By Tonic Advisors

Introduction

In our last article, we introduced the problem of surprise or “ambush” billing.  Ambush billing happens when you see a medical provider that you think is covered by your insurance but to your “surprise,” later you find out that it isn’t.  What’s more, because it is not contracted with your insurance there is virtually no limit to what you can be charged for its services.  A lab test that your insurer would normally pay $200 for could be billed to you for $2000.  Just when you thought you had gotten out of the hospital with just a financial scrape or two, thanks to your insurance coverage, your wallet takes a mortal wound from the ambush.

This is an issue everyone should care about.

Patients should care about it because they should feel confident when seeing a provider that they are not going to hit a financial land mine.  Employers should care because while insurance is designed to pay for better health, it is also designed to provide peace of mind and a safety net for employees.  Carriers (insurers) should care because while patients will certainly be angry with providers who ambush them, they will also be angry with the carriers that allow the ambush to happen.  Even providers should care because it hurts their reputations as a whole.  Politicians and those interested in public policy should care because this is an issue that affects everyone.

It is finally getting the attention it deserves and thankfully, Republicans and Democrats have joined hands to address the issue.

Developments

National Attention

President Trump has stated that ending surprise billing is one of his main priorities.  He has instructed officials in his administration to investigate solutions. Addressing the issue enjoys rare bi-partisan support in Congress, though consensus has yet to be reached on solutions.  Several approaches and bills have been drafted but the main ones have been proposed by:

Sen. Bill Cassidy (R-LA).  He proposed a bill that creates a member “hold harmless” provision limiting a member’s out of pocket costs to the carrier’s (insurers) agreed upon maximum cost sharing amounts. Providers would be entitled to get from the insurer the greater of a) the average in-network negotiated rates for the area or b) 125% of the average allowed amount of a service provided by a provider in the same specialty in the same geographic area. This would apply to a member during an emergency at an out of network facility and provider as well as non-emergency care performed by an out of network provider at an in-network facility. In addition, the bill requires hospitals to notify stabilized patients (after an emergency) if their continued care would be out of network and give the patient an opportunity to transfer to an in-network facility.

Sen. Maggie Hassan (D-NH).  She proposed a similar bill to Cassidy’s that differs on the resolution of the payments. Instead of the benchmark approach above, her bill instills a baseball-style arbitration in the event of provider and insurer not agreeing on price. Essentially, each party provides what they think to be a fair price (final offer) and the arbiter decides which amount is correct.

Both approaches have pros and cons but the basic thrust of each is to protect the individual member.  In future articles as we look at the potential policy solutions and implications, it will become clear that neither solution is as clean as it seems.  Aside from administrative burdens, the policies will affect the overall nature of the relationships between carriers, providers, and members and will affect many current and emerging strategies to manage costs and improve quality.  In other words, what may seem like a good solution to an existing problem may result in new challenges.

There are several other more narrowly scoped bills out there but due to the overlap, there is currently work being done to streamline the legislation. In addition, the House of Representatives has been holding hearings on the issue as well.

State Level Attention

Most states are beginning to look at ways to address Ambush billing by using the regulatory power of their insurance departments and departments of health.

1. Emergency Care.  Many states are focused on emergency care only.  It is a common source of surprise billing and one in which patients generally have no choice or foreknowledge.
2. Out of Pocket Limits. Other states have debated limiting out of pocket costs. Approaches include:
   • Using some multiple of Medicare charges as a benchmark for reasonable costs. The problem with this is establishing the benchmark for what is reasonable. Data is currently being gathered on this but depending on the region, the rates negotiated as a multiple of Medicare charges can vary greatly, especially between rural and urban areas. In addition, ER and anesthesiology rates are through the roof. The concept of a fair benchmark tied to existing charges is tough because the system has been gamed so much over the years.
   • Use of baseball-style arbitration on a case by case basis
   • Several states have more widespread legislation tackling all out of network charges but most are inadequate in the protections they offer. Full protection would include all types of care (ER, hospital, etc.), financial protections for patients and standards for how much insurers pay the providers (or at the very least a dispute resolution process).
3. Limited to Fully Insured Plans. A state’s authority generally stops at fully-insured plans. For self-insured employers, a federal solution would be needed. In addition, a federal solution helps eliminate confusion for employers with employees in multiple states.

Impetus for Government Involvement

Government involvement is being driven by private sector inaction.  Insurers (including those employers who self-insure) and Providers all agree they should work together.  They both admit that surprise billing is a problem, but cannot agree to the solution.

Insurer proposals tend not to be satisfactory to providers and vice versa.  Major insurance advocates such as AHIP and the BCBSA, as well as employer coalitions such as the National Business Group on Health and the National Alliance of Healthcare Purchaser Coalitions recently wrote a letter to Congress[i].  The letter calls for solutions similar to those described in some bipartisan bills and calls out the idea of setting reimbursement rates at market rates based on geography or a percentage of Medicare.

The Hospital Associations and provider advocates argue that having the government set rates in the private sector sets a dangerous precedent. They worry that it will create a disincentive for insurers to negotiate rates with providers if there they can take advantage of default rates for all providers anyway. They fear that it will upset the balance of negotiating power between carriers and providers.  The two sides are at an impasse.  They are in a car hurtling towards a cliff.  One side is yelling turn the steering wheel, the other is yelling to slam the brakes.

Conclusion

Surprise or “Ambush” billing is indefensible on its face.  Despite the universal condemnation of the practice, solutions to the dilemma remain controversial.  The fear is that the solution will affect some sector of the health care industry disproportionately.  In a sense, it’s a lot like the classic game theory example of the “prisoner’s dilemma.”  If neither party to the standoff (providers and carriers) are willing to give in, then the state (writ large as in the Federal government or writ small as in State governments) will step in and impose a solution that is likely to be hazardous for both groups.  If either one gives in unilaterally, the other will benefit to their detriment (though their own loss is likely to be less than if the state steps in).  If they can cooperate to each give up something, both sides to the dilemma are likely to be better off than any other alternative.

On the other hand, the carriers seem to have the upper hand.  Carriers can and have proposed a basic solution to the issue of Ambush billing, a limit on charges (with multiple methods used to limit those charges).  Limited charges give carriers the flexibility to ensure that their members are covered without putting either the member or the carrier at excessive financial risk.

Providers have not to date provided solutions, though there are some possible approaches that could be taken.  Providers’ chief solution would be to self-police.  Hospitals should ensure that any provider with privileges at their facility agree to the contracts the hospital operates under.  Providers could agree that for elective procedures, standards of informed consent on pricing and payment be followed.

Thus far such universal proposals applicable to all providers have yet to be proposed and adopted.  We are certain that the American Hospital Association and other trade group are mulling responses to the burgeoning crisis now, we look forward to seeing what is proposed.

Please give us your Feedback.

Tonic Advisors and PBGH will continue to keep you updated on this issue and evaluate more ideas on how to fix it.  PBGH considers this one of the key issues facing Western PA employers today and will continue to act as an advocate to make sure that surprise billing becomes a thing of the past.

Have you received a surprise medical bill? Would you be willing to share your story?  We would love to start a virtual conversation in the Comments Section below.

Do you have a solution that you think people should consider?  Let’s talk about it in these pages!

[i] https://www.ahip.org/wp-content/uploads/Hill-Sign-on-Letter-Surprise-Medical-Bills-031819-2.pdf