Stephanie Barak, MD; Ranjana Nawgiri, MD

Health care providers, patients and legislative agencies are disturbed by the impact of surprise billing on patients.

What is surprise billing?

Surprise billing occurs when an insured patient receives care by out-of-network providers. The patient’s insurance company pays part of the bill, and the doctor/hospital will submit a bill called a “balance bill” to the patient for the unpaid services. Although patients seek care in in-network facilities with the assumption that all services are covered, they are not informed that there are doctors and laboratories in the facility that are not in the network. This may occur in emergency situations or during planned surgeries. Not surprisingly, these uncovered and often enormous bills may lead to emotional and financial distress, and doctors and laboratories are made the swindling villains.

Prevalence of surprise billing

The prevalence of surprise billing is high, and it continues to increase. It varies from diagnosis and type of admission.  A retrospective study published in August 2019 in JAMA* described the increase in out-of-network billing for patients with private insurance through one large payor in the Unites States. Out of 13.5 million emergency room admissions at in-network hospitals, the incidence of out-of-network billing increased from 32.3% in 2010 to 42.8 % in 2016. Of 5.5 million inpatient hospital admissions, out-of-network billing increased from 26.3% to 42%.

Why does surprise billing happen?

Narrow or inadequate networks are the root cause of surprise billing and shift the cost of care onto the patient. If a patient cannot find a specialist in the network, he/she has no other option than go out-of-network and risk the consequence of a large surprise bill.

Efforts to limit surprise billing

The patient’s point of view – ban balance/surprise billing
Insured patients feel they should not be hostage to the situation and should have to pay only as much as the copay, deductible or coinsurance as if the provider was in network. If the provider and the insurance cannot agree on the amount covered, they can go to arbitration. Creating robust and adequate networks that cover a wide range of situations would also decrease the need for out-of-network providers.

The physician’s point of view  – fairly compensate physicians for the service provided for the service provided
Until legislation is passed and there is an agreement between insurance companies and providers/health care facilities, it is important to fairly compensate the physicians or laboratories for the services they provide. The College of American  Pathologists has advocated that “a fair market rate should be paid and payment rates to physicians from private payors should not be benchmarked to Medicare. Instead, payments should reflect the market value of the service based on charges and commercial payments for the service for each geographical area where the service is provided.”

Traditionally surprise billing is handled at the state level. However, in recent years and because of increasing media attention, the White House and Congress have been more involved.

Several bills on this very complex issue have been under consideration at the House and the Senate level. One such bill proposed to remove patients from the surprise billing process and requires insurers to pay providers a locally based market rate.  In the Summer and Fall of 2019, key House and Senate committees passed bills that included rate setting provisions using median in-network payment rates.  This would mean that out-of-network services would be paid at the same rate as in-network services.  The disadvantage of this formula is that the insurance companies could then drive down the median in-network rate and this would result in decreased payments for all services, both in-network and out-of-network.  The out-of-network providers would have no control over what they would be paid for their services.

The House legislation included an arbitration (“independent dispute resolution” or IDR) process as an option.  With this provision, either the provider or insurance company could request arbitration if they’re not satisfied with the payment for a service.  This IDR provision had a threshold of $1,250, meaning that the charge for any service would have to be at least $1,250 for the IDR process to be available.  This threshold is too high to benefit pathologists and many other providers since essentially all charges are below $1,250.

In December 2019, a compromise agreement was negotiated between the Chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee and the Chairman and Ranking Member of the House Energy and Commerce (E&C) Committee.  The resulting bill was to be included in the omnibus budget bill at the end of the year. However, negotiations are still ongoing in Congress, and further compromise has yet to be reached.

* Assessment of Out-of-Network Billing for Privately Insured Patients Receiving Care in In-Network Hospitals JAMA Intern Med. 2019;179(11):1543-1550.