Texas fines Humana $700K for network inadequacy, underscoring complexities of surprise billing

Humana building
The fine came months after the Texas Department of Insurance learned that Humana canceled network contracts with anesthesiologists in three of the most-populated counties in Texas. (Humana)

Texas regulators fined Humana $700,000 for network adequacy deficiencies, an unusual step that could signal state regulators are more willing to wade into concerns about surprise billing.

The fine came months after the Texas Department of Insurance (TDI) learned that Humana canceled network contracts with anesthesiologists in three of the most-populated counties in Texas. That dispute meant customers couldn’t get anesthesiology services at 20 hospitals and surgical centers in the state's three largest metro areas, according to TDI’s announcement.

Beyond just focusing on narrow networks, Insurance Commissioner Kent Sullivan pointed specifically to concerns about surprise billing.

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“Protecting consumers from balance bills was a priority in this case, and we’ve done that,” Sullivan said. “Humana has agreed to process these as in-network claims. Not one Humana consumer will pay extra because of this network issue.”

It’s unusual for states to fine insurers over network adequacy issues, said Mark Hall is a nonresident senior fellow in the economic studies program at the Brookings Institution and director of the Health Law and Policy Program at Wake Forest University's School of Law. Most state regulators field consumer complaints and then address those issues directly with the insurers.

It’s also notable that Sullivan emphasized the connection between network adequacy and surprise billing, he added. Hall co-authored a paper (PDF) last year urging for a “layered approached” to network adequacy regulations.

“There needs to be some way to hash out whether the insurer is making a good enough effort to negotiate, or the provider is insisting on an unreasonable rate,” he said.

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Texas regulators placed the blame on Humana in this particular instance. According to the consent agreement, the insurer failed to apply for a waiver showing the providers refused a contract or offered unreasonable terms.

That’s the other side of the coin, particularly in anesthesiology where just one provider group can have leverage exorbitant rates. That particular situation is playing out in a ongoing dispute between UnitedHealthcare and Envision where the insurer said the emergency department staffing company is asking for rates 600% above Medicare.

“At some point, it’s important to look at a blended solution to the two problems,” Hall said.