Out of Network / Balance Billing

It is all over the news and social media; out of network, balance billing, surprise billing, or whatever you want to call it. Hundreds and thousands of dollars are being billed to patients for healthcare services. Is this out of network providers, large deductibles, or not in contract? YES!! All of this and so much more.

Arizona addressed this 20 years ago. Todd B. Taylor, MD, FACEP is sharing a few effective arguments used in the debate in Arizona that could be useful to Kentucky.

Legislative Medical Fee Setting (regardless of in or out of network or other purpose):

  • It is unconstitutional. Governments certainly set fees for many health insurance programs (Medicare, Medicaid, etc.). But these are “voluntary” programs, for which you must agree to these fees under contract, i.e. exactly the same as private insurance plans. To force you to accept a specified level of compensation without a contract (i.e. involuntary servitude) is prohibited by the XIII Amendment to the US Constitution:

Amendment XIII
Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
Section 2. Congress shall have power to enforce this article by appropriate legislation.

  • Untoward State Healthcare Program Consequences: If a legislature determines appropriate fees for medical services, then those same levels of reimbursement must also apply to all state programs, i.e. Medicaid. In other words, physicians not contracted with state Medicaid would be eligible to receive 125% Medicare. As a consequence, nearly every ED would cancel their Medicaid contracts. That may, have additional consequences with the federal Medicaid program requirements. There are other nuances to this beyond this discussion.
  • Opens a “Pandora’s Box”: Such fee setting is unprecedented (although often discussed). Assuming it is even constitutional, once you do this for non-contracted emergency care, where does it go next? Do you then limit what Pharmacies can charge for insulin (or any drug), i.e. 125% of Medicare? There are example of where this would force providers to provide these services at below their cost (see argument #1 above).
  • Creates an Unregulated Monopsony (Anti-Competitive): “A market condition in which there is only one buyer. Like a monopoly, a monopsony also has imperfect market conditions.” By setting the fees, the State becomes the de facto “buyer” of these services, i.e. a “monopsony”. Like a monopoly, this creates both toward (control of prices) & untoward market conditions. For example, as noted, insurers no longer have any incentive to contract for services with Emergency Physicians, since 125% of Medicare becomes both the ceiling & floor for ED pro fees & eventually for facility fees as well. This then results in drastic changes in the availability of emergency care & how it is delivered. You think “ED crowding” is bad now . . . . ?
  • ACA largely resolved this issue for patients: ACA requires health plans to cover ED (EMTALA-related) services as in-network (regardless of contract). As such, the patient is only responsible for the in-network co-pay, co-insurance, & deductible. Insurers choose to ignore this fact & have misled many in the process. ACA, of course, does not regulate what insurers must pay non-contracted providers. That is the rub for them, so they want the State Legislatures to solve that issue for them, largely (IMO) because they are too lazy to negotiate in good faith with providers.
  • Ignores the real issues:
    • Hospitals & Emergency Physicians are required by federal EMTALA to care for all comers regardless of their ability (or intention) to pay. One of the consequences is that these providers must make up for all the “no pay” with those who “do pay”. Notice I did not say “can pay”. Many uninsured “can” pay, but choose not to. Likewise, insurance companies “can” pay, but choose to argue about whether they even should and when pushed, argue about how much, often offering less than their typical contracted rate to non-contracted providers.
    • Corollary to the above: EDs & EPs do not get to choose their patients unlike virtually everyone else in healthcare. And do so with no guarantee of payment, even if they are e.g. denial of payment due to medical necessity aka “not an emergency”.
    • The recent adoption of high deductible plans has exacerbated this issue in many ways. Patients who choose such plans must also be held to their own responsibility in doing so.
    • Due to the above, patients often get caught in the middle largely due to insurers failing to do their own due diligence (e.g. adequate network & contracting). Some health insurance plans are simply “defective” at fundamental levels and plans are all too happy to shift this risk onto their beneficiaries. Some of these cases are truly egregious. At least in Arizona at the time, insurers ended up losing on appeal 95% of the time. No wonder they want to get the State Legislature to “fix” their problem (which as noted is really their own lack of due diligence & good-faith negotiation)
    • A lack of transparency: Like a new car sticker price, no one knows what they are likely to have to pay due to an archaic charge master practices caused by Medicare rules. Likewise, insurers build into their contacts a “non-disclosure” provision preventing providers from sharing what their rates are. There can be more than 100% difference is what the same insurer pays for the exact same care even within the same region.
    • A lack of willingness (largely on behalf of insurers) to negotiate in good faith. Partly because it is a lot of work (cost) to contract with every provider. Also, hospitals will contract with insurers for the facility without an expectation that the insurer contract with the medical staff (see above). Hospital may have different incentives to contract vs physician. For example, the volume from any particular insurer may be dramatically different. In my group the hospital’s volume (largely elective admits) for one payer was 10-15%, whereas our ED pro fee billing was less than 2% for that same payer. Was not worth either of our time to contract in that case.
    • There are many other issues, including state-specific & regional. For example, in Arizona in the 1990-early 2000s almost 100% of private insurance was managed care.

Other Effective Tactics: “Turn the Tables”

  • Require private insurance to contract with “any willing provider” in “good faith”. Require arbitration if either party refuses to negotiate.
  • Require insurers to pay 110% of their highest contracted rate to non-par providers (and not just for emergency care). Put another way, if insurers are too “lazy” to contract, the default rate should be BETTER than their highest rate and not some arbitrary “lowball” Medicare percentage. i.e. If they are happy to pay that rate to a contracted provider, why should they balk at paying it to a non-par provider? And since it is higher, there is an incentive to contract.
  • Require insurers to pay ED providers (as above), then collect co-pay, co-insurance, & deductibles from their subscribers. Why? Because patients cannot plan for emergencies & ED providers cannot choose their patients. Everyone else in healthcare gets to plan their visit & collect these fees up-front. You cannot expect me to accept a substantial discount, then make me collect that amount from the patient over which I have almost no leverage (short of placing a lien on their assets).
  • Look at what individual insurer payment percentages are for various segments. For example, what percentage is paid for EP providers vs surgical providers. Overall, emergency care is less than 2% of healthcare costs. EP are a small fraction of that. When you see how small it is, it hardly seem would arguing about. In fact, that is the conclusion health plans reached in Arizona causing them to jointly forward the law passed 20 years ago.

Resource & reference: newsroom.acep.org/2009-01-04-fair-coverage-fact-sheet