North Carolina Coalition for Fiscal Health Executive Director Michael Kraskin chats about surprise billing with Katherine Restrepo, Director of Health Care Policy at the conservative John Locke Foundation, and Brendan Riley, Health Policy Analyst for the left-leaning North Carolina Justice Center.
Katherine Restrepo, Michael Kraskin, and Brendan Riley
Surprise billing or a “balance bill” has been a hot topic of conversation in the healthcare world. It refers to a bill that out-of-network hospitals and providers send to patients for the difference between what the insurance pays, and what a provider charges. These bills can reach high amounts, which the patient must pay for out-of-pocket. Since it is often unexpected, it is commonly called a surprise bill.
Michael Kraskin: Welcome to the NC Coalition for Fiscal Health's first ever Healthcare Hot Topic Confab. Joining us today are two of North Carolina's smartest health policy experts to talk about the important topic of surprise billing also known as balance billing. So, surprise billing is briefly defined as an unpleasant bill you weren’t expecting, usually due to having interacted with an out-of-network provider without knowing it. Do you both basically agree?
Katherine Restrepo: Absolutely agree, patients are blindsided by expensive medical bills at no fault of their own.
Brendan Riley: Agreed. The piece focuses on emergency care at hospitals, but I'd add that patients can get surprise bills in other care settings and in non-emergency situations. But it is most common at hospitals.
Katherine: Yes, like for elective surgery.
Brendan: Or ambulance rides!
Michael: Yes, ambulances are a pretty common place to get a surprise bill too.
Katherine: Your surgeon may be in network, but that anesthesiologist might not be.
Brendan: Or an assistant surgeon or radiologist.
Michael: … And as a patient, you have no way of knowing, with so many doctors coming and going. What's the fix here? Should the government step in? Better education of consumers?
Katherine: I think patient education is certainly important. The way NC insurance companies handle surprise billing is that the insurer sends the patient a check for the out of network service, and the patient uses that money to pay the provider. So, patients are still informed about the actual charges. Consumer protections are important in this situation for unexpected situations such as this.
Brendan: The key principle we ought to aim for is getting the patient out of the middle of the problem, which is ultimately a billing/negotiation dispute between providers and insurance companies.
Katherine: These charges are sent after the fact. Like many things in healthcare, patients don't know what the actual cost of care is upfront.
Michael: And the problem for the patient is that often that check doesn’t cover the whole surprise hospital bill!
Brendan: That's right. A lot of these out-of-network providers who are furnishing services at in-network facilities charge way higher than contracted in-network rates -- some billing more than 1000% of Medicare rates.
If your insurer sends you a check for what they are willing to pay based on their own out-of-network fee schedule, you could be stuck with thousands in medical debt.
Katherine: I've heard anecdotal stories of ER groups that charge exorbitantly high rates for services once they've opted out of an in-network contract with an insurer.
Brendan: Absolutely, Katherine! It's a business model for some provider groups.
We’ve got to get creative about the solution -- can't just make EVERY provider in network (otherwise, what's the point of an insurer trying to create a network in the first place?)
Surprise bills are contributing to skyrocketing healthcare costs in North Carolina
Next Up: Narrow Networks
Michael: Katherine, you had put the blame on narrow networks in your great piece last month. Can you talk more about that?
Katherine: Sure. Although North Carolina does have some consumer protections in place for surprise billing situations, it doesn't apply to patients who get health benefits through self-insured companies (over 60% of covered lives in the state).
So, with the rise of narrow networks under the Affordable Care Act, it could become more of a problem. Narrow networks mean fewer choices of providers or healthcare facilities to access care.
Brendan: Hmm, you attribute that to the ACA? I'd say we're seeing networks narrow as a cost-controlling strategy by insurance companies in the individual market, because they can no longer control costs by denying coverage for people's pre-existing conditions. But those non-group market reforms don't necessarily explain the network-narrowing in the large group market.
Katherine: Sure. The rise of narrow networks could expose patients to more surprise bills since not all states have consumer protections for these situations, or they may only be limited to emergency situations.
However, NC does have consumer protections in place for certain surprise billing situations. Blue Cross NC, for example, will send a check for the out-of-network charges to the patient. The patient will then pay that amount to the out-of-network provider(s).
Michael: But that check often doesn’t cover it, right? In many surprise billing situations, the insurer's check is for what they deem fair based on their own out-of-network fee schedule, which doesn't cover the inflated surprise bill. This leaves the consumer stuck with the balance, which, as Brendan said, is often multiple times higher than what it would be in-network.
Brendan: The situation that NC state law was designed to deal with is when patients are forced to go out-of-network for care because there isn't an in-network doc available without unreasonable delay. While it protects consumers from paying out-of-network cost-sharing rates, it doesn't necessarily govern providers' behavior.
Michael: So providers keep costs high.
Brendan: On top of that, in many (if not all) cases, consumers have to file a complaint with their state Department of Insurance to trigger the protection.
What are Possible Solutions?
Michael: Moving on to solutions, what do you think we can do from a policy perspective? Who should be regulated, and how?
Brendan: Well, first we have to recognize that there are a few regulatory schemes involved. Lots of folks are in what we call fully insured plans that are subject to state regulation. NC laws and protections can apply there, but when it comes to folks in plans governed by ERISA (which preempts state regulation), regulation is federal.
In general, I think we need to get consumers out of the middle of this.
Michael: ERISA refers to the Employee Retirement Income Security Act -- "a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans."
Brendan: It's fundamentally a dispute between insurers and providers about money.
Katherine: Brendan brings up a good point about ERISA laws. Self-insured businesses have the option to hold their employees harmless for any surprise medical bills
I'm not sure what the stats are on surprise billing disputes that have been filed by employees that get healthcare benefits through a self-insured employer ... but I did find this article on it and it seems pretty few in CA. Still, not sure what the national trend is on that.
Brendan: I'm not sure we have reason to suspect there is less surprise billing going on in self-insured plans than in fully insured plans. Some studies have looked at claims from large employers and found high rates of surprise medical bills.
Michael: Some have suggested caps on surprise bills, what do you think of that?
Katherine: Interesting. I'd like to see those. Especially considering that high health costs is what keeps large employers up at night.
Brendan: Sure thing -- This post mentions two, though neither solely looked at self-insured plans (but did look at large group market claims).
Michael: The idea would be that the provider can still bill the patient, but there's some control over how much. This would help keep costs from escalating outrageously.
Katherine: I think that consumers should be involved in the dispute. It keeps them informed of the actual cost of care.
Brendan: Let's revisit the emergency scenario:
Patients in these situations aren't always choosing their doctors and have no power to elect an in-network doctor to prevent the out-of-network bill.
There's a fundamental issue of fairness that's being violated. Patients aren't in the driver seat, and even when they do everything right -- make sure to go to an in-network facility and try to see an in-network doctor -- they can still face a major bill that could send them into major debt.
It's a symptom of a broken healthcare system, one that isn't patient-centered.
Katherine: Yes, I agree with you that they are blindsided by the situation. But removing the patient from the entire situation only adds to the problem of our system not being patient-centered.
And that it is no fault of their own.
Surprise bills are contributing to skyrocketing healthcare costs in North Carolina
Pricing and Out-of-Network Costs
Michael: I think you hit the fundamental problem, patients can try to do everything right, and get hit with a huge bill. That's why I'm interested in limiting how big that bill is so that when the insurer sends that check to the patient, it should be enough to cover the cost.
Brendan: Well, leaving them in the middle of it would expose them to the actual *price* of care, which I think we know is very different from the *cost* of care. Prices are a big problem with our healthcare system's costs problem (and therefore its affordability problem).
Which brings us back to Michael's question about capping costs. In my ideal world, the patient doesn't get stuck with this bill -- just their normal in-network cost-sharing for their health insurance plan.
Instead, you have the insurer and the provider settle the bill. That's where a cap on the reimbursement rate may or may not come in. Some states prohibit balance billing, and instead require some sort of mediation or arbitration between the out-of-network provider and the insurer over the final cost.
Michael: Those arbitration costs are going to get passed along in premiums. It's no win. I agree the problem is the price.
Brendan: You don't just want insurers picking up billed charges -- as we've talked about, these costs can be MASSIVE. Way above what is considered usual and customary.
That's not just bad because it's bad for insurance companies' bottom lines, but it's bad because it causes cost inflation for everyone in the form of higher premiums.
Michael: My problem with that is that the insurer didn't do anything wrong either. They would love to have the provider in-network, and are already paying the cost of what it would have been in-network. The problem is that it is, in fact, a surprise.
Brendan: I'm sure in some cases insurers may be excluding providers from their networks, but generally --especially in some of the specialties we've been talking about -- some providers are deliberately staying out of network.
Katherine, do you want to touch on price transparency?
Katherine: Yes. The OON (out-of-network) issue is a reason why SB 629 was introduced last session.
That bill would limit out-of-network charges to a defined benchmark for surprise billing situations (that benchmark being the lesser of a set percentage of what Medicare would reimburse, the actual charges, or a similar regional rate).
Opposition will say that OON providers won't be able to negotiate fairly with an insurance company for out-of-network services. But supporters will say that it's a way to limit overall premium increases, because it limits what out-of-network providers can charge.
Michael: OON providers charging whatever they want certainly limits the incentive to go in-network.
Brendan: Definitely, and that's why we can't just have a universal rule that insurers pay billed charges in these surprise billing scenarios.
But we don't want insurers just paying their UCR (Usual, Customary and Reasonable) and leaving the patient with the balance (as is commonly the practice).
Setting benchmarks for that reimbursement is a positive step to contain those costs and to protect consumers, while still maintaining the incentives to join networks.
Katherine: I'm also thinking, what is the hospital's role in this situation?
Brendan: Good question!
Katherine: Patients should be the center of the healthcare system. I know of some hospitals that take great efforts to ensure that their providers participate with in-network rates to increase overall patient satisfaction.
Brendan: We know hospitals often contract with, rather than directly employ, these ancillary providers, which is part of what leads to insurance network status differences.
And in some cases, it's those firms who develop the notorious reputation for relying on surprise balance bills as a revenue-maximization strategy. (See EmCare in the New York Times profile and Yale study.)
Michael: That New York Times piece is an amazing read. I recommend it to everyone.
Katherine: Same here.
Because of this, some states have developed what we call "notice and disclosure requirements" -- oftentimes written notices given to patients that warm them that they might be treated by an out-of-network provider.
And while I'm all for a more educated patient base, I'm not sure these notices do a lot of good on their own. If patients don't have a choice to elect an in-network provider, does knowing you might see an out-of-network doctor help anything? And do we really need this to be that complicated?
Katherine: It's important for consumers to be as engaged as possible, or have available resources (like notice and disclosure agreements Brendan mentioned).
I think there would be less "surprise bills" if people knew what the actual PRICE of healthcare services are upfront, for more basic and elective surgeries.
Brendan: Time for a plug: In the forthcoming issue of the North Carolina Medical Journal, I've got a piece on whether patients can really shop around for more affordable care. Most of the evidence suggests that even when exposed to tools like price transparency, patient shopping for more affordable providers doesn't happen. We definitely have to deal with healthcare costs by dealing with healthcare *prices*, but I'm not convinced it's by exposing patients to more of those costs.
Katherine: I have to disagree with Brendan. I think having more price transparency for certain health care services like primary care and even elective surgery can go a long way to reduce overall healthcare expenditures.
Direct primary care practices are helping people lower their overall out of pocket healthcare costs, and is helping employers save on healthcare claims, too.
Michael: We'll post a link or excerpt or whatever we can when that comes out, Brendan. And of course, we'll plug Katherine's piece on Surprise Billing as well! Thank you both so much.
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Conversation has been edited for grammatical errors, length, and clarity.