Employer Health Reform Issues Brief: Patient protections II – Emergency Services
Smart first steps
Group health plans, except grandfathered plans, that provide any benefits for hospital emergency services will be subject to the following new standards with respect to those benefits:
- No prior authorization can be required for emergency services, even if provided out of network.
- The coverage for emergency services must be provided without regard to whether the emergency services provider is a participating network provider for those services.
- If the emergency services are provided out of network, no administrative requirement or limitation on coverage may be imposed that is more restrictive than those applicable to emergency services from network providers.
Special cost-sharing rules will apply if the emergency services are provided out of network. Specifically, copayment amounts and coinsurance rates for out-of-network emergency services must not be greater than those for in-network emergency services. Out-of-network emergency services can be subject to other cost-sharing requirements – such as deductibles or out-of-pocket maximums – that generally apply to other out-of-network benefits. Any out-of-pocket maximum that generally applies to all out-of-network benefits must also apply to out-of-network emergency services.
Interim final regulations clarify that out-of-network emergency service providers may “balance bill” patients for the difference between the providers’ charges and the payments from the plan plus any coinsurance or copays collected from the patient. To make sure balance billing isn’t used to circumvent the cost-sharing rules discussed above, the regulations also require plans to pay a “reasonable amount” to out-of-network providers of emergency services. The regulations specify a “reasonable amount” is the greatest of –
- The amount negotiated with in-network providers for the services (if there is more than one negotiated amount for a particular service, the median of these amounts).
- The amount using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable charges) but substituting the in-network cost-sharing provisions for the out-of-network cost-sharing provisions, or
- The amount Medicare would pay for the emergency service.
In cases where plans do not negotiate per-service amounts with network providers, the “reasonable amount” is the greater of (2) and (3).
These rules do not prohibit plans from imposing any otherwise applicable exclusion or coordination of benefit provisions or permitted waiting periods with respect to emergency services.
Effective date: Plan years beginning on or after September 23, 2010. Does not apply to grandfathered health plans.
Key implication: Cost
Plans that currently use cost-shifting and other techniques to discourage participants from obtaining out-of-network emergency services probably will face higher costs due to these new restrictions.
Key implication: Plan design
Plans will need to be amended to the extent necessary to ensure compliance with the new requirements. Among other things, provisions may need to be added to specify how much the plan will pay out-of-network providers for emergency services in accordance with the “reasonable amount” rules.
Key implication: Communications
There are no special notice requirements associated with the rules for emergency services. However, any changes implemented to comply with these rules will require corresponding updates to the summary plan description (SPD) and other plan communication materials.
Smart first steps for employers to consider
Cost: Review available plan data on claims paid to out-of-network providers for emergency services under current plan terms. This will provide a good starting point for estimating the potential cost impact of implementing these new requirements. Because these rules do not apply to grandfathered plans, plan sponsors still trying to decide if they want to retain grandfathered status can use this information to evaluate the costs of losing grandfathered status.
Plan design: Identify and draft any plan amendments that will be needed to bring the plan into compliance. If amendments are needed, make sure they are adopted in a timely manner and have the appropriate effective date – i.e., no later than the first day of the plan year beginning on or after September 23, 2010, for non-grandfathered plans.
Communications: Update SPDs and other plan communication materials as required. In addition to explaining these new rights to participants, consider also discussing the advantages of using network providers for emergency services whenever possible. This might include, for example, an explanation of how out-of-network providers may use balance billing to recoup costs not paid by the plan.