Surgeons, patients, and policymakers are concerned about the impact that surprise medical bills have on patients and the patient-physician relationship. The American College of Surgeons (ACS) has advocated for a comprehensive solution that would remove patients from the middle of the payment negotiations between providers and insurers and that requires equitable and coordinated efforts by health care insurers, hospitals, and physicians.
Over the last year, members of Congress have been identifying and debating proposals to eliminate surprise medical bills for out-of-network care. In its advocacy efforts, the ACS has sought to provide policymakers with the physician’s perspective on this issue. Legislation to address surprise medical billing should protect patients, increase insurance plan transparency and accountability, and address narrow and inadequate networks. Furthermore, any solution should not rely on a benchmark payment rate, or rate setting, based on negotiated in-network rates or a percentage of Medicare to pay for out-of-network care. If policymakers do not follow these suggestions in crafting a solution to alleviate surprise medical billing, it could have large-scale ramifications on the health care system. The ACS asserts that a viable solution to the issue of surprise billing must strike a careful balance, allowing physicians and insurers to negotiate a final payment through a fair independent dispute resolution (IDR) process, while protecting patients from surprise medical bills.
Protecting patients by increasing transparency
The ACS has asserted that any legislation to address surprise medical bills should keep patients out of the middle. Patients who require emergency care are particularly at risk of receiving unanticipated medical bills because often they are unable to make informed choices about where they receive care. When receiving emergency care, patients should only be responsible for their in-network cost-sharing amounts. To preclude patients from being burdened with negotiations between insurers and providers, physicians should receive direct payment or assignment of benefits from the insurer. The ACS maintains that although patients should not be responsible beyond their in-network cost-sharing amount, health care plans should be required to work with physicians to ensure fair compensation for the care delivered.
The ACS has asserted that any legislation to address surprise medical bills should keep patients out of the middle.
Too often, despite being diligent about seeking care from in-network providers, patients may find themselves receiving surprise medical bills from physicians who are not in their insurance network. Often, patients have no way of accurately determining in advance which physicians will be involved in their care. Unfortunately, surgeons also are limited in their ability to help patients avoid these unanticipated costs because they are equally unable to accurately predict who might be involved in an episode of care or those individuals’ contract status with specific insurance plans.
To effectively remedy this problem and increase insurance plan transparency, insurers should be required to update their provider directories at least once a month to optimize the accuracy of and usefulness to patients seeking care from in-network physicians. In addition to improving transparency of provider networks, insurers should be required to provide greater transparency with regard to deductibles and required cost-sharing amounts for both in-network and out-of-network care. Any legislative solution that does not address these issues would serve to simply ignore one of the major root causes of surprise medical billing. By making sure insurers are transparent about required cost-sharing amounts for beneficiaries and that provider directories are up-to-date, patients can avoid “unexpected” bills.
Addressing narrow and inadequate networks
Health insurers are taking increasingly drastic steps to offer lower-cost plan options in an effort to attract consumers. Unfortunately, consumers may be unaware that less generous plans have an insufficient number of providers in their networks relative to both the number of covered patients and the lack of breadth in the specialties included in such networks. Insurance plans often choose to offer products with narrow and inadequate networks as a mechanism to manage costs. When consumers sign up for these plans, insurers do not adequately inform them that the provider networks are excessively restrictive, which often results in gaps in their health insurance coverage.
Most physicians prefer to be in-network because it is better for both their patients and their practices, but insurers often control the market, leaving physicians with little room to negotiate. According to the Centers for Medicare & Medicaid Services (CMS), 39 percent of counties in the federally facilitated exchange (FFE) have a single issuer, meaning that 19.8 percent of enrollees have access to only one insurer. Similarly, five states had only one issuer in 2019.1 Because of extreme health plan market dominance, unfettered by applicable and effective antitrust regulation, insurers increasingly are not acting in good faith in contract negotiations, often offering contracts of adhesion, which provide for a “take it or leave it” payment level. Subsequently, if physicians accept this low rate, the following year’s in-network payment rate often drops even lower. However, if physicians elect to not participate in the plan because of in-network rates, then it will become more difficult to attract patients and they will face more administrative burdens.
Insurers have a significant disincentive to create adequate networks because their own costs may be much lower when their covered patients see physicians who are out-of-network. The fact is, insurers can pay these physicians less than in-network physicians or may choose to deny claims outright for out-of-network care. Regardless, it is the patient who ends up with higher deductibles for out-of-network care or, in some cases, does not receive credit toward fulfilling their annual deductible obligations.
As Congress continues to advance legislation on surprise billing, the ACS’ position is that legislation aimed at effectively and permanently remedying surprise billing must address network adequacy. Insurance plans must be mandated to meet minimum standards of network adequacy to include contracting with an adequate number of surgeons, specialist and subspecialist surgeons, emergency physicians, and hospital-based physicians. In addition, Congress should consider geographic and driving distance standards, as well as maximum wait times. Comprehensive oversight and rigorous enforcement of network adequacy will be required from both the federal and state governments to ensure the effectiveness of such requirements.
Proven IDR model
The ACS supports a proven IDR or arbitration model as an effective means of reducing surprise medical bills. The out-of-network law passed in New York State serves as a useful template for federal legislative efforts. New York’s law holds insurers accountable for maintaining adequate networks of physicians and specialists to ensure that patients have greater access to in-network care. The law further establishes reasonable patient benchmarks and an effective IDR mechanism for those circumstances in which the payment offered is in dispute because of factors such as the complexity of the patient’s medical condition or the special expertise required. This law has struck a careful balance among the interests of key health care stakeholders, including physicians, hospitals, and health insurers, and has been successful in protecting patients from large, unexpected medical bills. The ACS is advocating that federal legislative solutions to address unanticipated medical billing be modeled on the New York State law.
The ACS has encouraged key congressional committees to use a fair and equitable IDR process. Demonstrated IDR models encourage the arbitrator to review a range of factors to make their determination. This process brings all parties to the table as equals. Specifics that the arbitrator should consider are as follows:
- Level of training, education, and experience of the physician and the circumstances and complexity of the case
- Individual patient characteristics
- The usual and customary cost of the service (as defined by the 80th percentile of charges for that service in that region) determined by an independent benchmarking database, such as FAIR Health Inc.
- Commercially reasonable amounts for comparable services or items in the same geographic area, which reflect the market value of services provided
- The market share held by the out-of-network health care provider or that of the plan or issuer
- Other economic data, such as previous contracting history
Other stakeholders have voiced concerns that consideration of the 80th percentile of usual and customary costs would lead to increased rates; however, the evidence suggests otherwise. According to a report from the Center on Health Insurance Reforms, Georgetown University McCourt School of Public Policy, Washington, DC, New York’s 2014 Law to Protect Consumers from Surprise Out-of-Network Bills Mostly Working as Intended: Results of a Case Study, the New York IDR model has been effective thus far. This study assesses the implementation of New York’s law five years after enactment and how the law is working for consumers, providers, and insurance company stakeholders. The study found a 13 percent average reduction in physician payments since the law was enacted.2 State regulators also report that the law has not had an inflationary effect on insurers’ annual premium rate filings. Participants in the study further note that, prior to the law, New York health maintenance organizations were required to pay out-of-network physicians’ full billed charges for emergency services when physicians did not agree to a negotiated rate. The IDR process likely has served to reduce those payors’ costs.
The Georgetown report acknowledged that the IDR is not perceived as “a slam dunk for either side.” As of October 2018, IDR decisions have been split approximately evenly between providers and payors, with 618 disputes decided in favor of the health plan and 561 decided in favor of the provider. However, insurers have tended to win most out-of-network emergency services disputes (534−289), whereas providers have won most surprise bill disputes (272−84). The study highlights that observers do believe the legislation has sent a signal to insurers and providers alike to “just be reasonable and work it out amongst yourselves if you can.”2
Unintended consequences of rate setting
While it is important that Congress find a solution to protect patients from surprise medical bills, the ACS has significant concerns with the use of median contracted or in-network rates as a benchmark for paying out-of-network physicians. Setting the payment benchmark at the median contracted rate will expand the disproportionate power that health plans have with physicians and will likely have two major negative consequences:
- For those physicians who want to be part of the health plan’s network, the ability to negotiate a payment rate with the health plan will be unfairly biased toward the insurer.
- For those physicians who are in-network and paid above the median in-network rate, the health plan will have unfettered power to lower the payment rate.
While it is important that Congress find a solution to protect patients from surprise medical bills, the ACS has significant concerns with the use of median contracted or in-network rate as a benchmark for paying out-of-network physicians.
If a physician is in-network and paid in the 80th percentile above the median rate, in the next contract negotiation the health plan could offer the physician the 65th percentile rate with no alternative. The physician would be forced to accept the insurer’s lower offer or go out-of-network and receive the median in-network rate. Insurers have no incentive to negotiate an adequate rate with the physician and could intentionally lower the median rate with each new contract.
Furthermore, setting a benchmark rate could increase consolidation within health care. Providers, having no leverage to negotiate, will have to accept the median rate, be forced out of network, or leave independent practice and become hospital employees. This situation will further drive consolidation. Accepting a federally benchmarked rate, as some stakeholders are advocating, could have a significant impact on the U.S. health care system.
Since the fall of 2018, policymakers have been holding roundtables and hearings, and collecting feedback on surprise billing proposals. Legislators have proposed different solutions to the problem, but members of Congress and the Administration have expressed a clear commitment to addressing the issue.
Sens. Bill Cassidy (R-LA) and Michael Bennet (D-CO) convened a bipartisan working group to develop a legislative proposal. Through their efforts, which included conversations and formal feedback from stakeholders, they developed the Stopping the Outrageous Practice (STOP) of Surprise Medical Bills Act, S. 1531, which would prohibit balance billing for emergency services and certain out-of-network care. Although the legislation includes an IDR process, it also uses a benchmark of insurer-dictated median in-network rates for out-of-network care. Hence, if an insurer offers an unfair payment, the physician could appeal the claim to an IDR. Although the inclusion of an IDR process was a positive step, the legislation contained a restriction that would prevent the independent arbitrator from considering charges from physicians in the same geographic area.
The ACS voiced formal opposition May 17, 2019, to the legislation, which would require arbitrators to use insurance-controlled data rather than an independent benchmarking database. An independent database, such as FAIR Health, which is used successfully in New York, is essential to maintaining the integrity of the arbitration process.3
Shortly after the STOP Surprise Medical Bills Act was introduced, in June 2019 Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) introduced the Lower Health Care Costs Act, S. 1895. Before this legislation was introduced, the ACS provided feedback on ways to reduce health care costs by increasing price transparency and improving value and submitted comments on a draft outline of the HELP Committee bill. The Lower Health Care Costs Act would prohibit balanced billing for emergency services and for out-of-network nonancillary services provided at an in-network facility if no notice is provided to the patient. The legislation took the route of establishing a payment benchmark for out-of-network care at the median in-network rate. The legislation does not contain an independent dispute resolution process. On June 20, the ACS issued a press release opposing the legislation because it would use the insurer-dictated federal payment rate setting as a shortcut to address the root cause of surprise medical billing.4 The HELP Committee approved the bill, but it has yet to reach the Senate floor.
ACS advocacy efforts to oppose rate setting proposals have been successful in ensuring a more robust dialogue regarding the need for an effective and fair IDR process. Having heard the physician community’s concerns about the insurer-friendly Senate proposals, Reps. Raul Ruiz, MD (D-CA); Phil Roe, MD (R-TN); Joseph Morelle (D-NY); Van Taylor (R-TX); Ami Bera, MD (D-CA); Larry Bucshon, MD, FACS (R-IN); Donna Shalala (D-FL); and Brad Wenstrup, DPM (R-OH), introduced legislation, the Protecting People from Surprise Medical Bills Act, H.R. 3502. The ACS supports the framework of this legislation, which is modeled on the effective state law in New York. H.R. 3502 would allow the arbitrator to consider actual charge data for the same service, in the same geographic area, performed by a qualified specialist or subspecialist, that is sourced from a statistically significant and wholly independent benchmarking database such as FAIR Health. Along with support from the health care community, the champions of this legislation have built support for a solution that includes an IDR process, and the legislation has more than 100 cosponsors.
Echoing the actions of the Senate HELP Committee, the House Energy and Commerce Committee developed the No Surprises Act, H.R. 3630, which was included in the Reauthorizing and Extending America’s Community Health (REACH) Act, H.R. 2328. As introduced, the No Surprises Act would prohibit balance billing for emergency services at in-network facilities. The legislation would allow for balance billing for certain out-of-network services if informed consent was received prior to the care being delivered. However, the No Surprises Act would set a benchmark payment rate at the median in-network rate for out-of-network care and does not contain an IDR process.
Because of the dedicated efforts of Representatives Ruiz and Bucshon, House Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Ranking Member Greg Walden (R-OR) agreed to an amendment to the legislation that would establish an IDR process. Although the inclusion of an IDR was a step in the right direction, in its current form the IDR would be almost completely unusable. The legislation includes a threshold for IDR consideration. In 2021, the median contracted rate paid by the insurer would need to exceed $1,250 for a provider to appeal a claim to the IDR. This threshold would be indexed to the inflation measure Consumer Price Index for all Urban Consumers and would increase for subsequent years. Physicians would be unable to batch claims together from the same insurer for the same or similar procedure to meet that $1,250 threshold. On July 17, 2019, the House Energy and Commerce Committee voted the legislation favorably out of committee.
Solutions on the backs of physicians
Although all stakeholders seem to agree that congressional solutions to address surprise medical billing should protect patients, it is unclear whether Congress will be able to arrive at one solution. It is clear, however, that rate setting proposals like the House’s No Surprises Act and the surprise billing provision in the Senate’s Lower Health Care Costs Act save the federal government money—money that would fund the reauthorization of expiring health care programs.
The ACS has significant concerns about advancing a sweeping solution that will have unintended consequences for the health care system in order to pay for other expiring programs.
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that, over the 2019–2029 period, the No Surprises Act would increase revenue by $20.9 billion and reduce direct spending by $1 billion, for a total reduction in the deficit of about $21.9 billion. The CBO acknowledges that most health care services are delivered inside patients’ networks, and more than 80 percent of the estimated budgetary effects of the No Surprises Act would arise from changes to in-network payment rates. The CBO and JCT maintain that if out-of-network care were reimbursed at median in-network rates, payments to providers—inside and outside of networks—would converge around those median rates.5 Similarly, the CBO estimated that the surprise billing provisions of the Lower Health Care Costs Act would save the federal government $24.9 billion over a 10-year period.6
The ACS has concerns about advancing a sweeping solution that will have unintended consequences for the health care system. Accepting a federally benchmarked rate or using rate setting to resolve the issue of surprise billing could have a deleterious effect on all physician payment and open the door to large-scale health care reform. The ACS opposes both the No Surprises Act and the Lower Health Care Costs Act because they contain a one-sided solution to the issue of patients receiving unanticipated medical bills.
What to expect
As 2019 was coming to an end, there was a possibility that surprise billing policy might end up in the end-of-year government funding bill. The ACS wrote to congressional leadership stating that a comprehensive solution should avoid the long-term consequences of setting payment benchmarks, provide a fair and accessible independent dispute resolution process, increase the transparency of insurance plans, address network adequacy, and level the playing field between physicians and insurers. The ACS highlighted its opposition to any solution that uses a payment benchmark at the median in-network rate for out-of-network care.7
As details of the government funding package were coming together, the Senate HELP Committee and the House Energy and Commerce Committee both pushed for Congress to act on surprise billing. On December 9, 2019, Chairman Alexander, Chairman Pallone, and Ranking Member Walden modified the Lower Health Care Costs Act to include an IDR process for claims in which the allowed amount exceeds $750. The agreement would not allow for the batching of claims and restricts how frequently the IDR process can be used. Advocates for the proposal pushed for its inclusion in the government funding bill to pay for other expiring health care programs. The ACS opposed the new proposal, as it continues to use the insurer-dictated median in-network benchmark rate as payment for out-of-network care and contains an unusable and restrictive IDR process.8 The ACS continued to advocate that Congress should not rush a bad solution to offset funding for other end-of year health care programs.
Soon after the bicameral announcement on the Lower Health Care Costs Act, Chairman Neal and Ranking Member Brady announced that the House Ways and Means Committee would exert its jurisdiction over the issue and would craft legislation to address the issue of surprise medical billing. The exact details of the proposal were unavailable at press time; however, the committee laid out a framework that includes an independent, mediated negotiation process to resolve billing disagreements.9 The College appreciates what appears to be congressional willingness to further examine this complex issue.10 Given the congressional dissension on this issue, surprise billing policy was omitted from the end-of-year funding package, H.R. 1865, the Further Consolidated Appropriations Act of 2020. This legislation, which provided funding for government programs for the rest of the fiscal year, also extended some expiring health care programs through May 22.
The timeline for advancing surprise billing legislation at the federal level will likely align with the May 22 deadline. Because health care priorities will need to be addressed before their expiration, Congress likely will enact a broader health care package that contains a surprise billing proposal. The ACS continues to educate members of Congress, particularly individuals who serve on the committees of jurisdiction. Both the House Ways and Means Committee and the House Education and Labor Committee leadership have indicated interest in moving legislation through the committee process.
Until Congress reaches consensus on this issue, the state legislatures likely will continue to address this issue on their own, leaving a patchwork of disparate laws across the nation. For details about state-level legislation, see the November 2019 issue of the Bulletin.11
The ACS continues to engage with policymakers at all levels to encourage a balanced approach to this issue that has significant ramifications for patients and physicians alike.
- Centers for Medicare & Medicaid Services. Data on 2019 individual health insurance market conditions. Available at: www.cms.gov/newsroom/fact-sheets/data-2019-individual-health-insurance-market-conditions. Accessed November 13, 2019.
- Georgetown University Health Policy Institute. New York’s 2014 law to protect consumers from surprise out-of-network bills mostly working as intended: Results of a case study. Available at: https://georgetown.app.box.com/s/6onkj1jaiy3f1618iy7j0gpzdoew2zu9. Accessed November 13, 2019.
- American College of Surgeons. American College of Surgeons opposes the “Stop Surprise Medical Bills” legislation introduced by Senator Cassidy and the bipartisan Senate working group. Available at: facs.org/media/press-releases/2019/surprise051619. Accessed November 13, 2019.
- American College of Surgeons. American College of Surgeons opposes the Lower Health Care Costs Act. Available at: facs.org/media/press-releases/2019/lower062019. Accessed November 13, 2019.
- Congressional Budget Office. Congressional budget cost estimate. H.R. reauthorizing and extending American’s Community Health Act. Available at: www.cbo.gov/system/files/2019-09/hr2328.pdf. Accessed November 13, 2019.
- Congressional Budget Office. Congressional budget cost estimate. S. 1895: Lower Health Care Costs Act. Available at: www.cbo.gov/system/files/2019-07/s1895_0.pdf. Accessed November 13, 2019.
- American College of Surgeons. Comment letter to congressional leaders. December 5, 2019. American College of Surgeons opposes Alexander, Pallone, Walden Surprise Billing Plan. Available at: facs.org/-/media/files/publications/newsscope/1211acs-letter-to-congressional-leadershipsurprise-billing-legislation-12519.ashx. Accessed January 3, 2020.
- American College of Surgeons. American College of Surgeons opposes Alexander, Pallone, Walden Surprise Billing Plan. Available at: facs.org/media/press-releases/2019/surprise-billing120919. Accessed January 2, 2020.
- House Committee on Ways and Means. Ways and Means Committee Surprise Medical Billing Plan. Available at: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/WM%20Surprise%20Billing%20Summary.pdf. Accessed January 2, 2020.
- American College of Surgeons. American College of Surgeons commends Ways and Means exercise of jurisdiction over surprise billing. Available at: facs.org/media/press-releases/2019/surprise-billing121219. Accessed January 2, 2020.
- Sutton J. State legislatures consider surprise billing legislation in 2019. Bull Am Coll Surg. 2019;104(11):35-37. Available at: bulletin.facs.org/2019/11/state-legislatures-consider-surprise-billing-legislation-in-2019/. Accessed November 13, 2019.