America’s Employers, Health Care Purchasers Urge No Surprises Act Implementation Regulations Protect Patients and Hold Down Health Care Costs
The Honorable Xavier Becerra
U.S. Department of Health & Human Services
200 Independence Avenue SW
Washington, D.C. 20201
The Honorable Janet Yellen
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220
The Honorable Martin J. Walsh
U.S. Department of Labor
1500 Pennsylvania Avenue NW
Washington, DC 20220
June 15, 2021
Dear Secretaries Becerra, Yellen, and Walsh:
America’s employers sponsor health benefits for roughly half of the people in the United States. Unfortunately, due in part to the lack of competition in many sectors of the health care system, employers pay some of the highest prices for health care in the commercial market, often several multiples of the Medicare rates, with these costs flowing to employees and their families. In 2019 and 2020, the undersigned organizations were leaders in the fight to stop surprise medical bills. We engaged in this critical fight for two reasons. First, and most importantly, to end the scourge of surprise bills affecting many of our employees and their families. Second to provide downward pressure on the inflated and ever-increasing costs of health care. America’s employers and health care purchasers urge you to ensure that in implementing the No Surprises Act, regulations both protect patients from surprise medical bills and hold down health care costs.
The comments below represent the consensus view of the undersigned employer / health care purchaser organizations. Several signatories also sent their own letters and / or signed other letters from different coalitions.
The Cost Containment Imperative
Depending on the source, academic experts believe that roughly one quarter of health care spending in the United States is wasted. Key areas of waste include failure of care delivery, failure of care coordination, overtreatment and low-value care, pricing failure, fraud and abuse, and administrative complexity. “Pricing failure” – defined as prices in excess of what would be expected in a competitive health care market – costs employer and consumers more than $200 billion per year. Americans pay substantially more for health care than any other industrialized country – a full 50 percent more than the second most costly country in the world, Switzerland. While surprise billing is a relatively small part of the problem overall, it has an outsized impact on overall health care costs. Academic research has found that certain providers are able to leverage their ability to surprise bill patients into higher payment levels in contract negotiations.
As is evident in the congressional record, the No Surprises Act was crafted with the clear congressional intent to both stop surprise billing and reduce overall health care costs. The primary committees of jurisdiction for the commercial market are the Senate Health, Education, Labor, and Pensions (HELP) Committee and the House Energy and Commerce Committee. In his opening statement at the congressional hearing on the legislation, in which the committee had proposed three possible solutions, Senate HELP Committee Chairman Lamar Alexander said: “All three of our proposals take the patient out of the middle. The question is, how do we reduce costs the most?” His counterpart in the House – Energy and Commerce Committee Chairman Frank Pallone – said “Ideally, such a [surprise billing] solution will not only take the patient out of the middle and hold them financially harmless from surprise billing, but will also help create a lower-cost, more rational health care system for all Americans. I believe that the [No Surprises Act] accomplishes these goals.” The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) interpreted the law the same way. Their final budgetary score on the bill stated: “CBO and JCT estimate that in most affected markets in most years, smaller payments to some providers would reduce premiums by between 0.5 percent and 1 percent.” 
Implementation of the Qualifying Payment Amount
Of particular import in implementing the No Surprises Act is the calculation and role of the Qualifying Payment Amount (QPA). The QPA serves two critical roles in the surprise billing law. First, it is the only consideration that the independent dispute resolution (IDR) entities must consider in all surprise billing cases brought before them. All other information considered is secondary – the QPA is primary, and thus, it is imperative that it is calculated in the way Congress instructed.
Second, the QPA is used as the basis for cost-sharing requirements for plan enrollees. Most Americans with private health coverage – more than 122 million individuals enrolled in employer-sponsored insurance – have some form of coinsurance for hospital admissions or outpatient surgery. For these patients, their cost-sharing requirement will be based on a percentage of the QPA. Failure to enact regulations that ensure the QPA is not inflated would mean higher out-of-pocket costs for millions of families in 2022 and beyond.
You can achieve the congressional intent, and protect patients and purchasers from higher costs, by ensuring that regulations defining the QPA are designed to reflect the true median in-network rates agreed to between purchasers and providers in appropriately defined geographic areas and are not inflated. Accordingly, the geographic regions used to determine the QPA for self-funded group plans should be metropolitan statistical areas (MSAs) (and then aggregating non-MSA areas per state) or Medicare Geographic Price Cost Index (GPCI) areas, rather than qualified health plan (QHP) rating areas. This should produce geographic areas which are sufficiently broad to reduce the impact of high-cost outliers and to ensure adequate information, but are sufficiently narrow to reflect variance in health care costs across the country.
Further, it is important that median contracted rates are calculated at the provider or provider group contract level, rather than individual provider level and are based on contracted rates, not paid claim amounts. If the median relies on averaging each provider, a huge advantage could be given to large, private-equity-owned staffing firms – the exact culprits whose outrageous prices and unscrupulous practices led to the formulation and passage of the No Surprises Act.
In addition, it is important for the forthcoming regulations to make clear when a plan is considered to have sufficient information to base the QPA on the median contracted rate. We suggest that a plan with at least three contracted rates to look to for an item or service is sufficient information to determine the QPA. In situations where there are fewer than three contracted rates, the Departments should use the State as the relevant geographic area; and if there are still fewer than three contracted rates, the QPA should be based on Medicare rates and never on a third-party database that captures billed charges.
It may additionally be of value to delineate between contracts based on network type or plan option type, such as HMO plans and non-HMO plans. It is also important that the 2019 rates that “anchor” these calculations be rebased annually to avoid institutionalizing abnormalities in a given market that may have existed in 2019. Also, we ask that self-insured plans be able to choose whether the QPA is measured over all the similar self-insured plans/plan options administered by its third party administrator (TPA) or, alternatively, over the similar self-insured plans/plan options maintained by the plan sponsor.
Moreover, as employers turn to value-based arrangements to improve the quality and decrease the cost of care, plans and issuers often provide quality-related performance payments for in-network providers. So as not to undermine this important tool for encouraging high-quality care, the Departments should make clear that plans and issuers have the option to exclude these quality-related performance bonuses from the QPA calculation.
President Biden has made reducing health care costs a central piece of his health care agenda. It is vital that your agencies implement the No Surprises Act consistent with Congressional intent and to the clear benefit of consumers and payers – by ensuring that the implemented law reduces health care costs overall, and minimizes the ability of providers to demand above-market rates for services in surprise billing situations. We appreciate your consideration.
American Benefits Council
The ERISA Industry Committee
National Alliance of Healthcare Purchaser Coalitions
Purchaser Business Group on Health
cc: Susan Rice, Director, Domestic Policy Council
Shalanda Young, Acting Director, Office of Management and Budget