Surprise Billing

Surprise medical bills are unexpected charges for procedures or services conducted by out-of-network providers. Since 2014, nine states have enacted legislative measures that protect patients from surprise medical costs. In 2019, the President called for Congress to draft federal legislation on the matter. This move was due in part to regulatory roadblocks that hinder the scope of state laws.

What Is Surprise Billing?

Surprise billing is often the result of urgent visits to the ER, where patients may not have the time or cognitive ability to decline out-of-network treatments. For example, emergency care services, such as ambulance rides, are not always supplied by in-network providers, leaving the patient to cover the additional costs.

Surprise billing can also occur after routine, in-patient procedures. Specialized services administered during scheduled treatments from in-network providers may not be covered by a patient’s insurance plan. For example, patients receiving in-network, routine surgeries may be forced to cover the costs of out-of-network anesthesiology groups contracted to the facility. In some cases, an explanation of costs is not relayed prior to treatment, and the patient is left unaware that one or two components of the surgery were considered out-of-network.

A study conducted by Peterson-KFF in 2017 revealed that 18 percent of all emergency visits and 16 percent of in-network hospital stays resulted in at least one out-of-network charge. This data refers to patients enrolled in large employer-sponsored plans. The percentage of out-of-network charges issued at in-network facilities varies between states, ranging from 2%in South Dakota to 33% in New York.

Why Is Balance Billing Exacerbating the Issue?

Healthcare providers and insurance companies negotiate the cost of services and agree on rates that satisfy both parties. However, if a patient receives services outside of his or her network, providers are free to charge the full, uncontracted rate. This practice is called balance billing. Unexpected charges, combined with the increased costs associated with balance billing, can leave patients with exorbitant fees.

The Affordable Care Act (ACA) requires health care plans to cover portions of emergency care, regardless of whether a provider is in-network. However, the law does not prohibit balance billing for these services. Therefore, patients receiving out-of-network services during emergency care visits may face higher costs regardless of ACA regulations.

Why Surprise Billing Has Reached Congress

Surprise billing places unexpected financial burdens on patients, feeding debt and leading to unpaid bills. As a result, collection rates are impacted, and providers may not be able to recoup basic costs. Over the past few years, states have moved to alleviate these issues by enacting local legislation to reduce surprise billing.

However, states cannot modify regulations surrounding large employer healthcare plans, which constitute a significant portion of surprise billing incidents. Therefore, the focus has been shifted to Congress to pass measures that tackle the issue at the national level.

According to a poll conducted by the Kaiser Family Foundation, eight out of ten Americans support legislation that would reduce surprise medical costs. With half of all Americans saying they have received at least one surprise medical bill, there is a relevant call for national legislative action.

Proposed Federal Solutions for Surprise Billing

Support for federal legislation is significant across party lines, with 84 percent of Democrats and 71 percent of Republicans in favor of passing a bill. After months of debate, two major proposals were combined into one bill led by the House Energy and Commerce Committee. The bipartisan plan was approved in early December and would require insurers to treat out-of-network emergency care services and other specific procedures as if they were in-network, removing the patient’s financial responsibility and the opportunity for balance billing.

Committee members debated over how insurers would pay out-of-network doctors—via arbitration or benchmark pricing—and reached a deal that included both measures.

  • Arbitration – Providers and insurers would enter into arbitration on charges over $750, using third parties to reach an agreement.
  • Benchmark Pricing – Bills under $750 would be paid using a default price based on similar in-network services for that region.

Rival Legislation

A rival proposal, issued by the Ways and Mean Committee, was introduced shortly after the House Energy and Commerce Committee’s bill was approved. The rival plan offers an alternative process of payment resolution, giving insurers and providers the opportunity to work out costs between themselves without the interference of a third-party. If negotiations fail, a structured pricing framework would determine the cost based on similar services in the region.

The rival plan would provide patients with additional information on what networks are included in their plans, as well as the anticipated costs of upcoming procedures. Transition periods during network changes would also be covered under the plan.

What Is the Future of Federal Legislation for Surprise Billing?

Although there is bipartisan support to eliminate surprise medical costs, the details of such a bill are still in contention. The House Energy and Commerce Committee bill was not included in the federal government’s year-end spending measures that passed on December 20, delaying any further action on the matter until next year.

Opinions on how and why the bill was not included in the year-end budget are varied, with some arguing that the last-minute Ways and Mean Committee proposal fractured support within Congress. Certain parties are also blaming the influence of large lobbying groups over legislative leaders, referencing the conflict between satisfying party donors and addressing patient needs as the cause.

Benchmark Pricing or Arbitration?

The issue of benchmark pricing could be considered the most contentious item facing lawmakers. Hospitals, lobbying bodies, and private equity firms invested in staffing emergency departments oppose benchmark pricing, as they would receive less money for services billed out-of-network. However, patients, insurers, and employers are in favor of the measure as costs would be lower for consumers.

Critics of the bill have also argued that benchmark pricing is a form of price fixing and could negatively impact smaller ‘mom and pop’ providers that operate above-median costs. Furthermore, hospitals argue that by introducing benchmark pricing for out-of-network emergency care visits, insurers may be incentivized to remove providers from their policies. This, in turn, could reduce access for patients in rural areas.

In contrast, the Coalition Against Surprise Medical Billing argues that arbitration on larger bills may be abused by out-of-network providers and private equity firms, leading to higher healthcare costs, premiums, and deductibles.

Looking forward, any legislation that addresses surprise billing must consider the needs of healthcare providers, taxpayers, patients, and insurers alike. Despite bipartisan support, a bill that satisfies all parties may take longer to pass than originally anticipated.

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Hugh Sullivan is the CEO of MailMyStatements, an industry-leading healthcare billing, and payments company. He has over 25 years of experience as a seasoned healthcare executive, was the co-founder of ENS Health — a highly successful national healthcare electronic data interchange company, and has served in various leadership roles within Optum, a UnitedHealth Group company. Considered as an industry thought leader, Hugh is an expert in using health IT to improve healthcare information exchange, which can enhance the quality of care, improve efficiency, and reduce costs.

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