The “law of unintended consequences” describes the general sociological principle that for every action there is an unintended or unanticipated outcome. An influential examination of the concept was published in 1936 by American sociologist Robert K. Merton and identified five factors that can cause unintended consequences when we attempt to effect social change. It is worth noting that lack of adequate knowledge (i.e., ignorance) and “error” are two prominent factors in Merton’s list.
Employer-sponsored healthcare is both a defining characteristic of the U.S. healthcare system and an unintended consequence. It arose from President Franklin Roosevelt’s 1942 Executive Order freezing employee wages.  Because employers could not use higher wages to retain workers, they found a work-around in the form of employee benefits – especially health care insurance – which they used as a recruiting and retention tool. The Internal Revenue Service further encouraged the trend by exempting health insurance benefits from taxation. These two measures are often credited for the U.S.’ unique and expensive reliance on a healthcare system heavily dependent on insurers, networks, administrators, regulators, utilization reviewers and sundry other parties that stand between a doctor and their patient. Although it’s too early to know whether another major change is at hand, what is clear is that a new federal law with the stated purpose of saving consumers from surprise medical bills has its own unintended consequences far beyond the law’s stated purpose.
Surprise Medical Bills … and a Whole Lot More
The No Surprises Act was enacted by Congress in December 2020 as part of the Consolidated Appropriations Act of 2021 (NSA or Act) and charges the U.S. Department of Health and Human Services (HHS), the Department of Treasury, and the Department of Labor with its implementation (collectively, the “Departments”). It was ostensibly designed to “protect participants, beneficiaries, and enrollees in group health plans 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 . . . ” However, a closer look at the regulatory foundation of this major legislation reveals, not surprisingly (pun intended), more expansive aims. The Centers for Medicare and Medicaid Services (CMS), the HHS agency implementing significant parts of the Act, recently asserted that the NSA addresses a broad range of systemic problems, including, in CMS’ view: physicians who use surprise medical bills as leverage to get higher in-network payments; high private health plan premiums; state laws that fail to “provide comprehensive consumer protections;” and the federal budget deficit. That’s quite a list, and one that goes far beyond the very real problems caused by medical debts that can exacerbate the effects of poverty, hinder an individual’s ability to create wealth and “ultimately affect a family for generations.” This list also implies that fault lies principally with healthcare providers for the high cost of healthcare in our country. Even if that was not the intended message, it didn’t take long for the insurance industry to react. Within a few weeks of regulations being promulgated and citing the NSA as the impetus for its actions, BlueCross BlueShield of North Carolina sent letters to physician groups demanding payment reductions ranging from 10% to over 30%. Other insurers followed suit.
A quick review of some of the more prominent features of the Act demonstrates why many providers and hospitals are concerned about serious consequences to the delicate contractual balance between insurers and healthcare providers.
- Emergency Services – When a patient has insurance that covers “emergency services,” the NSA prohibits a hospital and its providers from billing patients more than the in-network cost-sharing amount for services provided in an “emergency department of a hospital,” even if the hospital is out-of-network with the patient’s insurance.
- Continuing Care – In general, if a provider is no longer an in-network provider because a contract was terminated, certain protections apply to an individual defined as a “continuing care patient,” who is furnished items or services by that provider if the individual’s plan provides coverage.
- Uninsured, Self-Pay and Good Faith Estimates (GFE) – The NSA provides certain protections to individuals who do not have insurance (i.e., uninsured individuals) or who have insurance but do not want a claim submitted (i.e., self-pay individuals). The NSA requires that certain providers receiving the initial request for a GFE from an uninsured/self-pay individual or otherwise responsible for scheduling the primary item or service, inquire whether a patient has insurance and, if so, whether they are “seeking to have a claim submitted” for the relevant items and/or services. If they are uninsured or self-pay, then the provider must provide them a written notice of their right to receive a GFE. If a patient has insurance and wishes for the claim to be submitted to their insurance, the NSA requires the hospital/provider to submit a GFE to the insurer. The uninsured/self-pay GFE requirements became effective Jan. 1, 2022. HHS, however, is deferring enforcement of the requirement to submit GFEs to insurers for the time being.
- Nonparticipating Providers and Participating Facilities – The NSA and regulations promulgated by HHS both contain provisions that regulate the practice of “[b]alance billing in cases of non-emergency services performed by nonparticipating providers at certain participating facilities.” Under these provisions, nonparticipating (“out-of-network”) providers may not bill for non-emergency services an “amount greater than the in-network cost-sharing requirement for such services, unless notice and consent requirements are met.” Notably, the notice and consent exception does not apply to certain “ancillary services, for which the prohibition against balance billing remains applicable.”
The Fight Over the Elusive Out-of-Network Rate
With the NSA effectively barring certain out-of-network providers from billing patients more than in-network cost-sharing amounts, one question logically follows: how will these providers be compensated for services rendered to patients? The answer is… well, it’s complicated.
The NSA provides for a statutorily-determined “out-of-network rate” to be paid by plans to out-of-network providers, beginning with negotiations between the plan and the provider and, if negotiations fail, an independent dispute resolution (IDR) process, whereby a neutral arbitrator makes a binding determination of the appropriate out-of-network reimbursement rate. To guide the arbitrator’s decision, the NSA lists factors that the arbitrator “shall” take into consideration, one of which is “qualifying payment amounts” (QPA). QPA generally means the median rate that the insurer would have paid a provider for the item or service if provided by an in-network provider. Rather than applying equal weight to each factor, regulations promulgated by the Departments required arbitrators to presume that the QPA was an appropriate payment amount and to “select the offer closest to the [QPA]” unless the QPA was shown to be “materially different” than the appropriate rate. In other words, arbitrators were required to generally presume that the median contracted rate as set by the insurer was the appropriate out-of-network rate absent clear evidence to the contrary.
Displeased with the Departments’ presumption-based approach in favor of the QPA, the Texas Medical Association (TMA), on behalf of more than 55,000 physician-members, brought suit claiming that the Departments exceeded their authority under the Administrative Procedures Act by requiring arbitrators to “‘give outsized weight’ to a single statutory factor,” in conflict with the clear language of the NSA. More specifically, TMA claimed that the rebuttable presumption in favor of the QPA (and thus a rate based on the median contracted rate calculated by the payor), unfairly skews IDR results in payors’ favor, granting them a windfall and undermining a providers’ ability to obtain adequate reimbursement for their services. The Texas district court agreed with TMA, finding that a “presumption in favor of the … QPA [would] ‘systematically reduce out-of-network reimbursement compared to an IDR process without such a presumption’” and that “[n]othing in the Act … instructs arbitrators to weigh any one factor or circumstance more heavily than the others.”
Following this favorable ruling for providers, the Departments issued new rules and updated guidance on the IDR process to require arbitrators to consider more than just the QPA when determining the out-of-network rate. Specifically, while the Departments are “of the view that it will often be the case that the QPA represents an appropriate out-of-network rate,” they acknowledge that “additional factors may be relevant in determining the appropriate out-of-network rate.” Accordingly, the new final rules do not require the certified IDR entity to select the offer closest to the QPA. Rather, they “specify that certified IDR entities should select the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties.” Nonetheless, the IDR process, as currently structured, could encourage insurance plans to lower provider in-network rates in an effort to reduce the “median rate” for purposes of calculating the QPA.
It is doubtful that employers who began to offer healthcare benefits to workers in response to the 1942 wage freeze or the government officials who wrote and implemented the law could have anticipated the long-term ramifications of their actions. And although it may be too soon after the passage of the NSA to predict with any degree of certainty how our current healthcare system will be affected, the new law’s focus on providers and the actions they must take to prevent surprise medical bills has the potential, whether intended or not, to give insurers a distinct advantage. Only time will tell whether the increased cost, and yet another regulatory burden on the backs of healthcare providers and facilities, will have their intended result.
 Walsh, et al., Towards a Theory for Unintended Consequences in Engineering Design, published by the International Conference on Engineering Design (ICED), August 2019, https://www.cambridge.org/core/services/aop-cambridge-core/content/view/38C394AC04D537DE1EBCF26BEBE66472/S2220434219003482a.pdf/towards-a-theory-for-unintended-consequences-in-engineering-design.pdf).
 Robert K. Merton, The Unanticipated Consequences of Purposive Social Action, American Sociological Review Vol. 1, No. 6 (Dec. 1936), pp. 894-904.
 Id. at 901. The other factors are short-term thinking (the “imperious immediacy of interest”), dogmatism (“basic values”), and public predictions that become a new element that, in turn, influences the outcome. Id. at 901-904.
 The Stabilization Act of 1942, among other things, authorized and directed the President to issue an order stabilizing prices, wages and salaries. Pub. L. 77-729, 56 Stat. 765, enacted October 2, 1942, at § 1.
 Aaron E. Carroll, The Real Reason the U.S. Has Employer-Sponsored Health Insurance, The New York Times, September 5, 2017, https://www.nytimes.com/2017/09/05/upshot/the-real-reason-the-us-has-employer-sponsored-health-insurance.html.
 Compensation in the form of health insurance is not included in taxable income. See The Tax Treatment of Employment-Based Health Insurance, Congressional Budget Office, March 1994 at 5 (Preface).
 Pub. L. No. 116-260, div. BB, tit. I, 134 Stat.1182, 2758-2890 (2020).
 86 Fed. Reg. 36872-01, 36872. For ease of reference, we will refer to providers and facilities subject to the NSA as “providers.”
 CMS Guidance, Requirements Related to Surprise Billing; Part II Interim Final Rule With Comment Period, https://www.cms.gov/newsroom/fact-sheets/requirements-related-surprise-billing-part-ii-interim-final-rule-comment-period (September 30, 2021) (updated April 15, 2022).
 86 Fed. Reg. at 36875.
 Press Release, American Society of Anesthesiologists, Blue Cross Blue Shield of North Carolina Abuses No Surprise Act Regulations to Manipulate the Market Before Law Takes Effect, November 22, 2021, https://www.asahq.org/about-asa/newsroom/news-releases/2021/11/bcbs-abuses-no-surprises-act-regulations#/; see also Gillian Schmitz, Insurers Already Exploiting the Surprise Billing Law, Modern Healthcare, January 21, 2022.
 42 U.S.C. § 300gg-131; 45 C.F.R. 149.410.
 42 U.S.C. § 300gg-138.
 See generally 42 U.S.C. § 300gg-136; 45 C.F.R. § 149.610.
 45 C.F.R. § 149.610(b)(1).
 45 CFR § 149.610(b)(1)(iii). HHS has issued a model notice, which can be found in the zip file on CMS’ website here: https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10791.
 42 U.S.C. § 300gg-136(2)(A).
 Frequently Asked Questions (FAQs) about Consolidated Appropriations Act, 2021 Implementation – Good Faith Estimates, CMS (Dec. 21, 2021), https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Guidance-Good-Faith-Estimates-FAQ.pdf (emphasis added) (last viewed March 3, 2022).
 42 U.S.C. § 300gg-132.
 Overview of Public Health Service (PHS) Act Provider and Facility Requirements, Centers for Medicare and Medicaid Services (available at https://www.cms.gov/files/document/high-level-overview-provider-requirements.pdf).
 Id. at 16. (“Items and services related to emergency medicine, anesthesiology, pathology, radiology and neonatology; items and services provided by assistant surgeons, hospitalists, and intensivists; diagnostic services, including radiology and laboratory services; and items and services provided by a nonparticipating provider if there is no participating provider who can provide such item or service at such facility.”); see also 45 CFR § 149.420(b)(1).
 42 U.S.C. §§ 300gg-111(a)(1)(C)(iv)(I), (a)(3)(K) (explaining how states with an All-Payer Model Agreement or specified state law, the out-of-network rate is the rate provided by the Model Agreement or state law; also, in states without an All-Payer Model Agreement or specified state law, the NSA established the out-of-network rate as either: (1) the amount agreed to by the insurer and the out-of-network provider/facility; or (2) amount determined through the IDR process).
 Id. § 300gg-111(c)(5)(C)(ii),(D) (requiring arbitrators to consider factors such as (1) the level of training, experience, and quality and outcomes measurements of the provider; (2) the market share held by the plan and provider; (3) patient acuity; (4) the teaching status, case mix and scope of services of the provider; (5) demonstrations of good faith (or lack thereof) by the plan or provider to enter into a network agreement; and (6) such other information requested by the arbitrator. Notably, the NSA prohibits the Arbitrator from considering the provider’s usual and customary charges for an item or service, the amount the provider would have billed for the item or service in the absence of the Act, or the reimbursement rates for the item or service under Medicare or Medicaid). Id. § 300gg-111(c)(5)(D).
 Id. § 300gg-111(a)(3)(E)(i).
 86 Fed. Reg. 55580, 55595 (Oct. 7, 2021); 45 C.F.R. § 149.510(c)(4)(ii).
 Texas Med. Ass’n v. U.S. Dep’t of Health & Human Servs., 2022 WL 542879 *3 (E.D. Tex. Feb. 23, 2022).
Id. at 5. Similar suits have been brought by the American Medical Association (AMA), the American Society of Anesthesiologists, the American College of Emergency Physicians, and the American College of Radiology. Like the TMA suit, the AMA et al. claimed that because “insurers can now rely on the IDR process for an unfairly low rate, they will have little incentive to include providers with higher costs (and frequently higher quality and specialized services) in their network, all to the detriment of patients.” Complaint of Plaintiffs at 8, Am. Med. Ass’n, et al. v. U.S. Dep’t of Health & Human Servs., No. 1:21-cv-03231-RJL-WL 575921 (D.D.C. Jan. 24, 2022), https://www.aha.org/system/files/media/file/2021/12/AMA-v-HHS-As-Filed-Complaint.pdf.
 Ctrs. for Medicare & Medicaid Services, Federal Independent Dispute Resolution (IDR) Process Guidance for Certified IDR Entities, at 19 (2022), https://www.cms.gov/sites/default/files/2022-04/Revised-IDR-Process-Guidance-Certified-IDREs.pdf p. 19.
 Department Guidance, Requirements Related to Surprise Billing: Final Rules, pg. 37(August 19, 2022), https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/ebsa1210-ac00-and-1210ab99-idr-process-final-rule-dol816-final.pdf.
 Id. at pp. 38 and 50.
 Notably, the new final rules issued by the Departments attempt to create transparency in the IDR process by addressing situations where insurance plans “downcode” a billed claim. Under the new final rules, “downcode” means “an alteration by a plan or issuer of a service code to another service code, or the alteration, addition, or removal by a plan or issuer of a modifier, if the changed code or modifier is associated with a lower QPA than the service code or modifier billed by the provider, facility, or provider of air ambulance services.” Id. at pg. 19. Specifically, “if a QPA is based on a downcoded service code or modifier, in addition to the information already required to be provided with an initial payment or notice of denial of payment, a plan or issuer must provide a statement that the service code or modifier billed by the provider, facility, or provider of air ambulance services was downcoded; an explanation of why the claim was downcoded, including a description of which service codes were altered, if any and which modifiers were altered, added, or removed, if any; and the amount that would have been the QPA had the service code or modifier not been downcoded.” Id. at pg. 32.