The U.S. Congressional Budget Office (CBO) has a new analysis of legislation that would protect patients from surprise medical bills and help settle physician-insurer payment disputes through an arbitration process. CBO found that the bill, which is modeled on New York’s approach to settling balance billing disputes, would increase the federal deficit by “double digit billions” over the next 10 years. Conversely, competing legislation reported out by the House Energy & Commerce and Senate Health, Education, Labor & Pensions (HELP) Committees, which follow a California model, are projected to save an estimated $20 billion over the next decade.

For background on the issue of surprise medical bills and policy approaches to protecting consumers, visit Georgetown CHIR’s new website: https://surprisemedicalbills.chir.georgetown.edu/

Competing Analyses of the Impact of New York’s Law

Georgetown CHIR conducted a study of New York’s balance billing protections earlier this year. At the time, we had limited data about the effect of New York’s law on physician prices and health insurance premiums. However, the insurance company representatives we interviewed had concerns that the law would create incentives for physicians to increase their billed charges, resulting in higher costs for consumers. Data referenced by CBO now suggest they were right to raise those concerns: according to reports, commercial insurers’ payments to New York doctors have increased “as much as 5 percent” in response to New York’s law.

Supporters of Congressman Ruiz’s bill have questioned the CBO’s data and projections, arguing that a recent analysis published by New York’s Department of Financial Services (DFS) found that the law has saved money for consumers. However, as with all data analysis, it is critical to know what your baseline is. In New York’s case, the reported $400 million in savings stem from “emergency services alone.” A likely reason is that prior to enacting its balance billing law, New York had a “hold harmless” law for emergency services:  health plans were required to pay 100 percent of out-of-network doctors’ billed charges if the provider would not agree to a negotiated rate. Thus, the “savings” generated by the law likely stem from the fact that the dispute resolution process uses 80 percent of the usual and customary rate (akin to billed charges) as a benchmark. Not all states have a similar hold harmless requirement, so taking New York’s approach nationwide would be unlikely to reap similar savings.

More troubling, the New York DFS report finds that the majority of disputes over non-emergency “surprise bills” that occur when a patient goes to an in-network hospital and receives services from an out-of-network physician result in a victory for the physician. New York arbitrators deemed the health plan’s payment sufficient in only 13 percent of cases. In its review of a sample of arbitration cases, DFS found that when a decision was rendered in favor of the provider, the charge was up to 50 percent more than the usual and customary rate. If providers keep prevailing at this pace, it is hard not to believe that health care costs – and the premiums New Yorkers pay – will inevitably rise.

New Reports on California Approach Find Increased Network Participation, No Negative Consumer Impacts

While the Ruiz bill, modeled on New York’s approach, is projected to increase health care costs, the Energy & Commerce and Senate HELP committee bills are projected to save taxpayers’ money. Both are modeled to a large degree on California’s approach to settling out-of-network payment disputes. California’s law bans providers from balance billing and requires insurers to remit a minimum payment to providers for out-of-network services. The state also has a voluntary, non-binding dispute resolution process for emergency services, but it is rarely used.

Physicians in California have complained that the three-year-old law gives insurers an advantage in contract negotiations, and raised concerns it could reduce access for patients. But a study published on September 26, 2019 by researchers at Brookings finds significant declines in the amount of out-of-network services delivered at in-network facilities since the law was enacted. This suggests the law is actually encouraging greater network participation on the part of specialties that have been the most egregious sources of surprise medical bills in the past.

Another study, also published on September 26, 2019 by Health Access California, supports the Brookings’ team findings that provider networks have actually broadened, not narrowed, under the new law. The report also finds that consumer complaints to consumer organizations and state insurance regulators about surprise billing have largely been “quelled” in the wake of the law.

Considerations for Federal Policy

No state law can fully protect consumers from the scourge of surprise out-of-network billing, largely because a majority of people with employer-sponsored insurance are in plans solely regulated under a federal law called ERISA. Indeed, the New York report found that almost 20 percent of emergency billing disputes submitted to arbitration were rejected because the patient was in an ERISA-regulated plan. Congress will need to act. Any federal legislation in this area needs to prioritize protections for patients who, through no fault of their own, receive services from an out-of-network provider. But Congress also needs to think about all of us who pay insurance premiums and craft a resolution to provider-payer disputes that does not lead to price inflation.