By Colleen Becker
Approximately 4 in 10 Americans reported receiving an unexpected medical bill—commonly known as surprise, or balance, billing—in the past 12 months, according to a Kaiser Family Foundation survey.
But what is surprise billing? Although the terms surprise and balance billing are used interchangeably, they have different meanings. Patients receive a surprise bill in a circumstance outside of their control and from a provider not in their insurer’s network. A balance bill happens when the insurance provider pays some, if any, of the charges billed by the provider and the patient gets sent the remainder. These situations often happen together.
For example, let’s say you seek care for a broken limb. You are careful to go to a hospital that is in your health insurance plan’s network. You pay your co-payment and receive an X-ray. Several days or weeks after the visit, you receive a bill for hundreds, if not thousands, of dollars. Unfortunately, even though you were seen at an in-network hospital, the radiologist who read your X-ray was not. You are charged with picking up the difference between what the insurer paid and what the provider charged. This is a surprise balance bill.
Like that scenario, some of the most common ways patients receive balance bills are in situations where they go to an emergency room and unknowingly receive out-of-network services or visits from health care providers without their authorization. A study of insurance claims found that laboratories and specialty providers, such as anesthesiologists, also frequently balance billed.
Several states have explored ways to protect consumers from these surprise bills. Researchers at the Georgetown University Center for Health Insurance Reform (CHIR) assessed states on the comprehensiveness of their consumer protections based on the following indicators:
- Extend protections in both emergency department and in-network hospital settings.
- Apply laws to all types of insurance, including both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).
- Protect consumers both by holding them harmless from costs above their cost-sharing requirement and prohibiting providers from balance billing.
- State-specific method for payment: In general, a state has either a payment standard or a dispute resolution process, or a combination of the two.
As of July 2019, CHIR found that 13 states had comprehensive reforms with consumer protections and an additional 15 states have partial consumer protections. So far, at least 14 states are considering legislation related to surprise billing in the 2020 sessions.
For example, holding consumers harmless from surprise medical bills has gained bipartisan support, but approaches vary.
Some state and federal proposals set a benchmark standard where reimbursement is tied to a reference point—such as the median in-network rate paid within a certain geographic area or as a percentage of current Medicare rates. Others would require an independent resolution process (IDR) where the provider and the health plan submit a proposed amount and an independent arbiter chooses between them. Still other approaches embrace a hybrid of the two.
Pros and cons exist for both strategies. Arguments against a benchmark standard warn, not only is it too difficult to accurately calculate, it would be egregious government overreach. Those that oppose an IDR could say that the process is administratively burdensome and could artificially inflate costs.
Meanwhile, other states are looking to enact consumer protections in situations where surprise bills can be the most costly: during air ambulance rides. According to a recent Government Accountability Office (GAO) analysis of commercial insurance claims processed during 2017, 69% of air ambulance transports were out of network.
Beginning Jan. 1, 2020, a first-in-the-nation California law ends the practice of balance billing among air ambulance providers. Among the biggest challenges to any state law is the federal Airline Deregulation Act of 1978 which prohibits states from regulating air carriers.
Although states are enacting bipartisan solutions, current state laws do not apply to the roughly 60% of privately-insured Americans enrolled in self-insured health plans—the most common among large employers. Self-insured plans are when the employer assumes the financial risk for providing health care benefits to its employees. These plans are regulated by the federal law known as the Employee Retirement Income Security Act (ERISA). Only federal action can protect people against surprise medical bills in plans guarded by ERISA.
NCSL tracks enacted legislation in our Health Innovations Database and will update our members on breaking developments.
Colleen Becker is a senior policy specialist in NCSL's Health Program.