Contributors: Gregory A. Brodek and Emmy S. Monahan
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Surprise bills have become increasingly problematic for privately insured patients over recent years, as reflected in the never-ending stream of headlines describing patients who have incurred tens of thousands of dollars in surprise bills. For purposes of this article, a “surprise bill” occurs when a patient receives healthcare services at a facility that is a participating provider with the patient’s health plan, and, at the same time, also receives services from a healthcare provider who has not entered into a contract with the patient’s health plan. The provider rendering care without a contract with the patient’s health plan is commonly referred to as an out-of-network (OON) provider.
The “surprise” in the term surprise bill arises by virtue of the fact the patient did not expect to receive a bill from the OON provider, believing all of the care received to be covered by his/her insurance. As one can imagine, providers and payors disagree as to which party is the impetus for the surprise bill; the payor, for failing to cover the underlying services received, or the provider, for separately billing the patient. Regardless, one commonly shared belief is that patients should not be put in the middle of this provider/payor payment dispute. This article looks at federal legislative approaches on payment of surprise bills.
Affordable Care Act
At this time, the Patient Protection and Affordable Care Act (ACA) is the only enacted federal legislation that provides patient protections against surprise bills, but provides little meaningful guidance to either providers or payors. Under the ACA, all non-grandfathered self-funded and fully-insured health plans are required to cover OON emergency services and apply the in-network level of cost-sharing. The ACA does not address surprise bills in non-ED settings and does not prohibit OON providers from balance billing.
To address this latter concern, the Departments of Labor, Health and Human Services, and the Treasury require health plans to pay a reasonable amount before the patient becomes responsible for a balance billing amount. Under federal regulations, a health plan satisfies the “reasonable amount” standard if it pays the greatest of (1) the median in-network rate, (2) the usual, customary, and reasonable amount, or (3) the Medicare rate. In states that prohibit balance billing, health plans are not required to satisfy the payment minimum established by the “greatest of three” rule. The problem with these three criteria, from the provider’s perspective, is that each of them is flawed; with the first two being payor controlled (and not subject to independent provider confirmation), and the latter being a non-negotiated rate set by the government. Moreover, as there is no straightforward, independent cause of action under the ACA, the rules establish mere guidelines that can either be followed or ignored at the payor’s discretion.
Federal Surprise Bill Proposals
There has been a push for additional federal legislation because the ACA is limited in scope, and state-level protections against surprise bills vary widely and are largely not applicable to patients enrolled in self-funded health plans (several states have, however, allowed self-funded plans to “opt into” the state law – creating even greater confusion). Over the course of 2019 and 2020, the United States Congress has introduced several bills to address surprise bills, at least four of which offer comprehensive patient protections. Specifically, they (1) address surprise bills in both ED and non-ED settings, (2) offer protections to self-funded and fully-insured health plans, (3) limit patient cost-sharing to the in-network cost share amount and prohibit providers from balance billing, and (4) adopt a minimum payment standard or a dispute resolution process to resolve payment disputes between providers and insurers.
With respect to approaches on payment of surprise bills, the legislative proposals fit into two distinct categories: benchmark or arbitration. Generally, payors favor benchmarking, whereby the government would set a reimbursement rate for providers when they treat OON patients. For example, America’s Health Insurance Plans (AHIP) advocates an amount equal to the median in-network rate, or, if such a rate is not ascertainable, an amount based on Medicare, which would avoid tying payment to billed charges. However, physician groups find median in-network rates problematic because insurers do not rely on a known independent, transparent, and verifiable database. The fear is that use of median in-network rates will cause in-network rates to decrease over time because this benchmark will affect contracting dynamics between insurers and providers. Indeed, as Moody’s Investors Service reported on UnitedHealthcare’s termination of Team Health’s high-reimbursement network agreements in 18 states, UnitedHealth would effectively lower median in-network rates in certain geographic areas. To address and allay these fears, physician groups advocate a timely, upfront, commercially reasonable payment, based on actual local charges as determined through an independent claims database, using baseball-style, binding arbitration.
S 1895, reported by the Health Education Labor and Pension (HELP) Committee, and HR 2328, reported by the House Emergency and Commerce (EC) Committee, base payment for surprise bills on the median in-network rate, as of the time the services were rendered, or, in effect for 2019, adjusted for inflation, respectively. Additionally, HR 2328 would allow either side to bring the dispute to baseball-style arbitration, if the payor or the provider is dissatisfied with the amount paid under the payment standard, and the median in-network rate exceeds $1,250.
HR 3502, sponsored by Representatives Ruiz and Roe, outlines a different approach. It does not specify a payment standard for surprise bills. Instead, insurers and providers would first engage in negotiations over the payment of the surprise bill, and, if no agreement is reached, take the dispute to baseball-style arbitration that would take into account both the median in-network rate and the 80th percentile of actual billed charges.
In December 2019, the Senate HELP and House EC Committees announced a compromise that tracks closely with HR 2328 and includes (1) a median in-network rate for 2019, indexed for inflation, (2) a back-up baseball-style arbitration process to address insurer-provider disagreements, and (3) lowers the threshold for arbitration from $1,250 to $750. The changes did not gain the support of hospital and physician groups because the compromise continues to rely on the median in-network rate and the $750 threshold for arbitration is still too high. Additionally, the House EC and WM Committees remain at odds over the best approach for payment of surprise bills.
In February 2020, the WM Committee released legislation that does not use the median in-network rate as a starting point, but favors voluntary negotiations between insurers and providers, backed by an independent dispute resolution process to set the payment rate. On the day the WM Committee unveiled its proposal, the House Education and Labor Committee introduced a proposal that resembles the bicameral compromise, but also takes steps against protecting air ambulance patients against surprise bills. While Congress seems eager to pass surprise bill legislation, it remains to be seen if they can find middle ground.
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