When Cigna wanted to cut reimbursements for a physician group, the health insurance company came armed with a new negotiating tool: the No Surprises Act.

The insurer notified a clinical practice last week that its contracted rate was no longer competitive because of the federal ban on surprise billing, according to an email provided to Modern Healthcare. Indeed, Cigna wrote, it was requesting rate reductions for all providers with the same specialty.

Cigna regularly reviews contracted rates it deems above-market with an eye toward bringing them down, a spokesperson wrote in an email. And the company doesn’t routinely cite the No Surprises Act as a reason to change payment levels, the spokesperson wrote.

Yet written notices from Cigna and other health insurance companies citing the No Surprises Act indicate that the new law is influencing insurers’ in-network and out-of-network negotiations with providers. Whether that’s a good thing depends on who you ask. 

Physicians point to these messages as evidence that health insurance companies are trying to leverage the surprise billing ban to strong-arm them into accepting lower payments. Insurance carriers are seeking pay cuts as high as 50%, American Medical Association President Dr. Jack Resneck Jr. wrote in an email. 

“We continue to communicate our concerns to regulators that these payer tactics will lead to inadequate networks or access issues,” Resneck wrote. “The AMA is monitoring this situation and will work relentlessly to beat back these cynical ploys.”

Insurers argue they are working to lower costs for patients, particularly among private equity-owned specialty providers that charge exorbitant rates. 

In February, CVS Health’s Aetna refused to pay more than the rate outlined in the No Surprises Act for services the air ambulance company Global Medical Response provides its members, according to a bill the Greenwood Village, Colorado-based firm submitted to regulators. Aetna didn’t respond to interview requests.

Blue Cross and Blue Shield North Carolina, which declined to comment, referenced the No Surprises Act in letters sent to providers in March and November 2021, writing that it would end contracts with anesthesiologists, radiologists, emergency physicians and others unless they agreed to payment reductions of up to 30%.

UnitedHealth Group subsidiary UnitedHealthcare likewise requested a 40% decrease, according to a letter the American College of Emergency Physicians sent to the North Carolina congressional delegation in March.

North Carolina physicians charge some of the highest rates nationwide, with some out-of-network doctors billing at more than 1,000% of Medicare rates, a UnitedHealthcare spokesperson wrote in an email. “The No Surprises Act is bringing greater price transparency to the healthcare system and finally putting an end to the financially crippling surprise bills that consumers have struggled with for years,” the spokesperson wrote.

Doctors who accept these reimbursement cuts would struggle to keep their practices open and those who reject them would only be available out-of-network, said Ed Gaines, vice president of regulatory affairs and industry liaisons at revenue cycle management firm Tech Partners. Both outcomes threaten patient access, he said. Health systems are already struggling with rising costs due to inflation, labor shortages and looming Medicare pay cuts, said Gaines, who sits on the American College of Emergency Physicians’ reimbursement committee.  

“This is a reimbursement perfect storm like I have never seen in my 30 years,” Gaines said. At least three of his company’s emergency and anesthesiology clients have received similar notices from Cigna, he said.

Cigna and other insurance companies are focused on terminating contracts to reduce the median in-network rates they pay physicians, said Amanda Hayes-Kibreab, a partner in King & Spalding’s healthcare and life sciences group who represents providers in payment disputes. This rate is known as the qualifying payment amount under the No Surprises Act and represents a critical data point to determine what providers ultimately get paid. 

The new law requires parties that cannot come to agreements to enter a mediation process rolled out before final guidance was issued on how arbiters should resolve payment disputes. The Centers for Medicare and Medicaid Services directed arbiters to base payment decisions, in part, on the qualifying payment amount that insurers set. Health insurance companies are cutting ties with costly providers as a way to lower this rate and take advantage of the arbitration system, Hayes-Kibreab said. 

“As they pick off their higher rate contracts, their [qualifying payment amount] is going to go down. It creates a race to the bottom,” she said. “I don’t think that’s necessarily what Congress or CMS intended when the No Surprises Act was passed, and it’s not a positive development for managed care.” 

CMS plans to issue a final rule this summer that establishes the factors arbiters must consider when ruling on payment disputes and spells out how much weight arbiters should give to the qualifying payment amount, said Jack Hoadley, a health policy professor emeritus at Georgetown University’s McCourt School of Public Policy.

“People weren’t writing the law for the purpose of changing the way network contracts were negotiated, but I think it was certainly anticipated that it would have an effect on negotiations,” Hoadley said. 

The Congressional Budget Office estimated in 2019 that the No Surprises Act would reduce health insurance premiums by up to 1%. More than 80% of these savings would come from renegotiated in-network contracts because the vast majority of patient care is delivered in-networks, according to the CBO. The law could increase provider pay, too. Paired with new regulations that require insurers and providers to disclose negotiated rates, providers could leverage that information to demand higher reimbursements, said Loren Adler, associate director of the University of Southern California-Brookings Schaeffer Initiative for Health Policy.

“The thing people always leave out is that the median is higher than what half of doctors get paid,” Adler said.

The No Surprises Act aims to discourage private equity-owned specialty physician practices from avoiding insurance networks to generate revenue by balance billing patients. Insurers citing the law to set lower rates are furthering that goal, Adler said. “This is a positive sign that the law is working as intended and may end up reducing premiums,” he said. “The market dynamics appear to have shifted slightly so that the playing field is a little bit more level now.”