11 minute read 2 Oct 2019
Medical charts with doctors soft focus in background

Five things industry needs to know about surprise medical bills

Authors

Laura Dillon

Washington Council Ernst & Young (WCEY) Senior Manager

Health policy wonk. Former health system best practice researcher, global and mental health advocate. Avid hiker, biker and wayfarer.

Heather Meade

Principal, Washington Council Ernst & Young

WCEY health care principal, health & tax-exempt policy, former Congressional staffer, recovering ERISA attorney, coalition builder, teacher of civics and math through games. Sideline soccer fan.

Tara Bradshaw

Executive Director in Washington Council Ernst & Young

Change maker. Story teller. Passionate about helping clients achieve their policy goals through strategic communications.

11 minute read 2 Oct 2019
Related topics Tax

Congress pushes to stop surprise medical billing, seeing this as a potentially achievable win in addressing runaway health care costs.

Surprise billing

A term coined by the media, surprise billing is when an insured individual inadvertently receives out-of-network care that results in a higher than expected medical bill.

Chapter 1
(Chapter breaker)
1

Chapter 1

Congress is aiming to address surprise billing across various sites of care

Congress is aiming to address surprise billing across various sites of care.

Recent studies frequently cited in the news media find that one in five visits to the emergency department (ED) is likely to result in a surprise bill. However, it may come as a shock that even for elective, inpatient care at in-network facilities, surprise bills can arise in as many as 9% of cases. In the context of the congressional debate, members are trying to address surprise billing more comprehensively by addressing situations when an insured individual inadvertently receives out-of-network care resulting in a higher than expected bill which is not covered by insurance. In these situations, a provider bills the patient the balance between what the provider charges for the services and what the insurer has agreed to pay —known as “balance billing.” Because balance billing is usually prohibited for in-network services due to contractual agreements between the insurer and the provider, it often comes as an unpleasant surprise to the patient.  

The leading congressional proposals look to address surprise billing in several situations: 

  • When a patient goes to an emergency room or a freestanding emergency department and the hospital or provider is out of network (OON).

  • When out-of-network services are provided to patients following emergency or maternal care if they are medically unstable, are unable to be transferred, and/or have not been provided adequate notice and given consent to receiving out-of-network care and the associated costs.

  • During scheduled care at an in-network facility, when out-of-network ancillary providers (e.g., anesthesiologists, radiologists, pathologists) are brought in to participate in the care or out-of-network services are ordered at in-network facilities (e.g., laboratory or imaging services), and/or if patients have not been provided adequate notice and given consent to receiving the out-of-network care and associated costs.

Percentage of care likely leading to surprise medical bill
Chapter 2
(Chapter breaker)
2

Chapter 2

Congress agrees that patients should be held harmless and not “balance billed.

Congress agrees that patients should be held harmless and not “balance billed.

Each of the major congressional proposals to end surprise billing prohibits the practice of balance billing in emergency situations and protects patients from high out-of-pocket charges by ensuring they only pay in-network cost-sharing rates in these situations. The proposals differ slightly, however, regarding out-of-network care in non-emergency situations. For example, a proposal introduced by Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH) (the Cassidy bill) provides blanket protection for patients who receive out-of-network care at an in-network facility, while the Senate Health Education Labor and Pension Committee (HELP) and Energy and Commerce (E&C) bills require the express consent of the patient before they receive out-of-network care and the quoted out-of-pocket costs. Many of the bills also protect patients in after-emergency or post-stabilization care if they are unable to be transferred or do not consent to the care and costs. Several proposals also call out care from “ancillary providers,” who have been singled out by some as the substantial contributor for surprise medical bills. These providers, such as anesthesiology, pathology, neonatology and radiology, are often out of network and paid rates many multiples higher than the Medicare rate when compared to other specialties. The HELP bill would protect patients who receive such out-of-network ancillary services if they are at an in-network facility, and a proposal by Reps. Raul Ruiz (D-CA) and Phil Roe (R-TN) (the Ruiz proposal) protects patients when out-of-network imaging or lab services are ordered by a provider in network.

Out-of-network claims and in-network rates
Chapter 3
(Chapter breaker)
3

Chapter 3

The crux of the debate is how providers are paid for surprise bills.

The crux of the debate is how providers are paid for surprise bills.

Because patients are held harmless in surprise billing circumstances, payment for services is left to be resolved between the insurer and the provider. Four leading proposals are under consideration:

Benchmark/rate setting

Setting a benchmark rate of payment that the insurer pays the out-of-network provider in surprise billing situations is a leading proposal. The Senate HELP bill, for example, uses an insurer’s median in-network, or contracted, rate for payment. The exact methodology for setting this rate is unclear and would be determined by Health and Human Services (HHS). The rate could consider things such as site of care, complexity of the patient and/or procedure, and more. Setting a benchmark rate —specifically the median in-network rate — is the preferred method for insurers, who have also proposed pegging rates to a percentage of Medicare (e.g., 125% of what providers are paid under the program).

Independent Dispute Resolution (IDR)

Otherwise known as arbitration, IDR is featured in other leading proposals. The Cassidy bill, for example, includes an independent IDR process that allows providers to seek a different payment rate than the default benchmark rate. The “baseball style” arbitration (named after the method used by Major League Baseball for some salary negotiations) empowers an independent arbiter to select between insurer and provider offers, determining which is the fairest. The Ruiz bill has a similar provision, but starts with the “commercially reasonable rate,” and an amendment to the Energy and Commerce (E&C) bill amended its benchmark-only proposal to include an arbitration backstop when the median in-network rate exceeds $1,250. Including an arbitration mechanism is favored by providers, who note concerns about network adequacy and inadequate payment for certain high-cost facilities and specialties in the benchmark proposals.

Network matching

Also called an “in-network guarantee,” network matching would require facility-based emergency, ancillary and other providers to contract with all the same health plans as the facility or to secure payment from hospitals rather than insurers. Network matching was one of three initial ideas included in an early HELP committee discussion draft (and favored by the Committee’s Chairman, Senator Alexander); however, the committee decided in favor of a benchmark after learning it produced more savings. This approach is favored by some economists, who argue that benchmark and IDR approaches could result in inappropriate payments and encourage physicians to go out of network to achieve higher reimbursement.

Bundling

Another approach that has been proposed by economists is to bundle the reimbursement of hospitals and hospital-based providers into one payment jointly negotiated with insurers. This would likely have a similar effect as network matching, but could create operational hurdles for providers currently billing separately for their services.

Arbitration raises costs and doesn’t eliminate surprise medical bills. It rearranges the deck chairs on the Titanic.

James Gelfand 

Senior Vice President, the ERISA Industry Committee

 

Setting payments at these discounted rates would further disrupt the increasing market imbalance favoring health insurers.

Dr. Bobby Mukkamala 

Board Member, American Medical Association

 

Chapter 4
(Chapter breaker)
4

Chapter 4

Ambulances are scarcely addressed despite high rates of out-of-network billing.

Ambulances are scarcely addressed despite high rates of out-of-network billing.

According to a GAO analysis, 51% of ground ambulance transports and 69% of air ambulance transports are out of network for privately insured patients. However, only the Senate HELP proposal currently addresses surprise air ambulance bills — and none of the proposals broach the issue of ground ambulances. The HELP proposal protects patients from surprise, out-of-network air ambulance bills and requires the insurer to pay the median in-network rate for the service, similar to how the HELP committee address other surprise bills. And while the E&C proposal does not protect patients from out-of-pocket expenses or set a benchmark for air ambulance rates, it does aim to increase transparency for air ambulances by requiring ambulance companies to break out costs by air travel and emergency medical services and supplies.

Despite the prevalence of out-of-network ground ambulances, the issue of air ambulances has been viewed as more pressing because federal law prevents local regulation of their prices. Ground ambulances, on the other hand, are regulated by the states and often run by local and municipal governments. This makes it less likely that Congress will act in this area to override local authorities.

transports for privately insured patients
Chapter 5
(Chapter breaker)
5

Chapter 5

Congressional action may be needed to aid those in self-funded employer-provided health plans.

Congressional action may be needed to aid those in self-funded employer-provided health plans.

Nearly half of all US states have passed statewide surprise billing laws to protect consumers, but these laws don’t apply to a large number of commercially insured consumers due to the Employee Retirement Income Security Act of 1974 (ERISA), which exempts almost 100 million people in self-funded private insurance plans. Action at the federal level is needed to address surprise billing for ERISA-preempted plans. While none of the proposals aim to supersede state laws — instead seeking to protect these currently unprotected consumers — a few attempt to establish state-level patient protections that are as robust as the new federal proposals. Both the E&C and Ruiz bills protect patients from higher cost-sharing under state law, where one exists, and the Cassidy proposal aims to protect patients more generally from state laws that are less robust.

State surprise billing laws have served as templates for the federal proposals and represent a divide in terms of how they rectify payment disputes. States such as Florida and California use benchmark rates, with Florida basing payment on “usual and customary charges” for similar services in the geographic region and California requiring insurers to pay the greater of the average contracted rate or 125% of Medicare fee-for-service rates. New York, on the other hand, mandates the health plan establish a reasonable payment, but also allows the provider to contest the payment and initiate an IDR process. While proponents of the various proposals often use state data to bolster their arguments, many of the state laws are still young, and it is unclear if the data is applicable nationally. 

State laws protecting against balance billing

Want to dig deeper into the federal proposals?

Federal proposals

What’s next

On 17 July 2019, the House E&C Committee approved its surprise billing legislation, complete with a compromise amendment by Rep. Ruiz that creates a “backstop” arbitration mechanism to its benchmark approach. Other House committees with jurisdiction have yet to act, and we expect ongoing discussions between the committees in the coming weeks. In the Senate, debate continues on the surprise billing component of a larger HELP-passed package with Chairman Alexander and Sen. Cassidy working to reach agreement on a similar blended approach. In addition to the policy dynamics, the cost of the legislation will also be a factor in the outcome. The extensive HELP package currently benefits from the inclusion of the surprise billing benchmark, which generates an estimated $25 billion in savings over 10 years and helps offset other committee priorities, such as funding for public health programs like community health centers.

While the committees and the two houses of Congress are ostensibly getting closer to a resolution, existential questions remain for the surprise billing debate: What is the best way to compensate health care providers if balance billing is prohibited? Can we find a system that works for payors, providers and consumers? And will other health care priorities like addressing drug pricing and increasing transparency, or disagreements over the future of health care get in the way of a compromise? The coming months will tell.

Summary

A recent survey found that 41% of working-age Americans have medical bill problems or are paying off medical debt, up from 34% in 2005, and 15% had cost-related access problems. Congress is ramping up its push to stop surprise medical billing, one of just a handful of health care issues that enjoys both the bipartisan support and the political will necessary to move before the 2020 elections. Congress sees addressing “surprise billing” as a potentially achievable win in the complex landscape of addressing runaway health care costs, a top issue for the electorate.

About this article

Authors

Laura Dillon

Washington Council Ernst & Young (WCEY) Senior Manager

Health policy wonk. Former health system best practice researcher, global and mental health advocate. Avid hiker, biker and wayfarer.

Heather Meade

Principal, Washington Council Ernst & Young

WCEY health care principal, health & tax-exempt policy, former Congressional staffer, recovering ERISA attorney, coalition builder, teacher of civics and math through games. Sideline soccer fan.

Tara Bradshaw

Executive Director in Washington Council Ernst & Young

Change maker. Story teller. Passionate about helping clients achieve their policy goals through strategic communications.

Related topics Tax