October 24, 2016

In a 2015 Consumer Reports survey (see our May 31, 2016 eAlert), nearly a third of Americans had received a medical bill in the previous two years in which their health plan paid less than expected.  Among those, nearly one in four had received a surprise bill from an out-of-network physician, such as an anesthesiologist or radiologist, for care delivered at an in-network facility.  Only 28 percent of those who received a surprise bill were satisfied with how the problem was resolved, and 57 percent ultimately paid the bill out of their own pockets.

There is virtually no dispute among stakeholders or either of the two major political parties that surprise billing is a serious concern, and that it is becoming more common and financially damaging to patients, particularly as insurance companies narrow their provider networks to keep premiums down.  In a new white paper, Solving Surprise Medical Bills, the Brookings Institution attributes the problem of surprise billing to a confluence of factors¹:

Regardless of network size, when care is out-of-network, the financial consequences for patients are becoming more severe. Individuals and small employers are more frequently choosing HMO and EPO health plans that have no out-of-network coverage (Hempstead 2015), leaving patients exposed to the full brunt of non-network billing. Also, health plans with some out-of-network element are making that coverage leaner, with higher deductibles and coinsurance (Andrews 2012), or more restrictive definitions of allowable charges (NY State 2012). Finally, some, perhaps many, providers are more aggressively taking advantage of opportunities that the market presents to charge rates that greatly exceed network rates (AHIP 2015). Simultaneously, many providers are becoming more disciplined about collecting unpaid medical bills (Hall 2008). The combination of these various trends is pushing more patients into financial distress, and even bankruptcy (Hamel 2016).

A 2010 study cited in the Brookings report showed that patients who received larger out-of-network bills submitted under New York health plans were charged for approximately half the cost of out-of-network emergency care, an average of $3,778 per case, while balance bills from out-of-network assistant surgeons averaged $12,120.²

“When insurers and providers disagree on what rates are reasonable, the financial consequences for patients can be serious, or even ruinous,” according to the report.  “This is especially true for the lower-income people who have acquired insurance recently under the Affordable Care Act, but surprise bills can be a financial burden for middle or upper income people as well.”

Seeking Solutions

That the growth and severity of out-of-network billing requires scrutiny is not in question.  Less certain than surprise billing’s impact on shocked patients is how to resolve the byzantine problem in a way that protects patients and also satisfies both providers and payers.  The federal government and several states have proposed or adopted a variety of solutions. President Obama’s HHS 2017 Budget “supports the standardization of billing documents and eliminating surprise out-of-network charges for privately insured patients receiving care at an in-network facility” with the goal of promoting greater transparency on price, cost and billing for patients.

New York, Connecticut and, most recently, Florida and California, have passed bipartisan legislation to protect patients from surprise bills, including a dispute resolution process for health plans and out-of-network providers.

As described in an article in Modern Healthcare, the Florida law:

. . . will apply to patients who go to a healthcare facility in their health plan network and inadvertently receive services from a non-network provider. Patients would only be responsible for paying their usual in-network cost-sharing. Plans and non-participating providers would have to work out payment for those services through a state-arranged, voluntary dispute resolution process, with a penalty assessed to the party that refused to accept an offer that was close to the final arbitration order. The negotiation would be based on the usual and customary rate for the particular geographic area. Disputes could be taken to court. The bill would only apply to PPO-type plans, since Florida already bars balance-billing patients in HMOs.

Florida has also passed accompanying legislation increasing price transparency in hospitals.

The bipartisan California bill, AB 72 (PDF), which will go into effect in July 2017, will require patients who have received care at in-network facilities to pay only in-network cost sharing for non-emergency care (balance billing for emergency care is already barred in California).  The provisions of the bill would not apply to self-insured employer health plans, which are shielded from state regulations by the federal Employee Retirement Income Security Act.  Insurers would pay out-of-network physicians the health plan’s average rate or 125 percent of the Medicare rate, whichever is larger. Phillip Goldberg, attorney for the California Society of Anesthesiologists, discusses the new law’s provisions in an article on the association’s blog.

The Brookings Institution suggests that answers to the surprise billing problem may be found in a blend of federal and state laws and a comprehensive approach that involves both payers and providers in an efficient dispute resolution process.  The report puts forth six recommendations³:

1. Take comprehensive action that targets surprise billing situations systematically to include at least all common hospital scenarios, rather than merely emergency situations.
2. Take federal action that either addresses patients covered by self-funded employer plans, or authorizes states to do so. 
3. Improve transparency and notice to patients about out-of-network situations and charges, but recognize that improved transparency and voluntary efforts alone will not eliminate situations of unfair surprise.
4. Enact firm measures that hold patients financially harmless from additional costs associated with non-network bills. 
5. Encourage hospitals to increase network participation by key physician specialists.
6. Select from among several regulatory and dispute-resolution approaches to fairly compensate.

The Provider Voice

At a recent Brookings Institution forum, Protecting Patients From Surprise Medical Bills, Jeffrey Plagenhoef, MD, president-elect of the American Society of Anesthesiologists (ASA), commented that the Brookings white paper and other proposals could do more to consider the provider perspective.  “Patients want and expect physicians to help them with this and we see that physician perspectives are missed by many, including many proposing solutions,” he said. According to Dr. Plagenhoef:

[The white paper] is based on the assumption that patients are billed by out-of-network providers even though the patient did all they could to remain in network . . . However, it should be strongly understood that the vast majority of physicians want to be in network. With networks narrowing and tiering, the frequency of surprise bills is increasing. The truth is that there are very few physician outliers sending exorbitant bills. That has been shown. But the insurance lobby is claiming that, and contrarily and inaccurately yet persuasively portraying a few examples out there as the rule rather than the exception. In a free market capitalistic economy, there will always be a few charging higher rates for whatever they sell, and the emphasis should be on a few. A small minority of physicians send these huge bills. The vast majority of physicians report that they want to be and try to be in network and are met with ‘We don’t need any more physicians. We’re full.’ We want the patient volume that comes with being in network, we want the stability that comes from being in network, and our practice administrators really want us to be in network so that they know what to bill and they know what to expect that we can be paid. So the narrative is not true. It’s not that we won’t come to the table to negotiate, which I’ve seen printed in the press in multiple places. We aren’t being allowed at the insurance company-controlled tables in many instances. To summarize, physicians want patients to have ready access to physician networks capable of providing the care and services that they need. The best solutions will maintain incentives for insurance companies to appropriately negotiate in good faith with physicians for adequate, complete and comprehensive networks.

In an October 18 Washington Alert, the ASA urged lawmakers to “put the onus on insurance companies as they are the only ones who know whether a treating physician for a particular patient is in or out of that patient’s network at any given time.”  Tiering, in which a physician can be in-network with a payer in one tier and out-of-network with the same carrier in a different tier, adds to the complexity, according to the ASA.  The ASA also supports a Patient’s Bill of Rights to inform patients of the physicians and services covered by their plans, as well as an out-of-network deductible that would apply to an in-network deductible.

We encourage you to keep abreast of developments in your state through your professional associations.  A summary of state legislative activity regarding surprise billing, prepared by the National Academy for State Health Policy, can be found here.

With best wishes,

Tony Mira
President and CEO

References
¹ A. Hall, M.A., Ginsburg, P.B., Lieberman, S.M., Adler, L., Brandt, C., Darling, M. Solving Surprise Medical Bills, The Schaeffer Initiative for Innovation in Health Policy, a Brookings Institution – USC Schaeffer Center Partnership, October 2016, p. 13.
² Ibid., p. 8.
³ Ibid., p. 4.