Protecting Patients from “Surprise Medical Bills” (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

Group health plans and insurers may offer in-network benefits only (HMO) or both in-network and out-of-network benefits (PPO).  When an insured patient chooses to use an out-of-network provider, they will generally receive a lesser benefit level and be subject to balance billing since the provider has not agreed to a contracted rate.  For an HMO, the patient who chooses to use an out-of-network provider may be held responsible for the entire provider bill.

In some cases, an insured patient may inadvertently receive care from an out-of-network provider.  This may occur as a result of an emergency room visit or care by a provider that the patient does not have any ability to choose (e.g. radiologist, anesthesiologist, surgical assistant) even when an in-network facility is used.  In these cases, the lesser benefit paid by the insurer or group health plan and/or the balance billing by the provider is often a “surprise” to the patient who believed that the care being provided was covered as in-network benefits. The amount that the patient has to pay out-of-pocket as a result of the surprise medical bills is often significant.

According to a 2017 survey, on average:

  • 18% of emergency visits resulted in at least one out-of-network charge
  • 16% of in-network inpatient admissions resulted in at least one out-of-network charge

State Action to Address This Issue

Several states have taken action to protect individuals enrolled in fully-insured health plans from surprise medical bills.  Robust state laws generally include the following features:

  • Broad application – State law protection applies to emergency room, in-network hospital settings and network level cost-sharing to surprise medical bills. In addition, providers are prohibited from balance billing, so they are only able to collect the applicable in-network cost sharing.
  • Payment resolution – The approach for insurers and providers can vary by state. Some states have adopted a payment standard (such as 125% of the Medicare rate) for all surprise medical bills, while others have established a dispute resolution process that insurers and providers can use to settle payment issues.
  • Notice requirements – Insurers are required to provide notices to insured patients summarizing their consumer rights regarding surprise medical bills and give information about where they can file complaints or receive help. Providers are required to include prominent statements regarding surprise medical bills in billing invoices and other written communications to inform patients that they are not liable to pay more than the in-network cost sharing.

Protections in the State of Maryland

Maryland is one state that has adopted a comprehensive approach to surprise medical bills for fully-insured plans. State law provides that HMO enrollees may not be held liable (except for deductibles, coinsurance and copayments) to any health care provider for covered services as defined in the HMO contract, which generally include emergency services and other services provided at an in-network facility and under the direction of an in-network attending physician. This applies to both providers who are contracted with the HMO as well as providers with no such agreement. For non-contracted providers, state law provides payment standards.

For plans subject to Maryland law that offer out-of-network benefits, state law protection is more limited. If the patient and a hospital-based physician (i.e. one who works directly for a hospital or for a private practice group that has a contract with the hospital) or an on-call physician (i.e. a physician who has privileges to work at a hospital) agree to an assignment of benefits, then the insurer pays the doctor directly. In this case, the physician will be paid based on state law and the patient cannot be balance billed. For out-of-network providers other than a hospital-based or on-call physician, the providers may balance bill unless they 1) accept an assignment of benefits and 2) fail to provide a required notice. The notice will inform the patient the provider is not part of the insurer’s network, so the charge may be higher that what the health insurer will pay and the patient may be required to pay the difference in addition to any out-of-network cost sharing. The notice will also state that the physician may charge for services not covered under the health insurance contract and will provide an estimate of the cost of the services and any payment terms that apply. The provider must have a signed statement from the patient as evidence that the notice was provided.

If assignment of benefits is not accepted by the out-of-network provider, or if assignment is accepted and the required notice is provided, then the patient remains responsible for the surprise billing amount. The only recourse in these cases is for the patient to ask the insurer to review the claim for possible additional payment or for the patient or insurer to negotiate with the provider to reduce the out-of-pocket cost.

Possible Federal Legislation

Since many states still do not regulate surprise medical bills and since self-insured ERISA plans are not subject to state insurance law, federal legislative action is necessary to more fully address patients’ exposure to surprise medical bills.

Bills to eliminate surprise billing for patients have been introduced in the Senate and the House of Representatives. They would apply to both fully-insured and self-insured group health plans, as well as individual health insurance policies. They address out-of-network emergency claims and non-emergency services provided by out-of-network providers at in-network hospitals and other facilities. The Senate bill would also apply to air ambulance claims.

These bills would hold patients harmless from surprise medical bills, require group health plans and insurers to cover the out-of-network surprise bill and apply the in-network level of cost sharing, and prohibit out-of-network providers from balance billing on surprise medical bills. Both use the local median in-network rate as the benchmark reimbursement level. The House bill allows providers to appeal the benchmark payment in arbitration, which is an attempt to address the provider community’s opposition to a fixed payment standard.

While there seems to be broad bipartisan support for legislation to end surprise billing, it remains to be seen whether Congress will be able to pass meaningful legislation.

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