DMHC Guidance Confirms that California Law, Not the Federal No Surprises Act, Governs Payment and Dispute Resolution Processes for Certain…

Executive Summary

The California Department of Managed Health Care (DMHC) issued a recent guidance interpreting the application of the No Surprises Act (NSA)a new federal law prohibiting out-of-network healthcare providers from balance-billing patients for certain emergency and non-emergency servicesin California. Significantly, when determining which payment and dispute resolution processes will apply in a dispute regarding the value of non-contracted emergency and non-emergency services, the NSA expressly defers to existing state law which already protects patients from receiving surprise medical bills, as long as such state laws conform to certain requirements set forth in the NSA. The NSA refers to such qualifying laws as specified State law[s]. However, the NSA does not explicitly indicate which states existing balance billing laws qualify as specified State law[s]rather, each state must independently review the provisions of the NSA to determine if its existing balance billing laws qualify.

The DMHC recently issued an All-Plan Letter (APL) confirming that California law governing health care service plans, as set forth in the Knox-Keene Health Care Service Plan Act of 1975 and its implementing regulations, constitutes specified State law and will continue to govern out-of-network disputes for certain emergency and non-emergency services provided in California, rather than the payment and dispute resolution provisions of the NSA. However, in all states, the NSA governs disputes relating to air ambulance services, not state law.

Background of the NSA

The NSA, which went into effect on January 1, 2022, limits the amount an out-of-network provider can charge for emergency services, nonemergency services provided at in-network facilities, and air ambulance services. When a patient receives services covered by the NSA from an out-of-network provider, the NSA generally caps the patients cost sharing obligation at the median in-network contracted rate that the health plan agreed to pay for similar services from in-network providers for the same services in the same geographic region. In addition, the NSA also creates a dispute resolution process for out-of-network payment disputes. Under the NSAs baseball style dispute resolution process, when providers and payors cannot come to an agreement, each side submits an offer that an approved Independent Dispute Resolution Entity must select between as the final payment amount. The payment and dispute resolution processes of the NSA do not apply to every dispute, however. Before the enactment of the NSA, many states already had surprise billing laws in place, and the NSA does not fully preempt state payment standards. Instead, it expressly defers to the requirements of qualifying specified State law[s]e.g., a qualifying balance billing law as specified by the NSA. The NSA also envisions that states may revise their balance billing laws to qualify as specified State law in response to the passage of the NSA and its implementing regulations. See 86 Fed. Reg. 36,925 (July 13, 2021).

The DMHCs APL Confirms the Application of the NSA in California

On March 21, 2022, the DMHC issued an APL confirming that California law qualifies as specified State law for: (i) non-emergency, noncontracted services at an in-network facility by a noncontracted provider; and (ii) out-of-network emergency services. Federal law governs disputes relating to out-of-network services provided by air ambulance providers.

The DMHC stated that it expects CMS to issue an updated letter consistent with its interpretation of Californias balance billing laws.

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DMHC Guidance Confirms that California Law, Not the Federal No Surprises Act, Governs Payment and Dispute Resolution Processes for Certain...