How states can take the lead on mitigating surprise out-of-network billing

There are policy options, at the state level, which could help mitigate the costs of surprise out-of-network billing. According to a recent report from the USC-Brookings Schaeffer Initiative for Health Policy, surprise out-of-network costs, such as ambulance transports or care delivered by an out-of-network physician at an in-network hospital, are a huge burden.

If not prohibited by the state’s law, 1 in 5 visits to the emergency department results in a surprise out-of-network bill. And 50% of all ambulance cases involved an out-of-network ride in 2014, according to the report.

“The financial consequences of surprise out-of-network bills can be substantial,” noted the paper. Especially for patients enrolled in HMOs, who can be liable to provide payment for all charges on out-of-network care. 

Just how pricey?

According to data in the report, collected from a large national insurer, out-of-network emergency physicians charged about eight times what Medicare pays for the same service. And a survey of American Society of Anesthesiologists reports that contracted payments to anesthesiologists averaged 350% of the Medicare rates in 2018.

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Plus, the costs can also be high for the physicians who are charging for out-of-network billing. These doctors often end up settling with patients or health plans for payments below what was fully charged. Collecting an out-of-network bill has more administrative hassle, too, according to the report. 

But the problem lies at the hospital level, where it would be more expensive to require its out-of-network physicians to go in network, in turn, making it more expensive for insurers to encourage hospitals to take this approach, the report found. Then, physicians would most likely require higher stipends to compensate for the loss of income.

Therefore, the demand would likely need to come from patients asking that hospitals pay the balance to physicians, which is unlikely as many patients only require these arrangements in an emergency or are not aware of surprise out-of-network charges at all, the report said.

Still, the American Hospital Association (AHA) and several other hospital groups sent a letter (PDF) urging Congress to enact legislation that protects patients from surprise medical payments. 

"The last thing a patient should worry about in a health crisis is an unanticipated medical bill,” AHA President and CEO Rick Pollack said in a statment. "We must protect patients from surprise bills that could unintentionally impact their out-of-pocket costs and undermine the trust and confidence patients have in their caregivers.”

RELATED: Insurer-backed coalition forms to push efforts to stem 'surprise bills'

The Brookings paper sets forth five approaches that individual states need to consider in order to change the current policies surrounding surprise out-of-network billing. 

  • Take the patient out of the equation and require insurers and providers to resolve the problem and payment. 
  • Patients should be made aware of all out-of-network services within a facility before a procedure occurs. 
  • States should limit or ban all billing without prior consent, in writing, from patients. 
  • States have the power to manage enforcement through existing processes for managing licensure and certification and resolving patient disputes. 
  • Due to ERISA—which bars states from regulating self-insured employer health plans—state policy needs to focus on the regulation via health care providers. 

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Brookings suggests a policy setting “billing regulation,” which caps or sets limits on what out-of-network providers can charge patients in surprise situations.

The second approach, “contracting regulation”, makes it impossible for services to be out-of-network when the facility itself is in network. Although if new contracts are formed, facilities will need to be mindful of state kick-back laws and rules about the contracts between healthcare providers and insurers. 

The paper also suggests a billing regulation approach or a hybrid approach, drawing upon billing regulation and contracting regulations. The authors believe either two options could be enacted on the federal level as well, with only a few modifications. 

“If pursuing option No. 1, the federal government could require self-insured (in addition to fully-insured) health plans to hold enrollees harmless for any costs beyond normal in-network cost- sharing amounts associated with surprise out-of-network services,” the paper noted. “If enacting a federal solution, Congress would also have to decide whether to supersede existing state reforms, which range widely in their comprehensiveness and effectiveness.” 

The letter to Congress agreed with the sentiment that federal decisions should be mindful of state regulations and ultimately leave patients out of any payment debates.