In Congress and state legislatures across the country, policymakers are debating fixes to surprise medical bills. These bills often arise when consumers unexpectedly receive out-of-network care, either in an emergency or while undergoing treatment at an in-network facility. When an insurer and provider don’t have an existing contract, the insurer might pay less than the provider asks for, and the provider may send the consumer a bill for the remainder. These “balance bills” can lead to serious consequences for consumers, who are often on the hook for thousands of dollars. The federal government has yet to enact comprehensive balance billing reforms, but a number of states have taken steps to protect consumers.* One such state is Texas, which last year enacted a new law holding consumers harmless in situations that commonly lead to surprise medical bills. However, Texas’s experience presents a cautionary tale for federal and state policymakers. As with so many health policy issues, the devil lives in the details.

Texas’s Balance Billing Law is Among Strongest in the Country, but was Almost Gutted Due to an Implementation Loophole

After the law’s passage, consumer advocates and others quickly realized that a loophole could render the reforms meaningless for some patients. The law created an exception for circumstances in which a patient voluntarily seeks out-of-network, non-emergency treatment. But how to determine whether a patient voluntarily gives consent is tricky. Too often, patients are not told until they are admitted to the hospital that they might be treated by an out-of-network provider. They’re then often told that if they don’t agree be treated by that provider, they’ll have to reschedule for another time, or at a different facility. Quite often, out-of-network providers are the only providers available on the date and time of a patient’s procedure. In the midst of what may be a mountain of paperwork, and under the emotional, physical and financial stress of receiving a needed medical procedure, patients may sign away their protections against receiving a huge surprise medical bill without realizing that they had another option.

In Texas, advocates and insurers worried that with the “voluntary” exception under the law, providers would simply skirt the ban on balance billing by getting consumers to sign away their rights. Last fall, the Texas Medical Board proposed rules implementing the new law that did just that.

How Regulatory Efforts Undermined the Law’s Intent

Many states’ balance billing laws include provisions to account for when consumers actively choose an out-of-network provider despite the availability of in-network services. Consumers generally make this choice knowing they will pay extra, and carving out an exception for these cases can ensure that provider networks remain a guardrail for managing care and controlling costs.

Under the medical board’s proposed regulation, this small carve-out would have become a gaping hole in Texas’s balance billing protections, creating opportunities to circumvent the law’s requirements whenever a consumer receives out-of-network care for non-emergency services, even if they didn’t knowingly go to an out-of-network provider. While the proposed rules were ultimately withdrawn after an outcry from consumer advocates, state lawmakers, and the Lieutenant Governor, it’s worth considering their implications as a lesson for policymakers in Congress and in other states considering similar language.

Under New Rules, Consumers Have Additional Safeguards, but Gaps Remain

Since the medical board withdrew its proposed rules, the Texas Department of Insurance has adopted emergency rules and proposed rules on a more permanent basis that address the law’s voluntary out-of-network care exception without significantly widening the loophole. The insurance department’s rules, unlike the medical board’s proposal, require that enrollees have “meaningful choice” between in-network providers and an out-of-network option.

Under the insurance department’s rules, consumers must have the option of an available in-network physician to perform the service in order for the out-of-network provider to be considered their “choice.” This is in stark contrast to the medical board’s proposed rule, which would have allowed the hospital or out-of-network physician to give the patient a form to sign that waives their protections against out-of-network surprise medical bills regardless of their access to or knowledge of in-network providers.

To be sure, the new rules could still present problems for patients. While the “meaningful choice” requirement is more protective than the previous rules, presenting a patient with waivers that protect a provider’s right to balance bill while he or she is experiencing the pain and stress of being sick or injured creates a power dynamic that tilts heavily towards the provider.

Not a Lone Star – Problems with Notice and Consent Arise in Other States, at the Federal Level

The situation in Texas is not unique. Last year, for example, Colorado and New Mexico enacted legislation to protect consumers from surprise out-of-network medical bills that carve out an exception for consumers who voluntarily choose to receive care from an out-of-network provider, potentially creating a similar Texas-style loophole for patients. Three of the major bills currently under deliberation in Congress contain a notice and consent provision. While two of these include a requirement to provide consumers with a list of in-network facilities or practitioners who could provide the same services in certain situations, the other bill may enable providers to continue to balance bill if they get “consent,” even when the patient has little realistic choice of an in-network provider.

Balancing Cost Containment with Consumer Protections

Networks are a critical tool for controlling health care costs. But accounting for consumers who choose to pay more to get around network constraints without harming consumers who don’t have a choice is a difficult needle to thread. Unfortunately, the primary method for drawing this distinction is one form among many other documents given to people at what can be one of the most vulnerable times of their lives.

Policymakers continue to struggle with how to best guard against surprise billing while acknowledging the importance of plan networks at both the state and federal level. To protect consumers, notice and consent exceptions should, for example:

• Give patients sufficient lead time to consider their options, and reschedule or seek care at a different facility, if needed.
• Require that notices be written in plain language, include a good-faith estimate of the patient’s out-of-pocket costs for the entire treatment episode, and not be delivered in the midst of other required paperwork.
• Not apply if there is no in-network physician available to deliver the service on the date and time of the scheduled procedure.
• Prohibit potential coercion, such as cancellation fees or refusal to treat without the patient’s consent to receive out-of-network services.

Furthermore, hospitals that choose to allow out-of-network physicians to practice within their facilities should be required to support “patient navigators,” non-biased consumer-support personnel who can explain to patients the financial risks of consenting to out-of-network care.

 

*Only federal law can establish balance billing protections that apply to self-funded employer-sponsored insurance.

**Texas’s balance billing protections do not apply to self-funded employer plans. The hold harmless provision only applies to members of HMOs and EPOs. See more information here.