Health Plan Changes in the Consolidated Appropriations Act, 2021

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Jackson Walker

The protections for participants and their beneficiaries in the Patient Protection and Affordable Care Act (ACA) were expanded by the Consolidated Appropriations Act, 2021 (the “Act”). Some of the changes build on concepts in the ACA, some include additional reporting requirements for employers sponsoring group health plans and vendors providing services to group health plans, and other changes create opportunities for new entrepreneurs. While most of these changes for health plans will not be applicable until 2022, some are scheduled to apply sooner. Many changes were enacted in the Internal Revenue Code, the Employee Retirement Income Security Act (ERISA), and the Public Health Service Act (PHS Act) so that they will reach most health plans and insurers (other than plans exempt from such provisions).

Most changes are effective for the first plan year beginning on or after January 1, 2022, requiring group health plan sponsors to consider these changes in plan design and the vendor selection process that will start in the next few months for 2022 calendar year plans.

In addition, decision-makers on health plan vendor contracts will be required to review new required disclosures from such vendors which are intended to shine a new light on compensation arrangements for various service providers to group health plans. Disclosures must include both direct and indirect compensation to service providers. These rapidly approaching changes are discussed in more detail below.

Expanded Protections for Plan Participants and Beneficiaries

Prevention of Surprise Bills for Patients Seeking Care From an Emergency Room or Freestanding Emergency Care Facility

When an individual goes to an emergency department, there is no way the individual can control whether the health care provider or the related facility services and their health care providers are in their network. To reduce the unexpected bills patients receive after seeking emergency care from out-of-network health care providers, the Act included surprise billing provisions expanding the protections enacted in the ACA. Under the new Act, amounts paid for emergency care is treated as in-network for calculating reimbursement and the patient’s obligation up until the individual is stabilized, and is covered thereafter only if certain requirements are satisfied.

The changes require that such services be provided by emergency departments and freestanding emergency care facilities without requiring any prior authorization, and that the cost-sharing the plan participant must pay will not exceed the amount that an in-network provider or facility would charge. The Act also requires an out-of-network provider to notify the plan participants before providing services after the individual is stabilized. The provider must disclose their out-of-network status, provide a good faith estimate of the costs of the services to the participant, a list of participating providers at the facility that could provide the services, and whether prior authorization is required for any of the items or services. After receiving the notice, the individual must consent to be treated by the nonparticipating provider or facility.

The Act requires a claim to initially be paid in part within 30 days of submission by the health care provider and to ultimately be paid after the amount of the payment is determined through the new dispute resolution process added by the Act. Claims administrators will need to monitor when the emergency claim was received and the initial and final payments are due in addition to the ERISA claim and appeal timing deadlines.

Regulations to implement this new provision are to be issued by July 1, 2021.

For services and items furnished by out-of-network providers where there is no state law determining the payment rate, then the out-of-network provider and the plan will enter an independent dispute resolution (IDR) process operated by a certified IDR entity which shall determine the amount to be paid. This new process also applies to air ambulance services and is discussed below.

The Act also prohibits out-of-network emergency service providers from balance billing a participant in excess of the participant’s cost-sharing amount under the group health plan. The restriction is effective for plan years beginning on or after January 1, 2022.

There is coordination regarding the reporting of emergency care and billing violations to the applicable federal agencies for identifying patterns of noncompliance by health care providers with the notice and prohibition on balance billing. The complaint and enforcement process for the emergency room/facility surprise billing also applies with respect to surprise air ambulance billing.

Enforcement of No Balance Billing for Emergency Room or Freestanding Emergency Facility Out-of-Network Services

In addition to mandating that patients be provided notice regarding the prohibition on balance billing by emergency departments or freestanding emergency facilities by such health care providers, the Act amends ERISA and adds Section 522 giving the U.S. Department of Labor the authority to investigate and pursue patterns of abuse it notes in reports from the U.S. Department of Health and Human Services (HHS) and the states. The enforcement efforts will be coordinated between the agencies. A new complaint process to handle these complaints will be established no later than January 1, 2022, for receipt of complaints, transmitting such complaints to states or HHS for potential enforcement.

Prevention of Surprise Bills for Air Ambulance Services

To prevent surprise bills from air ambulance services, the Act stipulates that such services be provided without requiring any prior authorization. Such services shall be paid without considering the in-network or out-of-network status of the health care provider, and be paid so that if the service provider is not in-network, the cost-sharing the participant must pay will not be greater than if the services had been provided by an in-network provider.

Claims from an out-of-network air ambulance claim must count against the in-network deductibles and cost-sharing limits for the participant. The claim must initially be paid in part or denied within 30 days of receipt. After the initial payment, the group health plan and the air ambulance provider are to enter open negotiations regarding the out-of-network rate to be paid for the claim. If after the 30-day open negotiation period commences no agreement is reached, then either the plan or the health care provider can request that the claim be sent to the IDR process to resolve the difference. The IDR process is described below.

Claim administrators will need to monitor the date on which such emergency claim was received and when the initial and final payments are due in addition to the ERISA claim and appeal timing deadlines.

Participants or beneficiaries receiving air ambulance services which are paid for by a group health plan on or after January 1, 2022, should not be held liable for any amount in excess of their cost-sharing limits under their group health plan (deductible, out-of-pocket maximum, co-insurance, or copayments) from an out-of-network air ambulance service provider.

A group health plan is required to report specific data regarding air ambulance use to the Secretaries of HHS, Labor, and Treasury for two years after the final regulations implementing the air ambulance provisions of the Act. The information includes claims data for each air ambulance use disaggregated by five factors. Plan sponsors should work with their vendors as they start planning for 2022 to be sure their vendors are capturing the required data.

Independent Dispute Resolution Procedures for Determining Certain Out-of-Network Rates to Be Paid by Group Health Plans

For 2022 and beyond, there will be an IDR process that will be regulated by the Secretaries of HHS, Labor, and Treasury to determine out-of-network rates for services from a nonparticipating provider or facility for service rendered to a participant or beneficiary of a group health plan. After an out-of-network health care provider or facility receives an initial payment or a notice of denial of payment on a claim as an out-of-network provider, such provider or facility or the group health plan shall have 30 days to initiate open negotiations regarding the amount of the payment and any cost sharing. If an agreement is not reached by the last day of the open negotiation period, then either of the parties may initiate the IDR process within four days after the period ends to resolve any issues with the claim.

Thus, a new player will be involved in the claim process–the IDR service provider. The IDR process provider steps in to determine the amount to be paid on the claim. Once the IDR process provider determines the amount required to be paid on the disputed claim, the plan must pay that amount within 30 days of such determination. The IDR process provider shall determine the allocation of its fees amongst the respective parties to the dispute.

Because the IDR process only deals with the amount paid for a claim, some may think it could be viewed as not interacting with the ERISA claim and appeal process. However, ERISA’s claim regulations consider a claim denied if all or any part of the claim submitted is not approved. The determination of the amount to be paid under the IDR process will need to consider how it impacts a claim denial, unless the guidance to be provided exempts the amount of the payment determined under the IDR process as exempt from the ERISA claim process by relying on the no balance billing provisions added to the PHS Act.

By December 27, 2021, the Secretaries of HHS, Labor, and Treasury shall issue regulations defining the requirements to be an IDR process to which a group health plan can submit disputes regarding certain claims for payment for out-of-network providers and facilities. The Secretaries will develop the process to certify entities to be IDR service providers. Such certifications last for five years, but may be revoked for a pattern or practice of noncompliance with any of the requirements.

With the new requirements related to certain claims for emergency care and for air ambulance services effective for plan years beginning on or after January 1, 2022, and the guidance for the IDR process due by December 27, 2021, vendors seeking to become an IDR process provider will need to closely monitor the development of the requirements to become a certified IDR process provider to be able to timely step into this new role.

Access to Pediatric Care and OB/GYN Care

The Act includes provisions protecting access to pediatricians, obstetricians, and gynecologists as primary care providers. Each expands on similar existing provisions in the ACA as incorporated into the PHS Act. Direct access to pediatricians, obstetricians, and gynecologists as an individual’s primary care provider is now part of ERISA and the Internal Revenue Code and is no longer part of the addition to the PHS Act holding the ACA provisions. So, these protections should survive even if someone successfully challenges the constitutionality of the ACA and the ACA is overturned.

Continuity of Care

The new protections for certain patients in the midst of a course of medical care are effective for the first plan year beginning on or after January 1, 2022. A plan participant or beneficiary qualifies for this protection and is a continuing care patient if he or she is receiving care from a network provider for (1) a serious and complex condition, (2) a course of institutional or inpatient care from a provider or facility, (3) a nonelective surgery from the provider or facility, including receipt of post-operative care with respect to a surgery, (4) pregnancy and is undergoing a course of treatment for the pregnancy, or (5) a determined terminal illness and is receiving treatment for such illness from a provider or facility, and such provider or facility’s contract to be a network provider terminates or expires for any reason other than fraud by such provider or facility, then the plan is required to meet all of the following requirements:

  1. The group health plan must notify each individual enrolled under the plan who is a continuing care patient that he or she is protected for continuing care at the time the provider or facility’s contract terminates and tell such enrolled individual of his or her right to elect continued transitional care from such provider or facility.
  2. The group health plan shall provide such an individual with an opportunity to notify the plan or insurer of the individual’s need for transitional care.
  3. The group health plan must permit the individual to elect to continue to have the benefits provided under such plan or such coverage under the same terms and conditions as would have applied and with respect to such items and services as would have been covered under such plan had the provider or facility’s contract not terminated.

Such transitional coverage shall continue beginning on the date the individual receives notice of the contract termination and shall continue until the earlier of 90 days after the individual’s receipt of such notice, or the date such individual is no longer qualified as a continuing care patient under the definition above with respect to that health care provider or facility. The Act also requires the health care provider caring for the continuing care patient to accept payment from such plan for services and items furnished to the continuing care patient as payment in full for such items and services and to maintaining compliance with all policies, procedures, and quality standards imposed by the plan.

Additional Disclosure Requirements

New Transparency Requirement

Effective for plan years beginning on or after January 1, 2022, group health plan identification cards must include the plan in-network and out-of-network deductibles, out-of-pocket maximums, a telephone number, and a website address through which the individual may seek consumer assistance information, including which hospitals and urgent care centers have a contractual relationship with the plan.

As employers plan for the 2022 plan year, it will be important to work with the administrative service providers to identify such vendors’ capabilities in this area, particularly in situations where there may be more than one group of preferred or tiers of providers. For some plans using multiple specialty providers, this may require creating a plan website that integrates with the various specialty providers in use.

Advance Explanation of Benefits (EOB) Requirements

Beginning with the first plan year beginning on or after January 1, 2022, when an out-of-network health care provider notifies a group health plan that a participant or beneficiary is scheduled to receive services, the plan must notify the participant no later than one business day after receiving such notice (the deadline varies depending on when the service is scheduled as compared to when the notice is received) in clear and understandable language whether or not the health care provider or facility is an in-network provider for the plan. In addition, the advanced explanation of benefits is required to be provided to the participant or beneficiary and must include all of the following information:

  1. if the health care provider or facility is in-network, the plan’s notice must address for each of the items in the notice from the health care provider to the group health plan, the coverage with respect to the items or services, the contracted rate for such item or service, and
  2. if the provider or facility is out-of-network for the plan, then the notice must provide a good faith estimate for each item or service included in the notification received from the provider or facility which includes good faith estimates of:
    1. the amount the health plan is responsible for paying for the items or services in the estimate,
    2. the amount of any cost sharing for which the participant or beneficiary would be responsible for such items or service (as of the date of the notification),
    3. the amount that the participant or beneficiary has incurred toward meeting the limit of the financial responsibility toward the plan’s cost sharing amounts, and
    4. if such items or services are subject to medical management such as concurrent review, pre-authorization or a step therapy or similar program, a disclaimer that coverage for such item or service is subject to such medical management technique.

The advance EOB must include a disclaimer that the information in the notice is only an estimate based on the items and services as reasonably expected at the time of the scheduling or request and that the items or services needed may be subject to change. The advance EOB may include any other information or disclaimers that the plan determines are appropriate and consistent.

Pricing Comparison Tool for In-Network Services Required

For plan years beginning on or after January 1, 2022, a group health plan must offer price comparison guidance by telephone and make such a tool available on its website that permits an enrolled individual to compare prices under the plan’s coverage for different geographic regions for the plan year and to compare the amount of cost sharing the individual would incur with respect to obtaining services or items from different participating providers.

State All-Payer Database Reporting

Litigation has debated whether states can mandate group health plans subject to ERISA to report to state all-payer databases. ERISA plans have disputed such requirements in order to avoid being required to report to multiple states in multiple formats utilizing ERISA’s preemption. The Act responds to these competing interests by requiring the Secretary of Labor no later than December 27, 2021, to establish a standardized reporting format for voluntary reporting by a group health plan to a State All-Payer Claims Database of medical, pharmacy, and dental claims. Such reporting can also include eligibility and provider files. The Act authorizes such reporting in a standard format and creates an advisory committee to be formed to assist the Secretary.

Provider Directory Information Improvement

Effective for plan years beginning on or after January 1, 2022, group health plans will need to enhance website information and other communication with participants and beneficiaries regarding network providers. Communication should include an online directory, a verification process, and a mechanism to respond to participant inquiries.

The directory will need to go through a verification process, have an established database, disclose the date the directory was most recently published, direct the participant to contact the plan regarding the most information, and establish a protocol for an individual to contact the plan via telephone, internet, or a web-based method on whether a provider or facility is contracted to be an in-network provider. The plan must respond in either an electronic or print response no later than one business day after such contact is received, with the format determined by the requesting individual. The plan must maintain a database of the in-network providers on its website and update such database within two business days of receiving a notice of change from a health care provider or facility. Record retention requirements apply to the communications from the plan to the individual participants regarding the status of health care providers or facilities.

Health care providers and facilities are now required to put in place a business process to provide timely updates to provider directories at both the beginning and termination of a network relationship. If a health care provider or facility bills a patient greater than the in-network rate and the individual pays the bill, the health care provider is required to repay the individual the amount paid in excess of the in-network rate for the services or treatment with interest at the rate specified by the Secretary of HHS.

Brokers and Consultants to ERISA Group Health Plans Required to Disclose Direct and Indirect Compensation to Plan

In 2012, retirement plan service providers were first required to disclose the direct and indirect compensation received as the result of services to a retirement plan to increase the transparency regarding the fees related to retirement plans, but the regulations did not extend to health plans. The Act extends similar requirements to health plan service providers, such as brokers and consultants. Brokerage services and consulting services are defined broadly.

In order for the persons responsible for contracting with health plan vendors to be able to contract with a broker or consultant for health plan services, such person must review a disclosure of direct and indirect fees from the broker or consultant and determine if it is reasonable. Brokers and consultants providing services related to health plans must disclose the fees and commissions they will receive either directly from the plan or indirectly as the result of their relationship to the plan or the responsible fiduciary for the health and welfare plan. Direct compensation that is reasonably expected to exceed $1,000 for the provision of brokerage or consulting fees and any nonmonetary compensation of $250 or more (e.g., free tickets to an entertainment event) must be disclosed if they exceed $250 during the term of the contract. Indirect compensation is anything paid from any source other than the group health plan or plan sponsor or the covered service provider or its affiliate, and it extends to commissions, overrides, and persisting overrides that may be received as the result of contract renewals or the volume of renewals of a type of contract.

Brokers, consultants, and service providers to group health plans must disclose such fees to the responsible fiduciary for the group health plan–the person authorized to sign for the group health plan–beginning on and after the date the new requirements become applicable on December 27, 2021. If a service provider fails to make the required disclosure, the responsible fiduciary for the group health plan is required to notify the service provider of its failure and permit it 90 days to provide the correct disclosure. If the service provider fails or refuses to provide the correct disclosure within 90 days, then the responsible plan fiduciary must report the service provider to the U.S. Department of Labor. If the required disclosure relates to future services, the responsible plan fiduciary is required to terminate the relationship with the service provider. The responsible plan fiduciary must receive and review these disclosures for the contract to be reasonable so that the responsible plan fiduciary is able to contract with the service provider.

While the statute contains a general date on which the requirements become applicable, it also grants the U.S. Department of Labor the ability to provide transition rules and further definition of the requirements by regulations to be issued by December 27, 2021. Health insurance issuers are required to report such compensation. Though group health plan contracts executed prior to December 27, 2021, are not required to comply with these disclosure requirements, nothing exempts such contracts from the disclosure requirement on subsequent renewals. This may incentivize some group health plan service providers to complete the contracting process prior to December 27, 2021, to delay disclosing fees on some contracts.

The responsible fiduciary for a group health plan may want to begin by taking an inventory of the service providers required to provide disclosures. After the inventory is developed, the fiduciary should establish a process to review disclosures annually to ensure all of the required elements are contained. This process should also ensure that the responsible plan fiduciary receives all fee disclosures for the plan, and assesses vendor compliance, tracks follow-up requests for disclosures, and fulfills obligations to report omissions as required to the U.S. Department of Labor.

Mental Health and Substance Use Disorder Benefits

The Secretaries of HHS, Labor, and Treasury are directed to issue a compliance program guidance document to help improve compliance with the mental health parity and substance use disorder protections under the Mental Health Parity and Addiction Equity Act. The document shall provide de-identified examples of previous findings of compliance and noncompliance with nonquantitative treatment limitations and deficient information disclosures and descriptions of violations discovered in investigations.

For any group health plan that imposes nonquantitative treatment limitations, such as medical necessity criteria, on mental health or substance use disorder benefits, the Act mandates that beginning on February 10, 2021, the plan must perform a comparative analysis on the mental health and substance use disorder benefits compared to the medical and surgical benefits. The comparative analysis and additional data must be available to the Secretaries of HHS, Labor, and Treasury upon request and must contain specific information. The submitted information under the newly defined process shall not be subject to disclosure under 5 U.S.C. § 552 of the Freedom of Information Act. The comparative analysis must be provided to the applicable federal agency upon request and must include significant additional information regarding plan terms and how they operate. If this information is requested, the plan sponsor must provide it. If the Secretary of the agency determines the plan is not in compliance, the plan must respond within 45 days of such determination with a comparative analysis that demonstrates the plan’s compliance. If after reviewing the corrective actions to be taken by the plan, the Secretary finds the plan is still not compliant, then the Secretary notifies all plan participants that the plan is not in compliance.

Pharmacy Benefit and Drug Cost Reporting and Other Reporting Requirements

By December 27, 2021, and each June 1 thereafter, group health plans must submit to the Secretaries of HHS, Labor, and Treasury the following information regarding plan’s previous plan year:

  • the beginning and ending dates of the plan year,
  • the number of participants and beneficiaries,
  • each state in which the plan or coverage is offered,
  • the 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan and the total number of paid claims for each such drug,
  • the 50 most costly prescription drugs for the plan by the total annual spend and the annual amount spent by the plan or coverage for each such drug,
  • the 50 prescription drugs with the greatest increase in plan expenditures for the plan year preceding the plan year that is the subject of the reporting and for each such drug the change in the amounts expended by plan or coverage in each such plan year.

In addition to the above reporting on prescription drug costs, the new section also requires the following additional items be reported annually:

  1. The total spending on health care services by the group health plan, broken down by type of costs for:
    1. hospital
    2. health care provider and clinical service costs for primary care and specialty care separately
    3. prescription drugs by the health plan coverage and by the participants and beneficiaries
  2. The average monthly premium paid by the employer and by the participants and beneficiaries.
  3. Any impact on the premiums from rebates, fees and any other remuneration paid by drug manufacturers to the plan or coverage or its administrators or service providers and the amount so paid for each therapeutic class of drugs and the amounts so paid for each of the 25 drugs that yielded the highest amount of rebates or other remuneration under the plan or coverage from drug manufacturers during the plan year.
  4. In addition the group health plan must disclose any reduction in premiums and out-of-pocket costs associated with rebates, fees or other remuneration described in 3.

No later than 18 months following the first submission of the above report on December 27, 2021, the agencies shall provide a report on prescription drug costs in coverage in an aggregate manner and such other pricing trends.

Concluding Thoughts

Employers sponsoring group health plans should consider the above changes as they start the request for proposal and contracting process for the 2022 plan year. Some of the changes will impact the contents of the summary plan descriptions. The mandated disclosure of compensation will also impact the contracting process due to the rapidly approaching deadline. Employers will need to watch to see if the fee disclosure on group health plans suffers any of the delays the disclosure on retirement plans suffered when it was first introduced. Finally, some changes will require plan sponsors to add new processes and service verifications into the vendor selection and retention process and build documentation of those procedures.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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