[co-author: Spencer Smith]

This is the third and final blog in our Surprise Billing series. Our first two blogs addressed legislation in Texas and California limiting “surprise” or “balance” billing. This article will briefly touch on surprise billing legislation that other states across the nation have implemented, and also look at proposed federal legislation that mirrors those state laws.

In today’s political climate, it is rare to have both sides of the aisle agree on the need to tackle a pressing issue. But leaders from both parties see eye-to-eye when it comes to ending surprise medical billing, a problem that arises in roughly 1 in 5 emergency department visits. However, agreeing that something needs to be fixed is only the first step—agreeing on how to fix it is another, much more difficult, issue. There have been proposals, from both the House and the Senate, with bipartisan support that are based on existing state legislation. Congressional legislation regarding surprise billing is imperative for many Americans, because state legislation does not protect patients enrolled in self-insured employer health plans due to preemption by the Employee Retirement Income Security Act (ERISA).

The various proposed federal legislation, like the state laws that they reflect, have their differences but also contain critical elements of “comprehensive” protection against balance billing:

1) Protection from balance billing in the two main situations in which surprise out-of-network bills frequently arise: a) Out-of-network emergency care; and b) Out-of-network care, typically from ancillary physicians, delivered at an in-network facility;

2) Applicability of protections to all types of insurance, including both HMOs and PPOs, with the federal laws also applying to self-insured employer plans;

3) Shielding consumers both by holding them harmless from extra provider charges —limiting patient cost-sharing to the amount they would owe to an in-network provider —and prohibiting providers from balance billing; and

4) Adopting an adequate payment standard—a rule to determine how much the insurer pays the provider—or a dispute-resolution process to resolve payment disputes between providers and insurers.

Critical to any federal legislation would be a mandate that out-of-network emergency providers notify a patient, once stabilized, of the potential for higher cost-sharing if they remain at the current out-of-network facility and provide the option to transfer to an in-network facility. Most state legislation also includes exceptions to the balance billing prohibition if health care providers meet high disclosure and written consent standards. Federal legislation would presumably include this exception as well.

The different pieces of legislation implemented by the states and proposed at the federal level fit into two distinct categories when it comes to suggested payment methods: binding arbitration (Texas) and minimum payment rate (California). While both approaches have their advantages, establishing a minimum payment rate seems to be the slightly more popular approach. Of the state laws that have been deemed to provide “comprehensive” protection for patients, six have chosen the binding arbitration route, and seven have gone with a minimum payment approach.

The advantages of the binding arbitration approach include: encouraging each side, health plans and service providers, to submit reasonable offers because an impartial arbitrator, ideally, will not award an unfair amount; allowing for some flexibility in the rate chosen for differing circumstances; and, giving the involved parties more input into what that rate should be than a rate chosen by policymakers or regulators. Looking to maximize these advantages, New Hampshire’s Senator Hassan proposed a binding arbitration bill called the “No More Surprise Medical Bills Act of 2018.” Senator Hassan’s bill suggests a binding arbitration process that instructs the health plan and provider to each make final reimbursement offers, then an independent arbitrator contracted by the government chooses which of the two options it considers more reasonable. Theoretically, this would incentivize each side to make a reasonable offer or settle beforehand. The results of these arbitrations would then be made public which would facilitate settlement before going to arbitration as both parties learn to anticipate what rate the arbitrator would choose. The independent arbitrator would also be instructed to consider Medicare and negotiated network rates, rather than (presumably) higher provider charges, in making their rate determination. Hassan’s legislation also would allow states to establish their own arbitration process, as long as the state process is equally protective, and the arbitration results are made public. Most importantly though, the legislation would apply to self-insured health plans, which, as mentioned, can only be regulated by the federal government.

On the other hand, the binding arbitration approach adds administrative burden to the process. Arbitration could also bring about inflated settlements like the ones New York has faced. By instructing the independent arbitrator to consider the 80^th percentile of billed charges when determining the final payment amount, in-network negotiations have resulted in raised prices for insured patients because of the large out-of-network settlements.

Seeing the challenges that New York has faced, the states listed in the table above, and “The Lower Health Care Costs Act,” which was introduced by the Senate Health, Education, Labor and Pensions (HELP) committee, apply the minimum payment rate approach. Gaining support from both political parties, the Lower Health Care Costs Act would comprehensively eliminate surprise billing, fulfilling the four elements listed above. Like Hassan’s proposal, this bill would also cover self-insured health plans. The payment standard suggested is constructed to help providers, by requiring health plans to pay out-of-network emergency and facility-based providers their plan-specific median contracted rate for the relevant service in that geographic area. This is a different approach than states like California have taken, which establishes the payment rate at 125 percent of the Medicare payment for the same service in that geographic region. Interestingly, existing state laws that provide methods for determining out-of-network payment for surprise bills would remain for fully insured plans and would not be pre-empted.

Aside from facing the challenge of picking a plan that Congress can agree on, law makers are also up against lobbyist groups looking to voice their opinion as well. Tom Nickels, executive vice president of the American Hospital Association, testified in June before a House Energy and Commerce subcommittee on the proposed surprise billing legislation. He argued that “health plans and hospitals have a longstanding history of resolving out-of-network emergency service claims, and this process should not be disrupted.” He also said the nation’s hospitals are “particularly concerned” that “setting a reimbursement standard in law” or setting a benchmark rate that hospitals could charge insurers for out-of-network costs “will have significant negative consequences,” including a disincentive for insurers to maintain adequate provider networks. While Congress does seem eager to pass a law prohibiting surprise billing, they likely will take these points into consideration and continue to monitor the states that have implemented policies to track their results.

All members of the health care community should keep an active watch on this developing issue.