Surprise medical bills a costly problem for health plans, study says

Surprise, out-of-network bills hurt consumers, but two new studies show these bills undermine competition between health insurance plans and particularly harm plans that are trying to limit costs by offering narrower network products.

Contracted, in-network providers agree to accept discounted reimbursement rates negotiated with health plans, and health plans typically charge patients lower cost-sharing liability for contracted services.

However, 20 percent of emergency department visits and resulting admissions at in-network facilities involved an out-of-network physician, according to the studies published in Health Affairs and The New England Journal of Medicine.

There's also the problem of balance billing beyond emergency physicians.

[Also: Balance billing law working in New York as other states eye program]

Because states play a large role in the regulation of insurance markets and are knowledgeable of the local market, some legislators have suggested that surprise balance billing should be addressed at the state level.

More than a dozen states have enacted various protective measures. But even these states cannot protect more than half of commercially insured consumers due to a federal law known as the Employee Retirement Income Security Act of 1974.

ERISA exempts almost 100 million people in private insurance plans from state regulation because their plans are self-funded by employers.

Surprise balance billing is not substantially less prevalent under self-funded employer plans than under other, commercially insured private plans, Health Affairs said. But removing the patient entirely from the dispute and automatically deeming the service in-network for purposes of cost sharing is essential.

Additionally, there seems to be some consensus among states that regulation should address how much the health plan may owe the provider in surprise out-of-network billing, setting upper and lower bounds, or at least creating a dispute resolution mechanism with similar parameters.

The Affordable Care Act limits the cost sharing that health plans may impose on patients to what they would face at in-network facilities and also limits what health plans, including those that are self-funded, must pay the provider.

[Also: CMS targets balanced billing in proposals for new marketplace guidelines]

The ACA, however, does not limit what emergency-care providers may balance bill patients beyond the amounts that health plans allow.

To fully protect patients, federal law should prohibit any balance billing by providers for emergency services, also including ambulance services, the study said.

In addition, a comprehensive solution should cover a patient's entire treatment after coming to the emergency room, including any care during a hospital admission.

Specifically, the federal government should create a federal default dispute resolution process for self-funded employer plans that also applies to state-regulated issuers unless states opt to create their own process that meets minimum federal standards, the authors said.

Payment standards should also be set by federal law for self-funded health plans and for state-regulated issuers in states that fail to enact their own standards, they said.

According to the report, 9 percent of elective inpatient care at an in-network facility with an in-network lead physician involved an out-of-network ancillary provider. Also, 51 percent of all ambulance rides are out of network.

One 2016 survey reported that 21 percent of insured non-elderly adults have, at some point, received care at a hospital they thought was in-network but were billed by a non-covered physician. Another Kaiser survey from 2015 said that, over the past year, 6 percent of households with insurance had problems paying medical bills stemming from receiving care from an out-of-network provider.

Often this non-network care is provided by physicians in an emergency department and involves an anesthesiologist, pathologist, radiologists, neonatologists or assistant surgeons.

Twitter: @SusanJMorse