Assignment of Benefits FAQ

Assignment of Benefits (AOB) is a legal concept that directs or “assigns” to the healthcare clinician the patient’s right receive direct payment from an insurance company.  The “assignment” is made to the clinician on behalf of the patient who is the covered beneficiary of the insurance. The patient is the direct beneficiary of the healthcare policy and is ultimately responsible for the services provided to him/her by the clinician.  The clinician is considered a “third party beneficiary” of the policy.  When a patient or guarantor (patient) signs an AOB form, he or she transfers their insurance rights and benefits to the clinician, authorizing the insurance company to pay the clinician directly rather than reimbursing the patient.

As of April 2024, 48 states and the District of Columbia have some form of laws governing AOB in healthcare. Only Mississippi and Missouri lack comprehensive AOB laws, though they may have related regulations affecting medical billing practices. Each state's laws vary in scope and specific requirements.  State laws generally do not apply to ERISA plans and there are 130-140 million patients covered by ERISA plans.  The No Surprises Act (NSA) (see FAQ 6 below) governs ERISA plans and the AOB issue for ERISA plans. 

Assignment of Benefits offers several advantages for patients:

1. Eliminates the need to pay large medical bills upfront and wait for insurance reimbursement.
2. Reduces paperwork burden as clinicians manage most insurance communications.
3. Ensures more efficient processing of claims since clinicians are experienced with insurance procedures.
4. Minimizes the risk of patients mishandling insurance payments intended for medical services.

State AOB laws generally include several key protections:

1. Requirements for clear disclosure of AOB terms to patients.
2. Provisions for revoking or canceling an AOB agreement.
3. Regulations on clinician billing practices when using AOB.
4. Timeframes for insurance companies to process and pay claims.

While AOB transfers insurance payment rights to clinicians, patients remain responsible for:

1. Deductibles, copayments, and coinsurance amounts. 
2. Services not covered by their insurance plan.
3. Payment if insurance denies claims for covered services.
4. Additional costs if clinician is out-of-network.
5. Any balance remaining after insurance payment.

The NSA and its implementing regulations establish that health plans must remit reimbursement, or a denial of an out-of-network (OON) claim directly to the clinician or facility, rather than the patient. Below are the key legal citations and regulatory references that mandate this requirement:

1. Statutory Authority:
   1. Public Health Service Act (PHSA) § 2799A-1 and § 2799A-2 (42 U.S.C. § 300gg-111 and § 300gg-112)
   2. These sections require group health plans and health insurance issuers to make an initial payment or issue a denial within 30 calendar days of receiving the clinician’s claim from the nonparticipating clinician or facility.
2. Regulatory Authority:
   1. 45 C.F.R. § 149.130(b) - Payment or Denial of Out-of-Network Claims
      1. This regulation explicitly requires plans and issuers to remit the initial payment directly to the nonparticipating clinician or facility, not the patient.
   2. 26 C.F.R. § 54.9816-6T (IRS Regulation for Group Health Plans)
   3. 29 C.F.R. § 2590.716-6 (DOL Regulation for ERISA Plans)
      1. These parallel regulations also confirm that health plans must remit payment or a denial directly to the nonparticipating clinician or facility.
      2. CMS Guidance and FAQs:
3. CMS No Surprises Act FAQs (Set 1, April 2022)
   1. The FAQs clarify that the direct payment requirement applies uniformly to all NSA-covered claims and that plans may not issue payment to the patient in an attempt to avoid engagement with the IDR process.
4. CMS Guidance on No Surprises Act Enforcement (July 2021)
   1. Reinforces that initial payments must be sent to the clinician or facility and provides additional details on IDR timelines.
5. Supporting Interpretations: HHS, DOL, and Treasury Interim Final Rules (86 Fed. Reg. 36872, July 13, 2021)
   1. This rule establishes the obligation of plans and issuers to pay OON claims directly to the clinician or facility within 30 days.
   2. It also clarifies that this prevents plans from shifting financial responsibility onto the patient.
6. Federal IDR Guidance (Frequently Asked Questions on IDR Process, 2023):
   1. Confirms that a failure to remit payment directly to the clinician or hospital can constitute non-compliance with NSA requirements.
7. Conclusion: The No Surprises Act and its implementing regulations unequivocally require health plans to send payment or denial of an OON claim directly to the nonparticipating clinician or facility, not to the patient. Violating this requirement could subject plans to enforcement actions by HHS, DOL, and Treasury.