Payers, Providers, Lawmakers Debate Surprise Billing Guidelines

March 11, 2019 - State and federal policymakers are still considering various approaches to solve surprise billing issues and compensate out-of-network providers, including mandated values for reimbursement and independent dispute resolution, according to a brief from FAIR Health.

Surprise or balance billing has become a critical issue in healthcare policy debate, FAIR Health stated, with stakeholders working to find the best method for plans paying providers for out-of-network care.

“Policymakers at every level of government and stakeholders throughout the healthcare sector generally agree that insured consumers should be protected from surprise bills when they obtain necessary out-of-network emergency care and when they receive unanticipated out-of-network care,” the brief said.

“But the method for determining appropriate payment by plans to providers for such care is intensely debated. For years the states have acted as legislative ‘laboratories’ crafting solutions to the challenges of protecting consumers from surprise billing.”

While several states, including New York and Connecticut, have passed surprise billing legislation, FAIR Health noted that most state proposals are still in various stages of the legislative process. A recent letter from a bipartisan group of US Senators has also called for federal protection against surprise bills.

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Federal and state policymakers are considering varying approaches to curb surprise billing, including mandating a value for reimbursement based on a clear benchmark.

There are four types of benchmarks that are generally proposed, FAIR Health said.

One method is to use a percentile value based on the range of providers’ charges for a service. This type of benchmark supports flexibility in the level of a payment while still tying the system of payments to local market factors.

“Depending on the program, a percentile benchmark may be the prescribed payment or one of several standards; different laws adopt different percentiles,” the brief said.

“For example, Connecticut prescribes payment for out-of-network emergency services at the highest of three values: (1) the in-network rate (allowed amount) under the member’s plan; (2) usual, customary and reasonable rate for out-of-network emergency services, with UCR officially set at the FAIR Health 80th percentile charge benchmark; or (3) the Medicare reimbursement for the service.”

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Many provider groups have called for adoption of a standard based on providers’ billed charges for a service in a specific geographic area, FAIR Health said. These groups generally support the use of a specific charge benchmark that would reflect the distribution of charges for a service in an area.

The second type of benchmark is based on an allowed amount or in-network standard, which indicates the range of payments negotiated between providers and payers in a specific area for specific services.

FAIR Health added that when considering network compensation as a standard for payment, policymakers should keep in mind those providers who may not fully benefit from this type of benchmark.

“When providers contract with an insurer to participate in a network, the providers benefit from a listing in the payer directory and the opportunity to build practice volume based on the network’s membership,” the brief said.

“It should be noted that for providers who cannot take advantage of that volume opportunity, such as certain hospital-affiliated specialists who tend to be ‘invisible to patients’ and may be called upon by another treating professional, it may be appropriate to recognize the lack of a volume opportunity in determining the fee compensation.”

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Some lawmakers have also proposed a “hybrid” benchmark, which would combine a percentile charge benchmark and a percentile in-network benchmark.

Medicare fee schedule rates have been proposed by policymakers as well, though this type of benchmark could pose issues when applied to general healthcare services.

“In some programs, the Medicare rate schedule has been adopted as the standard for payment, using either the actual Medicare payment amounts in a particular region or some multiple of the Medicare rate,” the brief said.

“Although Medicare rates, which are fixed by the federal government, are accessible and easily adjustable by some percentage, they can present serious challenges when being deployed in the general healthcare market.”

FAIR Health pointed out that because Medicare was established to help pay for care provided to the elderly and disabled patients, it is not designed to support a comprehensive range of medical services, including pregnancy and pediatric care. Medicare rates are also adjusted annually, which may require complicated adjustments to be made to these benchmarks.

Stakeholders have also considered alternatives to mandated standards for out-of-network payments, including independent dispute resolution.

“If stakeholders cannot agree on a specific standard, they may find an independent dispute resolution system, particularly one that involves consideration of relevant clinical and economic factors, a satisfactory alternative,” the brief said.

“Surprise bill consumer protection laws in several states leave the resolution of payment disputes between providers and payers to independent dispute resolution, generally some type of binding arbitration or mediation.”

Finding a solution for surprise billing will require policymakers to consider the options that will work best in specific areas.

“Designing the best solution for every jurisdiction requires a nuanced evaluation of different options and a realistic appreciation of the implications of different legislative paths,” the brief concluded.

“Toward that end, it is critically important to use real-world data, reflecting actual healthcare economics in local markets, as a flashlight to shine in the corners of legislative discussions.”