Despite setbacks, health advocates push for solutions to surprise, out-of-network billing

Earlier this year, a physician from Los Altos, Calif., selected an in-network facility and surgeon for his own cardiac procedure. As a health provider himself, he knew to research potential out-of-network insurance charges before his scheduled surgery, and his primary surgeon affirmed he was in the clear.

But, he hadn’t looked up the anesthesiology group, which turned out to be outside of his insurance’s network. Now, his health plan says he’s on the hook for the full $6,000 bill for his anesthesia, and he’s in the midst of fighting the charges.

“It’s upsetting,” the physician told Center for Health Journalism Digital, declining to be named out of privacy concerns. “It’s an additional service that most patients don’t think about. They enter a hospital that’s in-network and just don’t think the possibility exists.”

His situation isn’t uncommon. Earlier this year, Consumers Union found that nearly one in four privately insured Californians have faced surprise medical bills. 

Now that the Affordable Care Act has ensured coverage for millions more Americans, consumer health advocates are increasingly turning their attention to surprise out-of-network billing. These costs typically occur when a patient doesn’t realize an out-of-network physician is assisting in some aspect of their scheduled procedure, even though they’ve selected in-network providers and facilities. As a result, they can be charged the full amount, or the difference between the out-of-network doctor’s charges and what their health plan agrees to pay — an amount that can lead to hundreds, thousands or even tens of thousands of dollars in bills.

That’s worrying to health advocates.

“The point of the ACA is to provide financial security but now there’s a gap where we’re still seeing surprise bills even when patients are doing everything right,” said Anthony Wright, executive director of Health Access California, a consumer health advocacy group, which supported a measure (AB 533) that would have protected patients from surprise out-of-network bills when seeking care at an in-network facility. That bill stalled in the California legislature in September.

System puts 'unreasonable burden' on patients

Dr. Arnold Milstein, a professor of medicine at Stanford University, offers an example of a typical surprise billing scenario that’s become increasingly common since the ACA’s passage:  A patient signs up for an Obamacare exchange plan, enticed by lower premiums in exchange for a more selective provider network. The patient schedules a surgery at an in-network hospital. But, without his knowledge, an out-of-network surgeon is called in to assist, or the anesthesiologist doesn’t participate in the insurance plan. 

“Doctors send out the retail bill, and the insurance company says, ‘You’re not in the network so it’s none of our business,’” he said. “And the usual discounts don’t apply and the patients find themselves having to pay the entire bill because it’s an out-of-network provider.”

Even though the patient has been conscientious about staying in their provider network, they still get a hefty bill, Milstein said, adding that anesthesiologists’ non-negotiated rates can be five times what Medicare pays.

“You’re putting a really unreasonable discovery burden on a sick person,” he said.  

This situation can also arise if a physician is a member of a group that bills collectively. Even though a few doctors in that group might decline to sign up with a particular health plan, the insurer may still list the group itself as an in-network provider. Out-of-date directories can add to the complexity since insurers don’t always immediately notify patients when doctors drop in and out of their networks – something that could be remedied by strengthening those directories and improving communication about in-network providers, Milstein said.  

Health insurance exchanges such as Covered California and the heightened competition they’ve infused into the market are also playing a role. To lower premiums, health plans often cut costs by eliminating certain doctors or hospitals that may charge higher rates or tend to order more tests.

Health plans are on the exchange are “trying to do the right thing by being more selective because that allows people to get a more affordable premium, but they move into it without having systems in place to be able to give consumers instant knowledge of whether a doctor is in their network,” Milstein said.

The results can be financially debilitating, especially for people living paycheck to paycheck, added Wright of Health Access California. “The patient did nothing wrong,” he said. “They followed the rules — they shouldn’t be financially penalized.”

Who should pay for ‘surprise’ bills?

So whose responsibility is it to cover these surprise bills? That difficult question is exactly what made the recent California effort to cut surprise billing so controversial.

The bill that stalled several weeks ago in the California Assembly would have removed the patient from the equation. Under its provisions, patients wouldn’t have to pay out-of-network health providers more than the patient’s regular in-network share of costs, said Tam Ma, policy counsel for Health Access California. At one point, the bill required health plans to pay out-of-network doctors the “average contracted rate” that the plan pays in-network doctors for the same services. Later, the bill was amended to require plans to pay Medicare’s reimbursement rate. If doctors wanted to be paid more, they could appeal through an independent dispute resolution process run by the state’s Department of Managed Health Care.

Using Medicare’s rates isn’t an unreasonable remedy, said Milstein, the Stanford professor. But he said a better solution might be for insurers to pay out-of-network doctors 120 to 130 percent of Medicare rates, since some physicians have trouble making money on Medicare reimbursements alone.

The California legislation faced strong opposition from medical groups who have argued that the problem lies with insurers who refuse to pay what they consider fair market rates for physician services. 

A couple of the biggest complaints were that the bill would have set the payment floor at Medicare rates, which are significantly lower in some instances than commercial rates, according to a California Medical Association spokeswoman. As a result, physicians in rural areas may be less likely to volunteer to be “on-call” for hospital emergency rooms, since Medicare reimbursements in rural areas are significantly lower than commercial rates and Medicare rates in urban areas. Also, the independent review process wasn’t defined sufficiently in the legislation, according to critics.

“In the end, AB 533 would reduce the number of physicians able to provide services to patients,” according to CMA documents arguing against the bill.

On a national level, the American Medical Association’s president has said doctors shouldn’t be forced into negotiations with insurance companies that could lead to unfair payments.

Earlier this year, New York passed similar legislation that protects consumers from surprise out-of-network bills. As Kaiser Health News reported in July, the state’s new law limits a patient’s responsibility to their regular in-network costs, as long as they complete a form that allows the provider to seek payment from their insurer. Insurers and providers can then figure out “surprise bill” payments through an independent dispute resolution process.

In California, the legislature could take up the stalled bill again once it reconvenes in January. 

Until then, the Los Altos physician still fighting his $6,000 bill advises patients to do ample homework before heading to the hospital for elective procedures.

“Explore all of these reimbursement issues directly — do not just listen to the main provider,” he said. “Ask about additional tests or services that may be included.”

[Photo by ResoluteSupportMedia via Flickr.]