Surprise Medical Bill

Last week, the U.S. Department of Health and Human Services released the HHS Secretary’s Report on Addressing Surprise Billing which was required under President Trump’s Executive Order 13877. The Report calls for steps, including Congressional action, to combat surprise billing and promote pricing transparency, with the following principles in mind:

  • Patients receiving emergency care should not be forced to shoulder extra costs billed by a care provider but not covered by their insurer;
  • Patients receiving scheduled care should have information about whether providers are in or out of their network and what costs they may face;
  • Patients should not receive surprise bills from out-of-network providers they did not choose; and
  • Federal healthcare expenditures should not increase.

“Surprise billing” happens when an out-of-network healthcare provider bills a patient for the difference between what the patient’s health coverage reimbursed and what the provider originally charged and the care was provided in either an emergency situation or a non-emergent situation where there was no realistic opportunity for the patient to know that care was being provided by an out-of-network provider. Research shows that 41 percent of insured adults nationwide were surprised by a medical bill in the past two years alone, and that two thirds of adults worry about their ability to afford an unexpected medical bill.

There are several main scenarios in which a surprise out-of-network bill occurs. The first is when a person receives care in an in-network hospital that uses an out-of-network private staffing firm to staff its emergency department. The second surprise billing scenario happens when a patient schedules a visit to an in-network facility but one or more of the ancillary providers of care (such as the anesthesiologist, pathologist or surgical assistant) is out-of-network. The Report also specifically calls out air ambulance services, which can be quite expensive and over 60 percent of which are out-of-network.

While some may argue that the regulation of the health insurance business should be left to the states, the Report points out that roughly 61 percent of workers with employer-sponsored health insurance are enrolled in self-insured ERISA plans (which are regulated by the federal government rather than the states). Additionally, under the Airline Deregulation Act of 1978, those expensive air ambulance flights mentioned above are exclusively the responsibility of the federal government under the purview of the FAA.

As of April 2020, 29 states have taken some action to address surprise billing, but legislation varies in scope and results have been limited.

To date, there are several bills at various stages pending in Congress but none has been passed. While they have much in common, they differ in how disputes between insurance plans and providers are resolved and how the level of payment is set when a surprise bill occurs. Only one establishes a dispute resolution process for instances when uninsured individuals who receive prospective estimates for the costs of services are then billed for charges “substantially in excess” of that estimate.

Two proposed solutions to surprise billing mentioned in the Report are rate-setting and independent dispute resolution (IDR). Rate-setting would involve the federal government setting a rate based on an average price for a service in a local geographical area. IDR (or arbitration), would require the insurer and the healthcare provider to make an offer on an appropriate payment, and an arbitrator would decide which is reasonable.

Detractors argue that both of these approaches ultimately amount to price control that will lead to shortages, particularly in areas where services are already scarce. While opposition to surprise-bill-control legislation has been loud, it should not go without notice that the two largest physician staffing firms happen to be owned by private equity firms who together have spent approximately $58 million on television and radio commercials and nearly $1 million on Facebook ads since last summer in order to influence the surprise billing debate.

For his part, HHS Secretary Alex Azar had this to say: “Americans have the right to know what a healthcare service is going to cost before they receive it. President Trump and his administration have done their part to deliver historic transparency around the prices of many procedures. Now it’s time for Congress to do what we all agree is necessary: combat surprise billing with an approach that puts patients in control and benefits all Americans.”