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IRS Announces Indexing Factor to Calculate No Surprises Act’s Qualifying Payment Amount for 2023



IRS Notice 2023-4 (Dec. 20, 2022)

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The IRS has issued Notice 2023-4, which provides the indexing factor to be used by group health plans and insurers to calculate the qualifying payment amount (QPA) under the No Surprises Act for items or services provided on or after January 1, 2023, and before January 1, 2024. As background, the No Surprises Act, enacted as part of the Consolidated Appropriations Act, 2021 (CAA, 2021), expanded patient protections to shield individuals from surprise bills for certain out-of-network emergency and non-emergency services, including certain air ambulance services (see our Checkpoint article). Related regulations address, among other things, participant cost-sharing for services subject to the CAA, 2021, in most situations using the QPA, which is based on the plan’s median in-network rate (see our Checkpoint article).

The regulations explain that for an item or service furnished during 2022, the group health plan or insurer must calculate the QPA by increasing the median contracted rate for the same or similar item or service under the plan or coverage as of January 31, 2019, by the combined percentage increase in the consumer price index for all urban consumers (U.S. city average) (CPI-U) over 2019, 2020, and 2021. (For 2022, the IRS determined that the combined percentage increase to adjust the median contracted rate was 1.0648523983 (see our Checkpoint article).) The 2022 QPA is then adjusted annually for items and services furnished during 2023 or a subsequent year. Notice 2023-4 advises that for 2023, the IRS has determined that the combined percentage increase from 2022 to 2023 is 1.0768582128. After applying the percentage increase, group health plans and insurers may round any resulting QPA to the nearest dollar.

EBIA Comment: Those responsible for calculating QPAs on behalf of group health plans and insurers will need to take note of this guidance as they implement these complex rules for 2023. Helpful examples of QPA calculations—including for items and services first furnished after January 31, 2019—are provided in the notice. For more information, see EBIA’s Health Care Reform manual at Section XII.B.3 (“Surprise Medical Billing: Emergency and Non-Emergency Services”) and EBIA’s Group Health Plan Mandates manual at Section XIII.B.3 (“Surprise Medical Billing (Emergency and Non-Emergency Services)”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.C (“Federally Mandated Benefits”).

Contributing Editors: EBIA Staff.

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