What Is Revenue Code 9816 for Surprise Medical Bills?
Learn how Internal Revenue Code 9816 redefines financial responsibility for surprise medical bills, limiting patient costs for out-of-network care.
Internal Revenue Code Section 9816 is a federal provision established by the No Surprises Act. Its primary purpose is to shield consumers from unexpected medical bills that can occur when they receive care from out-of-network providers. This rule protects patients from “balance billing”—the practice of an out-of-network provider billing a patient for the difference between their full charges and the amount paid by the insurance plan—and removes the consumer from payment disputes.
Patient Protections from Surprise Billing
The protections against surprise medical bills are specific and apply in several circumstances. The first is for emergency services. If you have an emergency medical condition and receive care from an out-of-network provider or at an out-of-network emergency facility, you cannot be balance billed for those services. This protection extends to services you may receive after your condition is stable, unless you provide specific written consent to waive your protections.
A second area of protection involves certain non-emergency services provided by an out-of-network provider at an in-network facility. This often happens when a patient goes to an in-network hospital or ambulatory surgical center but is treated by a specialist, like an anesthesiologist or radiologist, who is not contracted with their health plan.
A similar provision provides protections for most out-of-network air ambulance services. For patients transported by an air ambulance that is not in their plan’s network, the rules prevent the provider from billing the patient for more than their standard in-network cost-sharing amount.
In all these scenarios, the patient’s financial responsibility is limited to what they would normally pay for in-network care, such as their deductible, copayment, or coinsurance.
Health Plan Compliance Requirements
When a surprise bill occurs in a protected situation, the responsibility for managing the cost shifts to the group health plan. The plan must calculate the patient’s cost-sharing amount as if the services were provided in-network. This calculation is based on what the law defines as the “recognized amount,” which is the plan’s median in-network rate for that service, known as the Qualifying Payment Amount (QPA).
After determining the patient’s in-network responsibility, the health plan must directly address the payment with the out-of-network provider or facility. The plan makes an initial payment and, if there is a disagreement over the total amount, must engage in a 30-business-day open negotiation period with the provider.
If the health plan and provider cannot reach an agreement during the open negotiation, they may proceed to the federal independent dispute resolution (IDR) process. This is a formal arbitration where a certified third party reviews the case and makes a final, binding payment determination. The implementation of the IDR process has been affected by ongoing legal challenges, with court rulings invalidating parts of the federal rules concerning how much weight arbitrators should give to the QPA.
Enforcement and Penalties for Noncompliance
An excise tax serves as the enforcement mechanism for these consumer protections. This tax is imposed directly on a group health plan for each failure to comply with the surprise billing requirements. The penalty is not related to the medical bill itself but is a punitive measure paid to the government.
The excise tax is set at $100 per day for each individual affected by a specific failure. This means if a plan improperly handles a surprise bill for a patient, it could be liable for a daily penalty for as long as the noncompliance continues.
This penalty applies to various failures, such as incorrectly calculating a patient’s cost-sharing amount or failing to follow the payment determination and dispute resolution procedures.