No Surprises Act: Disclosure Requirement Update

The “No Surprises” Act was passed as part of the Consolidated Appropriations Act (CAA) of 2021 last year, and it was meant to reduce the effect and frequency of surprise medical bills on people with health insurance. No Surprises targets a variety of billing issues, including the direct and indirect compensation of agents/brokers involved in the sale of individual health insurance coverage, group health insurance, and short-term, limited-duration insurance (STLDI), all of which are now subject to new legal disclosure requirements.

Specifically, the CAA requires issuers of group health insurance plans, individual health insurance coverage, or STLDI, to inform policyholders of any direct or indirect agent/broker compensation paid in connection with enrolling them in those plans. No Surprises also requires issuers to include disclosures of any direct or indirect compensation paid to agents/brokers in the process of selling individual or STLDI coverages in the annual reports issuers provide to the Department of Health and Human Services (HHS).

The CAA establishes the effective date of the disclosure and reporting requirements as Dec. 27, 2021 (one year after the CAA’s passage), for applicable health insurance contracts executed on or after that date. Late last year, HHS issued a Notice of Proposed Rulemaking (NPRM) to provide additional regulatory guidance on the No Surprises requirements, but HHS has not yet issued a final rule, even though No Surprises itself directed HHS to issue one by year-end 2021.

Understandably, we have begun to receive inquiries about the status of the regulation and requests for additional information about how to proceed. In December, HHS recommended that agents, brokers, and insurers implement new procedures to conform to the disclosure requirements as if the applicable regulations are already in force, so that covered groups aren’t scrambling to do so once it is finalized.

Affected agents and brokers should proceed with the expectation that the final rule will substantially resemble the NPRM, at least for now, and may consider initiating a gap analysis, if they have not already done so, to determine the degree to which their existing processes meet the new disclosure requirements, and identify gaps that will need to be filled to ensure compliance. The financial penalty for noncompliance could be substantial, although administrative enforcement seems unlikely during this period of regulatory limbo.

On Dec. 30, to address the No Surprises disclosure requirements applicable to group health plans, the Department of Labor (DOL) issued Field Assistance Bulletin (FAB) No. 2021-03. According to the Bulletin, DOL is not issuing regulatory guidance “at this time” (see below for caveats), but the Bulletin offers guidance and what it refers to as a policy of “temporary enforcement” of the disclosure requirements applicable to group health plans only. It emphasizes the importance of disclosing indirect compensation because “a significant goal of the new disclosure requirements is to enhance fee transparency, especially for service arrangements that involve payment of indirect compensation.”

The DOL Bulletin clarifies that group health plan agreements executed prior to Dec. 27 but effective after are not subject to the new disclosure and reporting requirements. The requirements apply to contracts that are executed, renewed, or extended on or after Dec. 27. Additionally, according to the Bulletin, if an agent/broker enters into an arrangement through the use of a “broker of record” (BOR) agreement, the applicable date for purposes of determining the issuer’s disclosure obligation is the earlier of two dates: the date on which the BOR agreement is submitted to the carrier, or the date on which a group application is signed to obtain coverage for the following plan year, as long as such a signature is obtained through the ordinary course of business, and not for the purpose of evading disclosure.

According to the Bulletin, pending further guidance, DOL will not treat a covered service provider who provides brokerage services or consulting to a group health plan as having violated the disclosure requirements of No Surprises as long as the provider made its disclosures “in accordance with a good faith, reasonable interpretation” of the applicable law.

Finally, the Bulletin concludes, DOL does not intend to promulgate regulations concerning disclosures applicable to group health plan issuers, though DOL noted that it will be monitoring the implementation of the new requirements and seek feedback if it determines additional regulatory action may be needed.

HHS has issued no similar proclamation; we continue to await the publication of a final HHS regulation. We will provide additional updates on the No Surprises Act agent/broker disclosure requirements as they become available.