Editor's note: This article by Tony Mira, president and CEO of Anesthesia Business Consultants, an anesthesia & pain management billing and practice management services company, originally appeared in Anesthesia Business Consultants eAlerts, a free electronic newsletter. Sign-up to receive this newsletter by clicking here.
Illinois is the latest state to attempt to legislate a compromise between the respective interests of the patient, the provider and the health plan. In late November 2010, the Illinois legislature passed House Bill 5085 – which the Illinois Society of Anesthesiologists (ISA), and many others, promptly asked the Governor to veto.
HB 5085 would amend the insurance code for out of network physicians who provide services at an in network hospital or ASC. The bill would allow insurers to pay the physicians at an out of network rate marginally higher than the in-network amount, prohibit balance billing the patient and require the physician to initiate arbitration to collect fair payment from the insurer.
As explained in the Illinois Society's Winter 2011 newsletter, the first salvo was a bill introduced by Senator William R. Haine that would have required physicians practicing at in-network facilities to accept in-network rates without any recourse. The bill died without going to a vote. After some twists and turns, it resurfaced in amended form as HB 5085 and was adopted as Public Act 96-1523 with an effective date of June 1, 2011.
Before the House bill could take effect, and following much back-and-forth with the insurers and the medical associations, including the Illinois State Medical Society and the ISA, Senator Haine brought forward a new bill, SB 72. This version would:
- Apply to "nonparticipating facility based physicians and providers." (Facilities include hospitals and ambulatory surgical centers);
- Limit patients' liability for anesthesiology, radiology, pathology. Neonatology or emergency department services received in a participating network facility to the out-of-pocket costs that they would have incurred if the physicians had been in their health plan's network. A nonparticipating physician would be able to bill the patient only for the applicable copayment and deductible;
- Allow patients to assign their insurance benefits to the non-network physicians. (There would be a very strong incentive to make the assignment, since the patient who rejected assignment in writing could be billed for the physician's full charges.);
- Allow the physician to bill the health plan his/her full charges;
- Require the insurer pay the non-participating network facility-based physician directly, if the patient had assigned his or her claim, and to provide a written explanation of benefits specifying the proposed allowed amount and the applicable deductible, copayment or coinsurance amounts owed by the patient; and
- Allow the insurer the option of:
- Paying the amount billed, or
- Negotiating the amount payable with the non-network physician, and, if negotiations do not resolve the payment dispute within 30 days, or to initiate binding arbitration, from which there is no appeal.
The Illinois State Medical Society has urged the Senate to support SB 72. Upon introduction, it was referred to the Senate Committee on Insurance, which Mr. Haine chairs. The committee will hold a public hearing on the bill on Tuesday, March 1st.
Illinois is one of a number of states that have sought to prevent providers from balance billing patients with whose health plans they do not participate. Texas adopted legislation (HB 2256) in 2009 that gives the patient, rather than the health plan, the option to go to mediation when s/he is balance-billed. Note the difference: arbitration results in a decision. The goal of mediation is to reach agreement, but it may result in impasss—or a realization that the parties only can agree to disagree.
The Texas law allows patients covered by a preferred provider plan (or other non-HMO health benefit plan) to request mediation for an out-of-network claim settlement if two criteria are met: (1) the patient is responsible for a payment greater than $1,000 to a facility-based physician after paying all deductibles, co-payments and coinsurance, and (2) the facility-based physician provided the service in a participating hospital.
The Texas statute requires hospitals and ambulatory surgical centers that use out-of-network anesthesiologists, radiologists and other facility-based physicians to notify patients of the mandatory mediation procedure. Providers must also give patients a list of all facility-based physicians who have privileges at the facility and inform patients that these physicians could bill them for amounts not paid by their insurer. Facility-based physicians must to include information in their bills to enable patients to understand why they are being balance billed. Health insurers are required to disclose the potential for balance billing "in conjunction with issuance or renewal of the plan's insurance policy or evidence of coverage" – and they are also compelled to disclose internal methodologies or data sources used to determine maximum allowable amounts.
Importantly, HB 2256 requires the Texas department of insurance to adopt network adequacy standards to increase the likelihood that patients will receive services from participating physicians. This provision addresses one of medicine's weightiest arguments, i.e., that the onus should be on the insurers to contract with a sufficient number of physicians.
Also in 2009, Louisiana passed legislation similar to Texas HB 2256. The two statutes became building blocks for the Healthcare Balance Billing Disclosure Model Act developed by the National Conference of Insurance Legislators (NCOIL) over the past two years with the intent to "provide states with guidance during 2011 sessions." The model bill will be the object of a final vote at the March 2011 meeting of the NCOIL in Washington, D.C.
As indicated by its title, the model bill addresses the conflicting interests through disclosures to the patient by the facilities, by the physicians and by the heath insurers. It suggests that state legislatures consider "using an existing mediation process or establishing a mediation process to manage disputes that may arise regarding balance bills," but it does not contain any language on who may initiate mediation.
Other states have come up with different solutions, none as drastic as the Illinois legislation. Maryland's is perhaps the most complicated and the most unusual. Until 2010, Maryland was one of the 26 states in which it was illegal for patients to assign their health insurance benefits to out-of-network providers. The bill that became law in 2010 legalized certain assignments of benefits and provided that if an out-of-network hospital-based or on-call physician accepts such assignment, the amount for which the patient will be responsible cannot exceed in-network deductibles or copayments. The insurer is required to pay the out-of-network physician to whom the patient has assigned his benefits no less than either (a) 140% of its average payments to participating physicians for the same covered service or (b) 140% of average non-contracted rates in the same geographic area, whichever is greater.
Colorado law provides that if a managed care organization does not maintain an "adequate" network, then the MCO must arrange for an enrollee to see an out-of-network provider at no greater cost than if the enrollee had been treated by a network provider. In Delaware, all individual and group health insurance policies must provide for medically necessary covered services. If services are not available through the network providers within a reasonable period of time, however, the health plan shall allow a non-network physician or provider and pay an agreed-upon rate.
Still other states, including Florida and West Virginia, only prohibit HMOs as opposed to other MCOs from balance billing patients. In some cases, the prohibition only applies to a single service category, such as ambulance or emergency department services.
Legislation is not the only vehicle for expanding restrictions on balance billing. Several higher-level state courts have decided cases on the basis of a statute interpreted broadly. In early 2010, in JLR Medical Group v. Stein, a Florida appellate court upheld the trial court's ruling that an anesthesiology group could not balance bill certain HMO patients in the face of a state statute that barred attempts to collect money from HMO enrollees "if the provider in good faith knows or should know that the organization is liable." And in the 2008 Prospect Medical Group v. Northridge Emergency Medical Group decision, the California Supreme Court rocked the hospital-based physician community by looking at the overall managed-care statutory scheme and holding the HMO patient harmless although the emergency physicians had no contract with the HMO, stating:
[W]e conclude that billing disputes over emergency medical care must be resolved solely between the emergency room doctors, who are entitled to a reasonable payment for their services, and the HMO, which is obligated to make that payment. A patient who is a member of an HMO may not be injected into the dispute. Emergency room doctors may not bill the patient for the disputed amount.
There we have it—the crux of the issue. Courts, legislators, insurance commissioners and the general public view the patient as the party with the least market power in the three-way arrangement. Many medical organizations contend that removing the patient from the equation interferes with free market rules and "empowers market manipulation by the insurer, primarily because patients will no longer care about [out-of-network] considerations." (ISA Newsletter; see above.) The voices that are winning, however, reason that the patient is in no position to make sure that the anesthesiologist or emergency physician participates with his health plan. Even if full information is posted on the hospital walls, the patient may be unconscious or too ill to exercise his choice of physician. The provider should therefore seek payment from the insurer directly, and neither of these two parties should be able to determine the amount unilaterally. This last concept leads toward objective methods of determining fair or at least "reasonable" payment and perhaps even toward external fee schedules, although no one relishes the idea of negotiating an all-private-payer schedule. Even less appealing, of course, is the prospect of indexing commercial payments to Medicare rates.
Then again, if the Patient Protection and Affordable Care Act survives current repeal efforts, its state-level health insurance exchanges will eventually require such broadly based fee schedules. Predicting the future of federal healthcare reform is much more treacherous than predicting continuing state legislative efforts to immunize insured patients from large and unexpected medical bills. We believe that more states will go in this direction.
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