Wednesday, November 25, 2015

The NAIC takes on balance billing

Of all the dysfunctions of the U.S. healthcare system, perhaps the most egregious (besides leaving tens of millions uninsured) is the "balance billing" of insured patients at in-network hospitals by out-of-network providers.

Elisabeth Rosenthal has documented some particularly extreme examples -- e.g.,  a man who arranged with his orthopedist for neck surgery at an agreed price -- and was billed $117,000 by an out-of-network assisting surgeon. Sarah Kliff found a particularly sharp illustration of the roulette-like character of hospital care, in which two women working for the same employer and having the same insurance gave birth within weeks of each other at the same hospital. One was billed $1600 for an epidural by an out-of-network anesthesiologist who happened to be at work that day; the other (who also had an epidural) was billed nothing.  A Consumers Union survey conducted this past March indicated that 30% of  privately insured Americans received a surprise medical bill in the past two years, with their health plan paying less than expected.

This week, the National Association of Insurance Commissioners (NAIC) adopted a model act for health plan network adequacy that includes some protections for patients faced with balance billing. Such model acts are meant to serve as templates for state legislatures to adapt to local needs and political propensities.

I plan to write about the balance billing section of the model rule in some depth next week. This post is a sketchboard -- and an invitation for anyone with expertise in the area or a personal experience to relate to comment or contact me.

The model act provides pretty complete protection against balance billing for emergency care patients who are treated at an in-network facility. If balance billed, all such patients need to do is forward the bill to their insurer, and their responsibility ends.

The protections for non-emergency patients -- say, someone who schedules an operation with an in-network surgeon and is balance-billed by an attending anesthesiologist, or assisting surgeon, or radiologist, or all of the above -- are less complete. If the balance bill is under a certain threshold, penciled in at $500, the model rule offers no new recourse. That's true regardless of how many bills below the threshold the patient gets (e.g., from said anesthesiologist, radiologist, podiatrist, etc.).

If the bill is more than $500, the patient can forward it to her insurer, who must have a process in place for resolving it. As an opening gambit, the insurer can offer to pay the provider its in-network rate, or the Medicare rate plus a certain percentage (unspecified in the model rule). If the provider does not accept that offer, the two parties either negotiate payment or go to mediation.  If the payment exceeds the in-network rate, it is not clear that the patient will not be held responsible for all or part of the difference.

Among state laws providing balancing billing protections, the model rule's provisions on this front appear to be closest to those of a new Texas law, which also sends balance bills to mediation, but engages the patient in that mediation. It's weaker than a recently passed New York law, which essentially holds the patient harmless for any balance billing at an in-network facility -- as long as the balance-billed patient fills out a form and sends it to his insurer.

Note that state-level balance billing protection is not polarized on a left-right axis, or not entirely. As Claire McAndrew, private insurance program director for Families USA and consumer representative to the NAIC, told me, balance billing "hasn't been an issue of division along party lines. Folks in every party are hearing about this from their constituents. People of all political persuasions are getting hit."  McAndrew pointed out that the National Federation of Independent Businesses -- lead plaintiff in the lawsuit that sought to get the ACA declared unconstitutional -- supports pending legislation in Florida to extend the state's balance billing protections for emergency care, currently available only to HMO patients, to those in EPO and PPO plans.  The chair of the NAIC subcommittee that crafted the model law, J.P. Wieske of the Wisconsin Office of the Commissioner of Insurance, is a Scott Walker appointee.

The uninitiated -- among whom I count myself -- may wonder why balance billing is allowed at all when an insured patient arranges for care with an in-network provider at an in-network facility,  or goes to an in-network facility for emergency care. A very simple rule would be: The rates accepted by the lead caregiver, who's contracted with the patient and is in his insurer's network, apply to all ancillary providers. But that, of course, is not how things work in the U.S.  Responses to the model rule by various physicians' associations make that clear.

Balance-billed patients are pawns in an ongoing price war between insurers and healthcare providers. Balkanized though they are, insurers try to gain pricing leverage by excluding providers who won't accept their payment rates from their networks (insurers claim that they screen for quality, but it's mostly about price). Hence, narrow networks, and hence the growing phenomenon of hospitals that are in a patient's network while large numbers of the doctors roaming the hospital's halls are not.

Physicians' groups accordingly pressed the NAIC to get tough with network adequacy rules, which would effectively drive insurers to pay them more. According to the AMA, "A network that does not provide adequate access to in-network care at contracted hospitals should simply not be sold to consumers." Limiting surprise billing, they claim, will encourage insurers to keep their networks narrow. In their telling, insurers are the behemoths squeezing doctors: a world where the large insurers are merging and provider networks are narrowing, physicians need a level playing field to negotiate a fair contract. A payment standard that falls below market rates, and is not based on independent, out-of-network charge data, will result in a market that cannot work for physicians, and in turn patients.
The AMA and other physician groups pushed for 1) prior approval of networks -- i.e., that insurance departments assess network adequacy before approving a plan for sale; 2) clear quantitative standards to assess network adequacy, and 3) a requirement that the lowest tier in tiered networks (in which patients pay more for providers in higher tiers) meet network adequacy standards.

The AMA's assertion that payment rates should be based on "charge data" was a sticking point in the model rule for the American College of Emergency Physicians. ACEP's requests re the model rule are two-tiered: 1) scrap the balance billing provisions altogether, or 2) if that does't happen, change the benchmarks specified for insurers' initial payment offer when a balance bill is forwarded to them. As written, the benchmarks are either the insurer's in-network rate or a fixed percentage of the Medicare rate (left blank in the model rule, but bound to be more than 100%). ACEP complains that the recently reformed Medicare payment growth formula "involves a lack of growth in payment that would not be acceptable in any other business or industry."

In no other industry, the uninitiated might add, do Americans pay two and three times as much for service as do customers in comparable countries. Be that as it may, ACEP proposes an alternative means to benchmark insurers' balance bill offers:
In determining a proper mechanism for reimbursement, it should be noted that insurers have long advocated the use of usual and customary reimbursement (UCR) schemes. Traditionally, health care providers have questioned the use of UCR because such reimbursement methodologies were lacking in transparency and under the control of insurers who refused to disclose the basis for their calculations. However, as the result of the settlement of litigation in New York, a transparent charge data base now exists that can be used as the basis for determining fair reimbursement. While we would not suggest statutory language specifying that particular data base, we would contend that it or any future competitor that has comparably comprehensive data, quality, independence from the control of either providers or payers, and transparency would give policymakers an ideal mechanism for designating fair reimbursement at an appropriate percentile of the data base...

Health plans opposed to the use of this UCR mechanism have contended that it can be manipulated into an upward spiral. While that seems unlikely given that it would require coordinated manipulation of billions of transactions from a large number of provider entities, policy makers concerned about such an eventuality could resolve it by utilizing the data base as of a date certain and with an appropriate update based on medical inflation. Frankly, insurers mainly seem to oppose UCR because they no longer control it. We see independence and transparency as paramount to ensuring that payment based on statutory mechanisms is to be fair for all parties. 
The model rule does in fact encourage states to experiment with using charge data as a benchmark for settling balance bills. While ACEP complains that the treatment of this possibility is "relegated to a drafting note," that note is prominently placed immediately below the model benchmark:
Drafting Note: Subsection F above proposes that states set a benchmark or benchmarks for payments to non-participating facility-based providers. States can consider a number of options to use as the default reimbursement presumed to be reasonable, including, as provided in Subsection F, using a percentage of the Medicare payment that a state considers appropriate to determine the rate for the same or similar services in the same geographic area as provided in Subsection F and others such as: a) some percentage of a public, independent, database of charges for the same or similar services in the same geographic area; or b) some percentage of usual, customary and reasonable (UCR) charges in the state, if defined in state law or regulation. In setting a benchmark or benchmarks, states should carefully consider the impact on the market. Setting a rate too high or too low may negatively impact the ability of facility-based providers and health carriers to agree on a contract (my emphasis). 
Physicians' groups make no bones about wanting to continue to hold patients hostage in their eternal struggles with insurers. As McAndrew suggested, however, the explosion of balance billing is such an egregious abuse that even U.S. consumers -- and therefore, their elected representatives -- may not long stand for it at its current abusive level. By leaving the patient powerless to obtain wholly in-network coverage, and leaving her exposed to potentially enormous out-of-network costs, balance billing effectively renders insurance illusory.  That's not sustainable.


  1. What I don't understand is the push for insurers to bow to the providers. The consequence will then be increased premiums which consumers will also complain about. There must be some regulation to the extent that providers charge, but the Departments of Insurance do not have that authority.

  2. We may need to have some court cases where medical bills are challenged and nuillified (or at least modified) on consumer protection grounds. So far judges have upheld medical bills on what I guess is a doctrine of implied consent.