The challenges facing states looking to curb surprise billing

Medical bill healthcare cost price patient spending
The Brookings Institution held an event on surprise billing Friday morning. (Getty/everydayplus)

Policy experts have suggested rate setting and payment caps as solutions to pricey surprise patient bills, but regulators warn that such approaches come with significant downsides for states.

The Brookings Institution issued a report last month where it outlined two potential ways that states could address balance billing, an issue which has captured plenty of headlines of late. Under one suggested model, a “pure billing” regulation, states would set a limit on out-of-network costs based on what is reasonable in their markets. 

The second model the group suggests is a hybrid of billing and contracting rules. For certain services states would set a rate limit, while for others, such as emergency care or neonatology, insurers would pay hospitals in a bundle, paying out the funds to physicians as appropriate. 

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While those approaches have merit, state insurance regulators said there are major hurdles to implementing them: namely, people balk when legislators start setting rates.  

Jane Beyer, senior health policy adviser for the Washington Office of the Insurance Commissioner, likened it to the “camel’s nose under the tent” at an event hosted by Brookings on Friday morning: something that would pave the way for politicians to get their hands into other healthcare finance issues. 

“Anything that has a state legislature setting rates is automatically very controversial and volatile,” Beyer said. 

RELATED: Study finds surprise medical bills lead new mothers to switch hospitals—highlighting a bigger problem 

Beyer said Washington officials have worked for four years on the issue, and early legislation included defined rates in the bills. However, political pressures led to that being scrapped for a broader rate of “commercially reasonable amount” for arbitration. 

Jessica Altman, the commissioner of the Pennsylvania Insurance Department, said these policies, and addressing balance billing generally, run into another significant challenge at the state level: Who's in charge? 

States operate under a less-than-modern regulatory apparatus in which oversight is often quite split. In Pennsylvania, Altman’s office regulates insurance only, while physicians would be monitored by another state agency and hospitals by a third. 

While those other groups haven’t traditionally been involved in payment, and more in care delivery and patient safety, deciding who’s best to oversee a balance billing initiative becomes more complicated as more regulators get involved, Altman said. 

“When you’re trying to fit a construct to address this problem, there isn’t a natural home,” she said. 

RELATED: Insurers, hospitals diverge on how Congress should address surprise medical bills 

Though the experts warned against a one-size-fits-all approach to this issue at the federal level, both Beyer and Altman said there are clear pain points where the feds can and should intervene. Preventing surprise bills for air ambulances is a near-impossible task at the state level, they said, as Federal Aviation Administration rules preempt state lawmaking. 

Beyer added than banning surprise bills in emergency care nationwide would also be a valuable step from Congress, as some consumers may end up going to an out-of-state emergency room unexpectedly and incurring big bills as a result. 

States are also hampered by the Employee Retirement Income Security Act, which preempts most state-level regulation of self-insured plans. Federal steps to ease those burdens could also broaden the options states have to address surprise bills, the experts said. 

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