On December 27, 2020, the No Surprises Act and the Consolidated Appropriations Act of 2021 were signed into law. The No Surprises Act placed limits and procedures for determining costs on certain out-of-network claims, while the other enacted transparency requirements for insurance companies, hospitals, pharmacy benefit managers, and insurance brokers. Both became effective in 2022 with some provisions delayed until 2023.
Balance Billing of Out-of-Network Claims Comes Under Fire
The No Surprises Act put measures in place to prevent exorbitant balance billing by healthcare providers for certain types of claims, including non-network claims such as emergency room, radiology, or pathology services performed by physicians who aren’t in-network but work at in-network hospitals. The law includes a series of steps for negotiating out-of-network claims that could help individual members and health insurance buyers in the long run. Prior to this law, out-of-network providers could balance bill patients for any amounts not paid by their coverage, penalizing patients who had no choice.
Another development in case law set a new precedent for balance billing— a recent Colorado Supreme Court case that sits at the heart of both transparency and the balance billing issue. Lisa French was given a cost estimate of around $1,400 for her portion of a procedure scheduled at the hospital she thought was in her network. After services were rendered, the facility sent her a $300,000 bill letting her know at that time they were not in her plan’s network. Her insurer paid just over $70,000 of the charges and she was billed for the balance, over $200,000.
Ms. French’s attorneys argued the case on “Open Price Term” laws when pricing is not fixed up front. Open Price Terms include an expectation that fees will be “reasonable” after services are rendered. After numerous appeals and publicity, the Colorado Supreme Court agreed with Ms. French that her healthcare providers had not billed her a reasonable fee. They quantified this by using the hospital’s own Medicare and contracted fee schedules, further stating hospitals cannot use a list of fees hidden from consumers. The court ruled that her insurer’s payment was sufficient based on what the hospital accepted from other insurers for the same procedure. Click here to read more about this court case.
We all know the panic that ensues when a hospital and an insurance company decide to walk away from the negotiation table—both parties make big, scary, public announcements and hope that the outcry from the public will cause the other to bow to pressure. At the end of the day, we should realize that having all healthcare providers in the network has a cost. When the medical network is more exclusive and the plan has steerage to hospitals or doctors with better savings, premiums are typically six to eight percent lower.
Perhaps not every provider would need to be in-network if reasonable, alternative pricing methods were readily available for out-of-network claims? Of course, this means that carriers would have to rethink their out-of-network plan deductibles and out-of-pockets to make plans more attractive to buyers.
There are medical plans that don’t use any provider network at all. These options may become more attractive if there’s an ability to limit how much can be billed in the absence of a network. One of those options is called “reference-based pricing,” an equivalent of Medicare cost plus a reasonable percentage. These alternatives have been around for nearly a decade in level-funded or self-funded plans. The downside can be challenges associated with getting some hospitals to accept payments, but good administrators have solutions for addressing this as well as liability after the plan year ends. The No Surprises Act just placed some parameters for billing that will help these programs thrive.
Transparency Laws Mean Greater Access to Price Data
For hospitals, the new transparency rules require that they publish their contracted prices by carrier along with their Medicare and cash prices publicly. Hospitals will also begin giving good faith estimates prior to care when possible, similar to what you get when you talk to a mortgage lender about a loan on a house.
Members armed with procedure codes may be able to review the cost of care at different hospitals and discuss this with their doctors so that planned services can be done cost effectively without sacrificing quality. Although the data available right now is pretty basic, it’s more than members had in the past. What’s really getting attention is the disparity between different insurance carriers, Medicare, and cash prices!
A newer carrier in the marketplace is re-engineering benefits by using the hospital’s cash prices and setting maximum dollar prices per service. Members are encouraged to shop for the best price with a payment reward of the difference between the maximum and cash price. This carrier is not offering the product for small groups with less than 50 yet, but it’s available for large groups and for individual insurance.
How else will the market change to engage members? We expect the insurers to develop more apps, add incentives, create new plans, and introduce advocacy programs in order to equip members to shop around for the best price.
As insurance agents, we have first-hand knowledge of the paradigm shift that needs to take place to drive down the cost of care. Your Cornerstone team is committed to bringing you the latest developments in health benefit strategy. Please contact your Cornerstone broker advisor or director to learn more.
- Article: Colorado Supreme Court rules in favor of woman who was charged $229,000 in hospital bills. https://www.thedenverchannel.com/news/local-news/colorado-supreme-court-rules-in-favor-of-woman-who-was-charged-229-000-in-hospital-bills
- Open Price Term of the Uniform Commercial Code, US Law. See Section 2-305.