October 21, 2016

Solutions to Surprise Bills Probed by White Paper

A new white paper from the Schaeffer Center for Health Policy and Economics at Brookings Institute aims at solutions to surprise medical bills.

At an Oct. 13 briefing coinciding with the paper’s release, various stakeholders, assembled by the center and representing insurance, hospital, provider and consumer perspectives, acknowledged the complexities of the problem and agreed that no simple solution exists.

Nonresident Senior Fellow Mark Hall and co-authors Paul Ginsburg, the Center’s Leonard D. Schaeffer chair in health studies, and Steven M. Lieberman, a non-resident fellow, argued for change within existing market structures and rules to address the issue.

Among their main recommendations are federal action, increased transparency, dispute resolution approaches to fairly compensate non-participating providers and measures to hold patients financially harmless from additional out-of-network costs. They called for federal action in the form of using a certain percentage of Medicare rates to cap out-of-network billings for emergency services or legislation to allow states to create alternative measures adhering to federal standards.

Their paper correctly argued that state enactment “provides the greatest room in adapting to local market conditions and for continuing to try different approaches.” In some states, insurers are required to allow the full usual and customary rate for out-of-network coverage, but due to the preemption of state law by the federal Employee Retirement Income Security Act of 1974 (ERISA), health plans offered by self-funded employers can set their own benchmarks, sometimes with rates as low as 110 percent of Medicare. At this time, without federal action, self-funded plans are not subject to the same state mandated requirements, thereby creating a disparity in the ability of state regulators to enforce reforms.

Though the authors also correctly identified the main differences between proposed solutions to this issue, they failed to address some important provider concerns. They suggest having hospitals require contracting hospital-based specialists join the same primary health plan networks as the hospital. But hospitals already put pressure on providers to join such networks. Coercive contracting can be a real challenge for hospital-based providers. Moreover, there is competition with other physicians or physician groups seeking contracts with the same hospital. Leaving providers the option to be out-of-network providers is one of the few factors that make the plans more inclined to negotiate for reasonable market rates for physician services.

During a panel discussion, Jeffrey Plagenhoef, MD, president-elect of the American Society of Anesthesiologists, pointed out that his training is in medicine, not medical insurance. “What we have learned is that the problem is not really the surprise bills as much … (as it is) surprises in what insurance covers and doesn’t cover. Specifically, insurance companies are failing to create adequate and readily accessible networks,” he said.

Colin Drozdowski, Anthem Blue Cross Blue Shield vice president of national provider solutions, said the overwhelming majority of physicians want to contract and work with payers, but a smaller subset are physicians who are “seeking to game the system.” What was not mentioned is that out of the overwhelming majority of physicians who want to contract, a subset of physicians is not offered the opportunity to do so. In many markets due to mergers among insurers, the plans have the upper hand in contract negotiations with providers, especially in situations where the plans have a vast share of the regional insurance market.

The paper outlines two basic options for determining how much health plans should pay out-of-network providers: One is to regulate provider rates in surprise situations, the other is to mandate a form of dispute resolution. The paper stresses that a rate regulation approach “would need to be evaluated periodically to determine its market impacts and its fairness to respective parties.”

In its discussion of various dispute resolution approaches, the paper concludes the most efficient method appears to be ‘baseball-style” arbitration, which requires the reviewer to choose one of the two parties’ final offers. But, because of its complexity, the U.S. health care system does not allow for a simple solution to this multifaceted problem.

“It’s a bit of a porridge in the sense that it’s not a single ingredient thing,” first author Hall said.