The Biden administration is moving to overhaul how health insurers and healthcare providers hash out payment for surprise medical bills, amid heavy criticism of the process.
Regulators proposed a rule on Friday that they say is the result of feedback received on that independent dispute resolution process, or IDR. The changes are meant to make billing disputes more efficient and improve early communication between insurers and providers, the government said.
Starting in early 2022, consumers were protected from the cost of surprise medical bills thanks to the No Surprises Act, which required payers and providers to hash out disputes over out-of-network bills themselves and not leave patients on the hook for any balance. Health insurers and providers now resolve payment disputes by entering into “baseball-style arbitration,” wherein a third-party arbiter picks one payment offer submitted by either side.
That process sparked a number of lawsuits from provider groups that argued IDR favors health insurers. As a result of the wave of litigation, the Biden administration has been forced to halt and tweak the IDR process multiple times, most recently in August.
Meanwhile, insurers say some providers are abusing the process, with a representative for the payer lobby AHIP testifying on the Hill last month that three individual companies are responsible for more than half of all filed disputes.
The new rule — jointly issued by the HHS, the departments of Labor and Treasury and the Office of Personnel Management — is looking to improve IDR for all stakeholders, in part by reducing the number of disputes submitted to IDR that aren’t actually eligible for the process, regulators said.
The rule would require insurers to share more information on whether a payment dispute is eligible for IDR, including codes showing why a claim was adjusted or denied to an out-of-network provider. It would also require the party seeking dispute resolution to notify the other party and the government before a 30-day window for them to negotiate payment among themselves begins.
Parties would also be required to share more information during the open negotiation process, to improve meaningful negotiation before getting outside arbiters involved, according to the departments.
Along with the litigation that’s tied up IDR, the process has been besieged by an unexpectedly high volume of complaints. According to a progress update earlier this year, fewer than a third of the 90,000 disputes submitted to a government portal between April and September 2022 were closed.
The primary cause of delays in processing disputes has been the complexity of determining whether a dispute is actually eligible for IDR, regulators say. To address that, the proposed rule would set a deadline for arbiters to decide whether a dispute qualifies for the process. It would also create an eligibility review process regulators can use when the dispute volume is too high.
Providers have taken issue with not being allowed to batch, or combine multiple claims into one dispute resolution case. The rule would make it easier for parties to batch payment determinations, including services provided to one patient on consecutive dates that were billed on the same claim. Batched determinations would be limited to 25 items and services for a single dispute.
The rule would also incentivize parties to make more reasonable offers in IDR, by yoking them to lower administrative fees. Providers have also complained about expensive fees to participate in IDR, arguing they make dispute resolution cost prohibitive.
If the rule is finalized, parties would pay lower fees if the highest offer made during IDR is lower than a predetermined threshold. The party on the receiving end of an IDR complaint would pay a lower fee if the payment is found ineligible for IDR.
Critics of IDR aren’t only found in the private sector. Lawmakers have also slammed IDR, with some arguing regulators ignored congressional intent in the No Surprises Act in crafting the dispute resolution process.