As health insurance plans react to rising medical costs by narrowing networks and increasing patient cost-sharing, more patients are receiving unanticipated bills for services they did not realize they received from out-of-network providers. Public concern about such “surprise bills” and their impact on patients’ finances continues to put pressure on state lawmakers to stem the tide. In recent years, several states have passed laws to require insurers to pay a minimum for certain services, limit physician billing in surprise-bill circumstances, increase patient access to mediation for disputes over healthcare bills, and even mandate provider disclosure of costs and coverage for health services — a measure that used to be reserved for insurers.
A. The Rise of Surprise Bills
Since the passage of the Patient Protection and Affordable Care Act (PPACA), the rate of uninsured adults in the United States has dropped significantly. 1 Once a reliable explanation whenever large medical bills loomed, patients’ lack of insurance is no longer a dependable scapegoat for America’s medical bill woes. According to a recent national survey, nearly 62 percent of American adults who had difficulty paying their medical bills in 2015 had health insurance.2 Of those, nearly a third (32 percent) had received care from an out-of-network healthcare provider, and in the majority of those instances (69 percent), the patient did not know he or she was receiving out-of-network care when the services were rendered.3
These “surprise bills” are just one example of a medical billing practice causing headaches for patients and lawmakers alike: balance billing. Balance billing occurs when an out-of-network provider bills the patient directly for the difference between the out-of-network provider’s charges and the insurance company’s allowed payment amount. Sometimes balance bills occur when a patient cannot avoid receiving services from an out-of-network provider, such as in an emergency. Surprise bills, however, are a type of balance billing that occur when a patient seemingly does the right thing to avoid unanticipated charges by seeking care at an in-network provider or facility, but ends up receiving ancillary services from an out-of-network provider in the process. For example, a patient may schedule surgery at an in-network hospital with an in-network surgeon, only to discover after the fact that he/she owes payment to an out-of-network anesthesiologist who assisted in his/her procedure.
B. (Lack of) Federal Law Measures
Despite public outcry over balance billing generally and surprise bills in particular, few federal laws currently address the issue. 4 PPACA included some patient protection against balance billing for emergency services, primarily by requiring commercial insurance plans that cover emergency services to do so (a) without prior authorization, (b) without regard to whether the services are rendered in or out of network, and (c) at a “reasonable” level to discourage providers from balance billing the patient.5Nonetheless, the law stops short of prohibiting providers from balance billing the patient if they have charges outstanding.6 While programs like Medicare and Medicaid limit how participating providers may bill patients, efforts to pass broad national legislation to curb balance billing have not gained traction. In 2015 Congress proposed a bill that would have prohibited balance billing and required providers to disclose their network participation and prices before rendering non-emergent out-of-network services.7The bill never left committee. 8
C. States Take the Lead
Thus, healthcare insurance, services delivery, and billing and payment remain primarily in the hands of state legislatures and regulatory agencies. States may employ a variety of measures to combat balance billing, most of which place the legal burden of preventing or resolving balance bills on the insurer, the provider, or both. The most direct of these is a balance billing prohibition, which explicitly forbids providers from balance billing patients in certain situations (typically those involving surprise bills or bills for emergency services).9 Another method is to require insurers to pay out-of-network providers reasonable rates for their services in certain situations, and to hold patients harmless — i.e., take financial responsibility for — any charges beyond the patient’s typical in-network cost-sharing responsibility for the relevant services. 10 Several states combine these measures with programs that give patients access to an independent arbiter or mediator for disputed charges.11 Such programs provide the parties an opportunity to resolve disagreements over payment before they head to court.
III. Provider Disclosure — A New Frontier
States have long required insurers to disclose coverage details to patients, as evidenced by the plethora of online tools designed to help patients review their policy details, locate in-network providers, and estimate out-of-pocket costs for in-network care. However, these measures do not necessarily prevent surprise bills. Patients who knowingly seek out-of-network services may not realize the cost of those services until it is too late. In surprise-bill situations, there is often a missed opportunity to inform the patient before he/she receives services that one or more of the providers involved is outside his/her network. Accordingly, the legislative response in many states has been to enlist providers in the effort to give patients more information about their care before they receive it.
Some states have limited provider disclosure requirements to certain specific populations. In Maryland, for example, a patient in a PPO plan 12 may be balance-billed for services only if, prior to rendering services, the provider discloses its out-of-network status, provides an estimate of the anticipated charges, and explains that the patient may be responsible for any amount over his/her insurance coverage. 13 As of January 2016, Connecticut law requires providers to give all patients a similar notice regardless of whether or what type of insurance coverage they have.14
Other states have taken provider disclosure requirements further. In July 2016, Florida passed a healthcare transparency law that requires hospitals and ambulatory surgery centers to post their average payment information for services online, along with information regarding financial assistance policies and procedures.15 Such facilities must also notify patients that services may be rendered by physicians who do not participate in their network, and who may bill the patient separately.16 The facilities must make available the names and contact information of the providers with whom they contract, along with information on how to determine whether those providers are in a particular insurance network.17 Both facilities and individual physicians/medical groups must advise patients that they can request a “good faith estimate of reasonably anticipated charges” and must provide such an estimate within seven business days if the patient requests it. 18
New York requires diagnostic treatment centers and health centers serving medically underserved populations to disclose their network participation and a list of the hospitals with which they are affiliated.19 Individual providers and provider groups must notify the patient that he/she may request a cost estimate before rendering services, and must advise the patient that he/she may be billed for the anticipated services. 20 New York also requires physicians to provide the patient with contact information for “any provider scheduled to perform anesthesiology, laboratory, pathology, radiology or assistant surgeon services in connection with care to be provided” at the time they coordinate or refer the patient for care.21 A parallel requirement applies where a physician schedules a patient for services in a hospital.22
The most recent entrant to the provider-disclosure arena is California, which passed a law in September 2016 to address several aspects of out-of-network provider reimbursement.23 Effective July 2017, the law requires providers to obtain a patient’s written consent at least 24 hours in advance of rendering scheduled out-of-network services. 24 The consent document must be separate from consent-to-treatment documents signed by the patient, and the provider him or herself — not the facility or hospital — must obtain the patient’s signature. 25 The consent document must notify the patient that he/she may ask his/her insurer for information regarding in-network care for lower out-of-pocket costs, as well.26 The provider must give the patient a cost estimate for the anticipated services along with the consent form, and may not charge the patient more than the amount in the estimate unless “circumstances arise during delivery of services that were unforeseeable at the time the estimate was given[.]”27 In addition, the provider must caution the patient that, depending on the terms of his/her insurance contract, his/her payment toward the services may or may not contribute to his/her deductible or yearly payment caps.28 The required consent document and estimate must be provided to the patient in his/her spoken language if that language is a “Medi-Cal threshold language” as defined by statute.29
IV. Future Regulation
States’ efforts to require more provider disclosure show no signs of slowing down. New Jersey’s proposed balance billing legislation, for example, would require providers to inform patients when the provider is out-of-network and that the patient may be responsible for payment beyond what the insurer covers.30 Providers would also have to give patients contact information for other providers expected to render ancillary services such as anesthesiology or radiology so that the patient can determine whether those providers are in-network.31 The bill passed the New Jersey Assembly Appropriations Committee in October 2016, and is currently under consideration by the entire state Assembly before it can be sent to the state Senate.32
While it remains to be seen if the New Jersey law will pass, there will certainly be others to take its place as surprise medical bills continue to have a dramatic impact on patient finances.33 State laws addressing surprise bills have traditionally addressed charges after they arise, either by prohibiting providers from balance billing or requiring insurers to pay outstanding charges.34 The states discussed above, however, illustrate a new trend toward requiring providers to warn patients ahead of time that their services might be more expensive than anticipated. While some providers have always made it their business to provide patients with cost estimates, the practice is not universal. Many providers in surprise bill situations — the unexpected out-of-network anesthesiologist, for example — do not have a connection with the patient that makes it easy to communicate coverage or cost details before rendering care. It is in these situations that provider disclosure laws like those in New York or California have the most potential for impact, because they require providers to actively warn patients when surprise bills might be in the offing. Providers have long emphasized that prevention is better than cure when it comes to their patients’ medical woes. They must now be on the lookout for rules requiring them to do the same for their patients’ checkbooks, as well.
Republished with permission. This article was first published in the American Bar Association Health Law Section on November 29, 2016.
Stephanie Marken, U.S. Uninsurance Rate at 11.0%, Lowest in Eight-Year Trend, Gallup (Apr. 7, 2016), available at http://www.gallup.com/poll/190484/uninsured-rate-lowest-eight-year-trend.aspx (“The uninsured rate has declined 6.1 percentage points since the fourth quarter of 2013, which was right before the individual mandate provision of the Affordable Care Act took effect in early 2014 that required Americans to carry health insurance.”); see also Kaiser Family Foundation, Key Facts about the Uninsured Population (Sep. 29, 2016), available at http://kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population/ (“As of the end of 2015, the number of uninsured nonelderly Americans stood at 28.5 million, a decrease of nearly 13 million since 2013.”).
|2||Liz Hamel et al., Kaiser Family Foundation, The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey 1 (Jan. 5, 2016), available at https://kaiserfamilyfoundation.files.wordpress.com/2016/01/8806-the-burden-of -medical-debt-results-from-the-kaiser-family-foundation-new-york-times-medical-bills-survey.pdf .|
Id . at 12.
See, e.g. , Shannon Muchmore, Federal and State Laws Needed to Address Surprise Out-of-network Medical Bills, Modern Healthcare (Oct. 13, 2016), available at http://www.modernhealthcare.com/article/20161013/NEWS/161019947 ; Editorial, Ending the Scourge of Surprise Medical Bills, L.A. Times (July 12, 2016), available at http://www.latimes.com/opinion/editorials/la-ed-surprise-medical-bills-20160711-snap-story.html ; Haley Sweetland Edwards, The Hidden Cost of “Surprise” Medical Bills, Time (March 3, 2016), summary available at http://time.com/4246845/health-care-insurance-suprise-medical-bill/ ; Elisabeth Rosenthal, After Surgery, Surprise $117,000 Medical Bill from Doctor He Didn’t Know, N.Y. Times (Sept. 20, 2014), available at http://www.nytimes.com/2014/09/21/us/drive-by-doctoring-surprise-medical-bills.html .
75 Fed. Reg. 37194 (June 28, 2010); see also Center for Consumer Information and Insurance Oversight, Centers for Medicare & Medicaid Services, Affordable Care Act Implementation FAQs – Set 1, Q15, available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html .
Surprise Billing Act of 2015, H.R. 3770, 114th Cong. (2015).
See Congress.gov, All Actions: H.R. 3770—114th Congress (2015-2016) available at https://www.congress.gov/bill/114th-congress/house-bill/3770/all-actions?overview=closed
For example, Connecticut and Florida both prohibit balance billing by providers for emergency services and in surprise-bill situations. Conn. Gen. Stat. § 20-7f(b); Fla. Stat. §§ 627.64194(5), 641.3154(1)-(2).
For example, Colorado and Illinois require insurers to hold patients harmless for balance bills regarding emergency services and in surprise bill situations. Colo. Stat. §§ 10-16-704(2)(b)(II), (3)(b); Ill. Comp. Stat. § 5/356z.3a.
Limited mediation programs exist in Illinois and Texas. Ill. 5/356z.3a; Tex. Ins. Code § 1467. Both California and Florida have expanded the power and reach of their mediation programs in recent legislation. Cal. AB-72 (2016) §3-4; Fla. HB 221 (2016) § 7.
A preferred provider organization (PPO) insurance plan typically allows patients to see any in-network provider without first getting a referral from their primary care physician. They also provide some level of coverage for out-of-network providers. PPO plans are often contrasted with health management organization (HMO) insurance plans, which employ an enrollee’s primary care physician as a gatekeeper to specialists or advanced care providers, and which typically offer little or no coverage for services from out-of-network providers.
M.D. Code Ins. § 14-205.3(d).
Conn. Gen. Stat. Ann. § 19a-904a(a).
Fla. H.B. 1175 § 1 (2016) (codified at Fla. Stat. § 395.301(1)(a)).
Fla. H.B. 1175 §§ 1, 5 (codified at Fla. Stat. §§ 395.301(1)(a), 456.0575(2)).
N.Y. Pub. Health L. § 24(1).
N.Y. Pub. Health L. § 24(2).
N.Y. Pub. Health L. § 24(3).
N.Y. Pub. Health L. § 24(4).
Cal. AB-72 (2016).
Cal. Health & Safety Code § 1371.9(c)(1); Cal. Insurance Code § 10112.8(c)(1).
Cal. Health & Safety Code § 1371.9(c)(2); Cal. Insurance Code § 10112.8(c)(2).
Cal. Health & Safety Code § 1371.9(c)(4); Cal. Insurance Code § 10112.8(c)(4).
Cal. Health & Safety Code § 1371.9(c)(3); Cal. Insurance Code § 10112.8(c)(3).
Cal. Health & Safety Code § 1371.9(c)(6); Cal. Insurance Code § 10112.8(c)(6).
Cal. Health & Safety Code § 1371.9(c)(5); Cal. Insurance Code § 10112.8(c)(5). The California Department of Health Care Services
(DHCS), which oversees Medi-Cal, published its latest statistical report on threshold languages in May 2014. See DHCS Research and
Analytical Studies Division, Medi-Cal Statistical Brief (May 2014), available at
N.J. A1952 § 5 (2016).
Susan K. Livio, N.J. Lawmakers Try Again to End Surprise Medical Bills, NJ.com (Oct. 27, 2016), available at
While surprise bills represent only a portion of medical bills overall, 44 percent of those who had difficulty paying their medical bills in 2015 reported that the bills had a major impact on their family. Hamel, supra n.2 at 14. Roughly six in ten used most or all of their savings to address outstanding medical bills; over a third found themselves “unable to pay for basic necessities like food, heat, or housing as a result of medical bills,” and nearly the same proportion (31 percent) had problems accessing other healthcare as a result of their medical bill woes. Id. at 15-17.
See, e.g. , supra n.9 and n.10.