Incidents of unexpected medical bills, or invoices that are received by patients with unexpectedly high costs due to receiving out-of-network care, are widespread. This problem has caused some states to pass laws to regulate these high charges. However, there are gaps that can only be filled by federal legislation. Researchers have started to look more closely at situations where unexpected medical bills occur to try and remedy the problem. Stigmas surrounding unexpectedly high medical costs can affect your practice negatively by making it harder to attract the right patients.

In recent years, surprise medical bills have received substantial amounts of attention from the media. In 2014, an in-depth report by Elisabeth Rosenthal of the New York Times outlined stories of several different patients who received unexpectedly high medical bills. In 2015, a blog on Health Affairs was published by two mothers, Layla Parast and Erin Taylor. They shared their experiences of their pregnancies and deliveries to show how one of the mothers received a surprise medical bill while the other one did not. The mothers had the same health plan and received care from the same hospital.

The increased media attention has caused researchers to examine this issue more thoroughly. Paul Ginsburg, the co-author of an October 2016 Brookings Institution white paper and University of Southern California health policy professor, says that they have heard many expressions of concern and incidents that indicate that surprise medical bills are a large problem. According to the University of Chicago, nearly 60% of Americans are surprised by unexpected medical bills.

Christopher Garmon, an economist for the FTC and author of a study on surprise medical bills, began to investigate this issue further with one of his colleagues.

As attention has continued to grow for unexpected medical bills, there has been a drop in the rates of occurrence. Garmen and his coauthor studied data from Truven’s Health MarketScan database and found that 20% of hospital admissions in 2014 resulted in an unexpected medical bill compared to 2007’s 28%. However, according to Garmon, the attention paid to surprise medical bills did not likely influence the rates of occurrence. Instead, he believes the decrease was more due to hospital systems employing more of the doctors.

According to the October 2016 white paper from the Brookings Institution, legislation has been passed by over a dozen states that directly addresses surprise medical bills. The approach taken by most of these states is to cap the amount that can be billed by providers for any out-of-network charges. For example, Maryland legislation requires that HMOs pay out-of-network providers 140% of Medicare rates or 125% at least of what their average in-network rates are. Health plans in California must pay out-of-network providers the highest amount of either 125% of Medicare rates or average contracted rates.

One of the more comprehensive approaches has been taken by New York. The state has a law that prohibits providers from billing patients for any out-of-network charges. However, they can dispute reimbursements that health plans offer. An arbitration process was established by the law where each side can make its own offer. The arbitrator must decide between the two offers. The process has been designed to reduce how many disputes go into arbitration and to produce reasonable offers.

Most state laws regulating unexpected medical bills have been implemented recently. Garmon’s reviewed data does not indicate if the laws are effective. Garmon says it’s too early to tell what the best approach is and that further results from various state laws will be needed to determine the best solution.

Garmon’s study reveals that the rates of occurrence do show regional differences. In 2014, there was a tendency for surprise medical bills to occur more often in states that with large populations, such as Texas, New York, and Florida. Oddly enough, Alaska had the highest rates of occurrences and is one of the least populated of all the states. The lowest rates of occurrence were in Wisconsin, Washington, North Dakota, North Carolina, New Hampshire, Minnesota, and Iowa.

Garmon was unable to explain these variations within rates of occurrences. He said, “We don’t really know and that was something that would need to have further research done on.” Garmon believes further research into the Upper Midwest’s incidents rates may be useful in finding an effective way of dealing with surprise medical bills.

Few patients are protected from surprise medical bills and their high costs. Patients covered by a self-funded employer plan are not protected by states with regulatory legislation.  The Employee Retirement Income Security Act (ERISA) governs these. In addition, state laws may only apply to specific services, certain providers or limited health plans.

According to Ginsburg, the challenges is how to define surprise medical bills. A surprise medical bill is defined by the Kaiser Family Foundation as charges that arise when an insured person receives care from an out-of-network provider. Ginsburg says that comprehensive federal legislation will require more clarification.

Like most state laws, federal law most likely would apply to a combination of radiology, pathology, anesthesiology, and emergency – areas where patients have limited choices in choosing a provider. Placing a cap on out-of-network charges, such as the laws in Maryland and California, would be the most straightforward policy. These caps are applied according to a clearly defined set of services and providers.

If this type of policy is pursued by lawmakers, it could stir up some controversy between providers who want lower caps and those who want higher caps. However, according to Garmon, both sides would benefit. For example, narrow network plans are undermined by surprise medical bills, which results in consumer confidence being eroded. Competition among providers that are part of a narrow network plan is also discouraged.

Call us or contact Progressus Revenue for more information about our medical billing strategies, practice management solutions and ancillary care programs.