The letters describe the results of the survey process conducted by CMS to determine whether each of the states (i) had authority to enforce the provisions of the NSA with respect to health insurance issuers, health care providers and facilities, (ii) intended to enact legislation or issue regulations to do so by January 1, 2022, or (iii) alternatively would be interested in entering into a collaborative enforcement agreement with CMS. Under such an agreement, the states would seek voluntary compliance with NSA requirements and CMS would consider formal enforcement action only if the state could not obtain voluntary compliance. In the absence of state authority to enforce each of the NSA provisions or a collaborative enforcement agreement, CMS will directly enforce the NSA provisions.
In addition, the letters state CMS’ determination regarding whether state or federal law will determine the amount that plans must pay for out-of-network items and services covered by the NSA and whether a state or federal provider-patient dispute resolution will apply for uninsured or self-pay patients.
The CMS letters apply the NSA’s web of state and federal law and authority provision-by-provision and state-by-state. While the letters leave many unanswered questions about how the NSA will be implemented, the letters provide important insights into this complex and developing area of health care regulation.
First, the letters demonstrate that there will be a significant expansion of the federal role in enforcing balance billing and related consumer protection laws against health plans and health care providers. In contrast with the commercial health insurance reforms of the Affordable Care Act, which are enforced by the states in all but four cases, Manatt’s analysis of the published letters indicates the federal government will play a significant role in enforcing these laws in nearly every state. In some states, like Indiana, CMS will be responsible for directly enforcing every CAA provision that applies to health plans and health care providers.
In other states, such as North Dakota, CMS indicates there will be a hybrid approach. North Dakota generally had authority under state law to enforce the new provisions against health plans insurers, but did not have authority to enforce against health care providers or air ambulance services. As such, the state will generally enforce against health plans and CMS will generally enforce against these other entities.
Other states will likely enter into a collaborative enforcement agreement with CMS. Under that agreement, the state will generally conduct regulatory oversight activities and if an entity is noncompliant, it will make a referral to CMS to enforce. For example, in Oregon, the state’s Division of Financial Regulation has authority to enforce some CAA provisions against health plans, according to the CMS letter, but lacks authority to enforce other provisions against plans—and lacks authority to enforce any provisions against health care providers or air ambulance services. As such, the state and CMS will enter a collaborative enforcement agreement for those provisions.
Even in states like Washington, which already had a comprehensive surprise medical billing law and regulators that are ready to enforce the new federal requirements against health plans, some of the provider requirements will be federally enforced. However, Washington is also an example of a state in which regulators have proactively sought new legislation to better align state and federal law by conforming some provisions of Washington law to the NSA so that regulated entities will not be forced to navigate overlapping state and federal requirements. If the Washington legislation takes effect, there may be further changes to these relationships.
Altogether, this means health plans, health care providers and air ambulance services across the country will need to be ready to be overseen by CMS in ways they never have been before, and will be facing regulators whose jurisdiction has been newly expanded to encompass a broad swath of health care reimbursement. Further, this may change over time. The first draft of the Pennsylvania letter that CMS published (dated from December 2021) indicated the state would have a collaborative enforcement agreement with CMS, but a recently updated letter (from February 2022) indicates the state will be directly enforcing.
Second, under the NSA, unless a state has a “specified state law” which determines the patient cost-share and provider reimbursement under the circumstances covered by the NSA, the federal Independent Dispute Resolution process will apply. In some cases, such as California, CMS’ determination suggests substantial changes to current practice. While CMS found that California state law will continue to apply to claims by out-of-network individual health care providers for services at in-network facilities, CMS apparently concluded that California’s common law system for determining the reasonable charge for out-of-network emergency services does not constitute a “specified state law.” Therefore, the CMS letter states that federal law will apply to determine the amount of payment for out-of-network emergency charges. Similarly, although the federal regulations and guidance indicate that a state-mandated binding arbitration would be sufficient to constitute a specified state law, the CMS letters also indicate that a nonbinding mediation process is sufficient. For example, Texas state law provides that reimbursement for out-of-network professional and lab charges is covered by binding arbitration but reimbursement for out-of-network facility charges is subject only to nonbinding mediation. Nonetheless, CMS determined that both state laws supply the method for determining out-of-network reimbursement; therefore, the federal Independent Dispute Resolution process will not apply.
While it is helpful that the letters indicate when a state law is sufficient to set out-of-network reimbursement rates, the letters are not the end of the analysis, because under the NSA and the CMS regulations, the federal arbitration process will still apply to any claims to which the state law does not apply (as a matter of state law) as well as to claims subject to ERISA. For example, in CMS’ letter to Georgia, like many other states, CMS notes that although Georgia already has a state law determining out-of-network reimbursement, the federal arbitration process will apply in Georgia to the extent the state law does not. This means that barring more detailed guidance from the states, which so far has been limited, health plans and health care providers will need to study the laws of each state in which they operate to understand the complex interplay of state and federal laws as to how out-of-network reimbursement and other important matters will be determined.
