CA Surprise Billing Law Cuts Out-of-Network Specialty Visits 17%

September 27, 2019 - Out-of-network specialty visits in California may have declined by 17 percent since implementing AB 72, California’s surprise billing law,  a study by the University of Southern California-Brookings Schaeffer Initiative for Health Policy suggested.

California’s surprise billing law was intended to relieve patients of unexpected financial burdens due to out-of-network costs. The bill says that out-of-network providers must charge patients at in-network rates. Reimbursements are set at either the average contracted rate (ACR) for providers in the region or 125 percent of Medicare’s rate.

The Brookings Institution analyzed over 17.2 million claims before and after the surprise billing law took effect, 10.3 million of which were inpatient and 6.9 million emergency medicine claims. The researchers looked at the FAIR Health’s commercial claims data to aggregate in- and out-of-network utilization of specialty professional services such as anesthesiology, diagnostic radiology, pathology, and more.

Since the surprise billing law went into effect, out-of-network visits declined by 17 percent pre-legislation, the study found. This drop occurred almost entirely in the third quarter of 2017. Pathology dropped the most, dipping from 35 percent to under 30 percent utilization.

In-network services, in contrast, increased from 79.1 to 82.6 percent. On the lower end, in-network diagnostic radiology services rose by 2.2 percent. Pathology and assistant surgery services, however, rose by approximately five percentage points each.

READ MORE: Anthem, CA Providers Dispute Rates After Surprise Medical Bill Law

In general these results demonstrate a possible redirection toward in-network providers that could be motivated, based on the timeline, by the surprise billing law, the Brookings researchers claimed.

The original intent of the bill seems to be coming to fruition, the study says. The appropriate services are seeing a decline in out-of-network costs.

The brunt of the law’s opposition comes from provider organizations like the California Medical Association (CMA), which say that the surprise billing law will lead to narrower provider networks which would decrease patients’ access to care.

And this debate is being seen nationwide.

CMA, the American Medical Association (AMA), and other provider organizations wrote to members of the House of Representatives to express their concern about a federal surprise billing law, holding up California’s bill as a negative example.

READ MORE: CA’s In-Network Providers Increased 16% After Surprise Billing Law

“Physicians and insurers are not incentivized to contract and offer an appropriate network of physicians to ensure access to care,” the organizations wrote. “Insurers are terminating long-standing contracts with physicians or mandating significant rate cuts, and therefore, patient access to physicians is diminishing and patient costs will increase.”

That same month, CMA came out against major payer Anthem for cutting reimbursements to providers in California. CMA said that the move was a direct result of the surprise billing legislation.

However, the Brookings Institution found the claims that provider networks would shrink to be unsubstantiated and potentially false.

Instead, the study seems to indicate that more patients are going to in-network providers and that the law is targeting the populations it intended. With only a 1.7 percent in-network utilization increase, the statistics on emergency medicine seem to reinforce the belief that the surprise billing law was effective. Because emergency medicine was not included in the law, emergency medicine utilization should show little to no change before and after the legislation passed.

Many organizations have studied the California bill, its effects, and the import for national policy. America’s Health Insurance Plans (AHIP) released a study in August 2019 which found that physicians were moving to in-network positions. There were 16 percent more in-network physicians after the surprise billing law passed than prior to it, the study said, and networks either remained the same or grew, but did not diminish as CMA suggested.

READ MORE: Texas Enacts Bill to Protect Consumers from Surprise Billing

Though the Brookings Institution shared AHIP’s conclusions, it criticized the AHIP study’s limited scope. The organization failed to include the number of lives covered by the plans that they studied or the status of these physicians as part-time or full-time and their geographical distribution.

The Brookings Institution warned that its own study cannot be used broadly to represent the effects of surprise medical billing legislation on the state of California, much less the entire country, because FAIR Health is only one payer. It could not represent all payers’ experience. There is also missing information on some of the specialty provider types. Furthermore, the data only covers the 18 months after the law was enacted and looks solely at network breadth.

There were also limitations placed by the restrictions in the law itself, such as who the law applied to and under what circumstances, and the general legal environment of California which differs from many other states.

Rather than make a sweeping statement on the law’s effectiveness and implications on a national level, the Brookings Institution called for more research.

“Without a more thorough analysis, these increases could simply be a byproduct of a broader trend in California,” the researchers concluded. “There is a critical need for additional research to understand the impact of policy on other important factors – including contracted rates and total cost of care – as well as evaluation of longer-term effects.”