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Discussing Approaches to Curbing Surprise Medical Bills

Patients receive surprise medical bills when they seek care at an in-network hospital, but receive treatment or services from an out-of-network provider, ambulance, or facility. When this happens, insurers pay the in-network rate, and physicians bill the patient for the difference, referred to as “balance billing.” At a recent Bipartisan Policy Center event, policy experts from think tanks and stakeholders representing hospitals, nurses, and insurers discussed the different legislative approaches under consideration by Congress to protect patients from surprise billing. While there was a strong consensus among the approaches and panelists to excuse consumers from these balance billing charges, there was less agreement about at what level to pay the out-of-network providers and whether to allow arbitration. Panelists discussed the impact of these approaches on stakeholders.

American health care prices are higher than ever, but consumers rarely feel it more viscerally than when they receive surprise medical bills. Patient stories reported by Kaiser Health News and NPR, Vox, and even a member of Congress have elevated the issue over the past two years to the top of the agenda for both Congress and the Trump administration. Congress is currently discussing several bipartisan proposals, included in larger health care proposals, designed to protect patients and prohibit surprise bills. Lawmakers, hospitals, payers including insurers, and out-of-network providers all agree that patients should not be on the hook for these out-of-network charges. However, the leading House and Senate bills differ on how to find a payment rate that is acceptable to both payers and providers: an average of what providers are usually paid or “benchmark” payments, arbitration, or benchmark payments with arbitration as a backstop. The Senate previously considered using an in-network guarantee where facilities had to guarantee to patients that all providers they saw would be in-network, but dropped it amid cost concerns

The Bipartisan Policy Center hosted a panel discussion on these approaches. Panelists included Loren Adler, Associate Director of the USC-Brookings Schaeffer Initiative for Health Policy; Garry Brydges, President of the American Association of Nurse Anesthetists; Sabrina Corlette, Research Professor at the Center on Health Insurance Reforms at Georgetown University Health Policy Institute; Benedic Ippolito, Research Fellow in Economic Policy Studies at the American Enterprise Institute (AEI); Kris Haltmeyer, Vice President, Legislative and Regulatory Policy at Blue Cross Blue Shield Association (BCBSA); and Molly Smith, Vice President, Coverage and State Issues Forum at the American Hospital Association (AHA). Marilyn Serafini, director of BPC’s Health Project, moderated the panel.

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Surprise Billing

In considering solutions, it’s important to understand the dynamics that are driving surprise bills. Patients typically receive surprise bills in one of two scenarios. Patients either have an emergency and their hospital, ambulance or provider is out-of-network, or they schedule care at a facility and a provider is unexpectedly out-of-network. During the panel discussion, USC’s Adler called surprise billing the result of a market failure—allowing emergency and ancillary physicians such as pathologists and radiologists to contract independently from facilities with payers means patients lack choice in these two scenarios. Adler’s view is that since patients are unable to choose these providers and these providers have the power to surprise bill, they charge the highest list prices and bill out-of-network charges to patients when compared to peer physicians. He called this pricing “strategic behavior” that also grants these physicians leverage to negotiate higher in-network rates. Surprise billing is a practice limited to a small number of providers and facilities but affects many patients. Sometimes non-physician providers are forced to balance bill due to state licensure and certification restrictions that prevent them from joining insurer networks.

Benchmark payments

One of the most controversial decisions for policymakers has been how—and at what level—to set payments to these out-of-network providers. One approach under consideration on the Hill is setting benchmark payments. The Senate Health, Education, Labor & Pensions (HELP) Committee approved the Lower Health Care Costs Act on June 26, and the bill could be considered by the full Senate this year. The bill contained regulations tying out-of-network charges to a federal benchmark of median in-network rates—what the plan pays providers in-network in the same geographic area for the same service. The Congressional Budget Office (CBO) estimated benchmarking would save $25 billion over the next ten years, more than any other option that they have scored. The House’s Energy & Commerce produced a similar bill before it was revised to add arbitration.

The debate over benchmark payments revolves around whether a chosen benchmark would be satisfactory to all parties and encourage the expansion of insurer networks. America’s Health Insurance Plans, the trade association of health insurance companies, support the benchmark payment approach as they consider median in-network rates fair, but it faces pushback from physicians and hospitals who fear that the benchmark would be too low and lead to narrower networks. Panelist Molly Smith of AHA, for example, said that it would be very easy to get the rate wrong, leading to significant downstream consequences beyond surprise bill claims. Though the benchmark applies only to the out-of-network claims, in-network rates that determine the benchmark would likely be affected as well and provider-payer negotiations would certainly be affected. She, along with other providers, has said that the approach would not capture the multitude of factors involved in payment negotiations such as provider experience or case severity that arbitration could.

Some believe the benchmark payment approach could work if the benchmark was set low enough to contain costs while others state the need for treating all providers the same regardless of the chosen benchmark. Adler and Benedic Ippolito of AEI characterized the median in-network rates in the HELP legislation as too high, “lock[ing] in today’s inflated payment rates” with “potential for gaming” due to how these proposals compute rates on an insurer-specific basis. From the nurse anesthetist point of view, panelist Garry Brydges cautioned that a benchmark system would need to ensure provider parity so all providers would be similarly reimbursed for the same kind of service. His concern is that any solution treats providers equally so they can be a part of insurer networks while remaining competitive.


Binding arbitration is another process to settle payment between insurers and providers. Either party can petition an independent arbiter to reach a final decision on payment amount if negotiations fail. While the panelists said they believed that successful legislation would likely include some form of arbitration to pacify providers, some of them questioned the necessity of arbitration in addition to benchmark payments. Moreover, arbitration proposals are controversial. Some experts say they are concerned the incentive is too great for providers to turn regularly to arbitration in hopes of obtaining a higher payment than designated by the benchmark rate. Some proposals, however, would also make it possible for the provider to receive a lower payment. In “baseball-style” arbitration, the provider and the insurer each submit one price to an independent arbiter who then chooses one of the choices without compromise.

While the Senate currently uses benchmark payments solely in their proposal, the House has added arbitration. The House Energy & Commerce Committee approved a bill that contained an approach of using benchmark payment with a baseball-style arbitration system available for expensive services. Rep. Raul Ruiz (D-CA) spearheaded the addition of the arbitration backstop. The arbiter would be required to consider the median in-network along with clinical severity, provider experience and education, and previous quality and outcome measures of the provider or facility. In the Senate, Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH) have also advocated for baseball-style arbitration. All three policymakers have cited New York’s state legislation as a successful model for their legislation. New York notably did not have benchmark payments, and arbiters used 80th percentile of local billed charges as a decision guideline. Both the proposal on the Senate side and the final Energy & Commerce bill do contain benchmark payments and lack the 80th percentile guideline.

Panelist Sabrina Corlette of Georgetown and Olivia Hope co-authored a case study on New York’s experience under a surprise billing law that used purely baseball-style arbitration in pricing disputes. The study found that both emergency department doctors and insurers initially supported the law, and it did largely protect patients. USC’s Adler noted that, contrary to the theory of baseball-style arbitration wherein use of arbitration decreases over time, in reality, arbitration claims have risen substantially over time and providers have all of a sudden started winning a lot more arbitrations in 2018, implying they’ve found it to be a favorable system. From her experience studying New York and other states’ implementation of surprise bill legislation, Corlette opined that arbitration should require guardrails that would have providers risk being paid less than the benchmark rate in arbitration if triggered. While quite a few states have passed these laws, policymakers and experts still lack much evidence of what impact they’ve had as states are still collecting data on costs, claims, and network coverage.

Hospitals and physicians have taken somewhat different stances on arbitration while insurers generally oppose it. AHA’s Smith, speaking on behalf of hospitals, said that she would prefer sticking to the current system of direct communication between hospitals and payers to resolve out-of-network disputes to arbitration. Hospitals and payers have, in her view, historically used this method successfully for the emergency surprise bills hospitals handle. However, many physicians have supported arbitration instead to have a chance to get payments higher than the median in-network rates. On the other side, Kris Haltmeyer of BCBSA said he worries that providers would exploit the arbitration process and ask for unreasonable prices that would trickle down to consumers through increased premiums. The policy experts from USC-Brookings echoed that point and added that adding arbitration would reduce transparency and add administrative costs, citing the $1 billion cost listed in a CBO draft.

The panelists said that some remaining issues include how federal legislation will deal with existing state legislation tackling surprise billing, surprise bills from air and ground ambulances (only the HELP legislation addresses the former with none dealing with the latter, and a GAO report from 2014 cited that 51 percent of ground ambulance transports were out-of-network), and how to determine in-network rates with some states having limited data. All panelists predicted that surprise billing legislation would pass this year and all other than Haltmeyer said that it was more likely than not that arbitration would be part of the bill.

Batsheva Honig contributed to this post.

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