a surprise medical billing law, like Michigan, then the Federal Act looks to the Michigan Act to determine the amount that the insurance company must pay the out-of-network provider and the baseball style IDR process does not apply. But the Federal Act only looks to the state law “to the extent such State law applies.” Many plans (most notable plans subject to ERISA) are not subject to the Michigan Act. When Part I of the Interim Final Rules were written, they allowed for ERISA plans to “opt-in” to a specified State law, provided the State law permits it to do so. Currently, the Michigan Act does not contain any language suggesting that an ERISA plan can opt into the payment methodology set forth in the Michigan Act.
So, it seems that if Federal Act applies, then the rate is determined by the Michigan Act if the Michigan Act also applies. But, if the Michigan Act does not apply (like in the case of an ERISA plan), then the rate is determined by the IDR process outlined in the Federal Act. Providers will need to determine whether the patient’s plan is subject to the Federal Act or whether the plan is subject to the Michigan Act to know which law applies. Thus, providers may need to consider modifications to business processes that make more information available upfront regarding patients’ health insurance plans.
Challenges
At least two lawsuits have been filed challenging parts of the Federal Act, although both focus on challenging the arbitration procedures. A Federal Court in Texas is scheduled to hear oral argument on Summary Judgment Motions on February 4, 2022 in a case filed by the Texas Medical Association.[1] Briefing is also underway in a lawsuit filed jointly by the American Medical Association, American Hospital Association, and others.[2] The AMA/AHA lawsuit made it clear that the AMA and AHA support the Federal Act, but take issue with certain regulations that address what the arbitrator may and may not consider when determining the appropriate payment rate.
Conclusion
Many stakeholders have strong opinions about the Michigan and Federal acts. Those in favor cite the need to prevent patients from surprise out-of-network bills. Those opposed contend they deprive providers of their ability to determine how much to charge for their services, and that they weaken in-network providers’ ability to negotiate in-network rates.
Regardless, nonparticipating providers must comply with both acts, and navigating between the two is not an easy task. Providers should keep up-to-date on the evolving regulations implementing the Acts, as well as the legal challenges to certain provisions of the Acts.
This article was originally published in Healthcare Michigan, January 2022.
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About the Authors:
Christopher Ryan is Of Counsel and Health Care Litigation Task Force Co-Chair in Dickinson Wright’s Ann Arbor office. He can be reached at 734-623-1907 or cryan@dickinsonwright.com. His biography can be accessed here.
Gregory Moore is a Member in Dickinson Wright’s Troy office. He can be reached at 248-433-7268 or gmoore@dickinsonwright.com. His biography can be accessed here.
[1] Eastern District of Texas, Case No. 6:21-cv-00425-JDK.
[2] District of Columbia, Case No. 1:21-cv-03231-RJL.