Surprise Billing: Independent Dispute Resolution Process

April 1, 2022

Surprise Billing: Independent Dispute Resolution Process

This In Focus summarizes statute and interim final rule

(IFR) regulations to describe the independent dispute

resolution (IDR) process available to insurers and out-ofnetwork providers in certain surprise medical billing

situations. It accounts for IFR aspects invalidated in the

Texas Medical Association v. U.S. Department of Health

and Human Services decision but predates a federal

response to that decision.

For more information on surprise billing in general and

corresponding consumer protections, see CRS Report

R46856, Surprise Billing in Private Health Insurance:

Overview of Federal Consumer Protections and Payment

for Out-of-Network Services. For more information on the

litigation related to the IDR process, see CRS Insight

IN11906, No Surprises Act’s Independent Dispute

Resolution Process and Related Litigation.

Surprise Billing

In general, surprise billing occurs when consumers are

unknowingly, and potentially unavoidably, treated by

providers outside of their health insurance plan’s network.

As a result, these consumers unexpectedly receive larger

bills than they would have received had the provider been

in their plan’s network. To address surprise billing,

Congress passed the No Surprises Act, which was part of

the Consolidated Appropriations Act, 2021 (P.L. 116-260).

Among other requirements, the No Surprises Act specified

a methodology to determine the amount insurers must pay

to providers for services provided in the following surprise

billing situations: out-of-network emergency services,

nonemergency services provided by an out-of-network

provider at an in-network facility, and out-of-network air

ambulance services. (For post-stabilization services [in

limited circumstances] and out-of-network nonemergency,

non-ancillary services provided at an in-network facility,

the federal methodology would not apply if notice and

consent requirements were satisfied.) The amount an

insurer pays, when combined with amounts consumers pay

in cost sharing, represents the total amount a provider

receives as payment for services.

Methodology to Determine Insurer

Payment to Providers

Under the federal methodology, insurers must make an

initial payment (or notice of denial of payment) to the

provider, after which the provider or the insurer may initiate

open negotiations to determine an agreed-upon payment

amount for the services. If negotiations are unsuccessful,

the parties may use an IDR process, which is a “baseballstyle” arbitration process.

This methodology does not apply in all situations. If a state

has its own surprise billing law that pertains to a given plan

type, provider type, and service, the state law methodology

would apply. In addition, if a state has an all-payer model

agreement, the amount designated under the agreement

would apply.

Initial Payment

Insurers are required to make an initial payment (or notice

of denial of payment) to a provider within 30 calendar days

of receiving a bill for services. Federal law and regulations

do not specify how to determine the amount of the initial

payment, though it should be an amount that the insurer

intends to be payment in full (i.e., not a first installment).

Open Negotiation

After the insurer makes an initial payment (or notice of

denial of payment), the provider or the insurer may initiate

open negotiations during the subsequent 30-business-day

period by providing a notice to the other party. The parties

then have 30 business days from the date the notice was

sent (i.e., the open negotiation period) to reach an

agreement on the payment amount. If the negotiations are

successful, the insurer is required to pay to the provider the

agreed-upon amount (or, after accounting for the initial

payment, any remaining balance) within 30 calendar days.

Independent Dispute Resolution Process

If a provider and insurer cannot reach an agreement during

the open negotiation period, then either party may initiate

the IDR process. The IDR process is a baseball-style

arbitration process under which the provider and the insurer

each submit to a neutral, certified third-party arbitrator (i.e.,

IDR entity) their best and final offers that represent the

amount that each party considers adequate payment. The

IDR entity must review both offers and make a

determination based on certain factors as to which of the

submitted offers is the final payment amount.

The provider and the insurer have four business days

following the end of the open negotiation period to initiate

the IDR process by submitting a notice to the other party

and the federal government. In some instances, a provider

and insurer seeking resolution regarding multiple identical

(or similar) services can combine (or “batch”) the services

to be considered as part of a single IDR determination.

If initiated, the parties have three business days to jointly

select an IDR entity. If the parties do not make a selection

by the deadline, they must notify the Departments of the

Treasury, Labor, and Health and Human Services (triagencies) on the fourth business day and the tri-agencies

will randomly assign an IDR entity within six business days

of the IDR process initiation. Once selected, the IDR entity

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Surprise Billing: Independent Dispute Resolution Process

must attest whether it satisfies conflict of interest

requirements within three business days. The IDR entity

also must determine whether the IDR process applies to the

situation and, if it is determined that the process does not

apply, the IDR entity must notify the tri-agencies and the

parties within three business days of the determination.

status, case mix, and scope of services of the facility that

furnished the service; and (5) demonstrations of good faith

efforts (or lack thereof) made by the provider or the insurer

to enter into network agreements and, if applicable,

contracted rates between the provider and the insurer during

the previous four plan years.

At the time the IDR entity is selected, both parties must pay

an administrative fee to the tri-agencies for participating in

the IDR process. This fee amount is set annually so that the

total amount of fees collected equals the total estimated cost

for the tri-agencies to carry out the IDR process. For 2022,

the administrative fee is $50. This fee is initially collected

by the IDR entity, which then remits the fee to the

government.

For air ambulance situations, the IDR entity is required to

consider the following (if submitted): (1) quality and

outcomes measurements of the provider that furnished the

service; (2) acuity of the individual receiving the service or

the complexity of furnishing the service to the individual;

(3) training, experience, and quality of the provider that

furnished the service; (4) ambulance vehicle type, including

the clinical capability level of the vehicle; (5) population

density of the pick-up location (e.g., urban, suburban, rural,

or frontier); and (6) demonstrations of good faith efforts (or

lack thereof) made by the provider or the insurer to enter

into network agreements and, if applicable, contracted rates

between the provider and the insurer during the previous

four plan years.

No later than 10 business days after the IDR entity has been

selected, the provider and the health insurer each must

submit to the IDR entity an offer for the payment amount;

any information requested by the IDR entity; and, if so

choosing, other information related to the offer. At this

time, both parties must pay a fee to the IDR entity for its

payment determination services. (This fee is in addition to

the administrative fee.) Each IDR entity can determine its

own fee amount, but generally these fees will fall in

between a range determined annually by the federal

government. For 2022, the fee range for a single

determination is $200-$500; for batched determinations, it

is $268-$670. IDR entity fees are held in a trust or escrow

account until a final determination is made.

After the IDR process is initiated but before there is a

determination, insurers and providers may continue to

negotiate a payment amount. If the parties reach an

agreement through negotiation during this period, the

agreed-upon rate is treated as the final payment rate. The

parties would split the IDR entity fee unless the parties

agree otherwise. The administrative fee is nonrefundable.

The IDR entity has 30 business days from the entity’s

selection to determine which of the submitted offers

represents the payment amount. To make this decision, the

IDR entity must consider the insurer’s 2019 median innetwork amount for the same or similar service provided by

a provider in the same or similar specialty in the same

geographic region (indexed for inflation), which is referred

to as the qualifying payment amount, or QPA. The IDR

entity also must consider a set of additional circumstances

if submitted by the parties (specified below), any

information requested by the IDR entity, and any other

information about the submitted offer supplied by the

provider or the insurer. To be considered, this information

must be credible and must not include information that the

IDR entity is prohibited from considering.

For all situations, excluding air ambulance, the IDR entity

is required to consider the following (if submitted): (1) the

level of training, experience, and quality and outcomes

measurements of the provider that furnished the service; (2)

the market share of the provider or insurer in the geographic

region where the service was provided; (3) the acuity of the

individual receiving the service or the complexity of

furnishing the service to the individual; (4) the teaching

In all situations, the IDR entity is prohibited from

considering usual and customary charges, the amount that

would have been billed by the provider for the service had

the surprise billing protections not applied, and the amounts

that public payors (including Medicare, Medicaid, the

Children’s Health Insurance Program [CHIP], or

TRICARE) would pay or reimburse the provider for the

service.

After considering the qualifying payment amount,

additional circumstances, and any additional information,

the IDR entity must select the offer that best represents the

value for the services under consideration. The IDR entity’s

decision is binding on both parties, unless there is fraud or

an intentional misrepresentation of facts. A binding

payment determination generally is not subject to judicial

review except in limited situations.

After the IDR entity makes a decision, if the payment

decision is more than the initial payment, the insurer must

pay the remaining balance to the provider within 30

calendar days of the decision. If the payment decision is

less than the initial payment, the provider must reimburse

the insurer within 30 calendar days of the decision. The

party whose offer is not chosen is responsible for paying the

IDR entity fee, and the IDR entity must refund the IDR

entity fee paid by the party with the chosen offer within 30

business days.

During the 90 calendar days after an IDR decision has been

made, the party that initiated the IDR process may not

subsequently attempt to initiate the IDR process to seek a

payment determination involving the same opposing party

and the same (or similar) services that were subject to the

initial determination. In instances where the same parties

are again in a surprise billing situation regarding the same

(or similar) service and the open negotiation period for such

services ends during this 90-day “cooling-off” period, either

party may initiate the IDR process within the 30 business

days following the cooling-off period.

https://crsreports.congress.gov

Surprise Billing: Independent Dispute Resolution Process

IF12073

Ryan J. Rosso, Analyst in Health Care Financing

Disclaimer

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