Surprise Medical Billing Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

Senate HELP and House Energy and Commerce Committee Announce a New “Surprise Medical Billing” Proposal

Soooo, this past weekend, the Senate HELP and the House Energy and Commerce (E&C) Committee announced a bi-partisan, bi-cameral agreement on a surprise medical billing proposal. As I speculated in prior updates, the proposal calls for a hybrid of a (1) “benchmark” rate up to a specified dollar amount, and then (2) an “arbitration process” for any bills in excess of this magic specified dollar amount. Interestingly, the “magic” specified dollar amount would be $750. This is lower than the E&C Committee’s original hybrid benchmark/arbitration proposal which called for a $1,250 threshold. And, this is considerably lower than the threshold amount that I – and others – have suggested (i.e., we were suggesting $5,000).
- Analysis: BUT, this low dollar threshold is NOT the most controversial part of the proposal. What I mean is this: Although a number of stakeholders are NOT happy about the $750 threshold (because they think it is too LOW), a number of other stakeholders are going NUTS over the arbitration process. Why? Because the HELP/E&C proposal limits the universe of bills that are eligible for arbitration. I will talk more about these “limitations” in the following post. BUT FIRST, let me talk about the $750 benchmark threshold. According to the proposal, if the median negotiated in-network rate for a particular medical service in the geographic area where the medical service was provided is $750 or below, an insurance carrier or a self-insured plan will pay the provider this median negotiated in-network rate. No questions asked, and no arbitration. BUT, I do have a very important question to ask: HOW do you determine what the “median negotiated in-network rate in the geographic area” actually is? A summary of the proposal indicates that it would be a “market-based” rate. But what does that mean? Does this mean that you look at up to say 3 providers in the geographic area, and then you look at the amount of the in-network rate for a particular medical service that is negotiated by ALL of the carriers and self-insured plans operating in the geographic area? Then, you identify the median rate? Maybe so. And if so, HOW do you get the necessary data from the 3 providers and ALL of the carriers and self-insured plans operating in the geographic area to determine what the median rate actually is for a particular medical service? During discussions earlier in the year, Congressional staff considered FAIR Health (a private-sector organization that collects data on health claims) as the data-set that could be used to determine what the “market-based” rate is for a particular medical item or service in a particular geographic area. BUT, a number of folks argued that FAIR Health is NOT a reliable source because, among other things, their data is often times out-dated, or the data-set has too many outliers, or concerns over how FAIR Health could be “gamed.” Soooo, if it is NOT FAIR Health, what is a reliable data-set to use? At this point, I do NOT believe that anyone knows. BUT, what about the recently proposed transparency regulations? Those regulations require EVERY insurance carrier and self-insured plan to publish their negotiated in-network rates for EVERY provider in their plans’ network for EVERY medical item or service covered under the plan on a public website. Viola! A natural data-set that can be used to determine the “median negotiated in-network rate for a particular medical service in a particular geographic area.” BUT, these proposed transparency regulations have to be finalized first. There are a lot of dark clouds forming over the transparency regs. So TBD. One last thing on this magic $750 threshold: It appears that the threshold will be indexed each year to inflation, which grows much slower than health care costs. So, it would appear to me that fewer and fewer bills will be paid at this median negotiated in-network rate over time because more and more of the health claims that produce the surprise bill are going to exceed the $750/indexed to inflation rate. And in cases where the bill exceeds this $750/indexed to inflation rate, you are in the arbitration process.

Senate HELP and House E&C Committee’s Proposal: Limits on the Arbitration Process

Speaking of the arbitration process, I can now explain some of the “limitations” I noted above. According to the proposal, if a surprise bill goes to arbitration – because the bill is above the $750/indexed to inflation benchmark – the arbitrator is limited in the “types” of information he or she can consider when determining the amount an insurance carrier or self-insured plan must pay over to the provider.
- Analysis: This means that if a specific piece of information that an arbitrator may have taken into account in the past is NOT on the list of the “types” of information that is set forth in the HELP/E&C proposal (described below), then this specific piece of information CANNOT be considered. Many have argued that this means that, among other things, “billed charges” and “list prices” CANNOT be taken into account. Also, providers CANNOT argue that they should be paid at a higher rate because they are required to accept lower reimbursements under Medicare and Medicaid. So what “types” of information can be considered? First, the “market-share” of the provider will be considered. Why is this important? Because if a particular provider has significant market-share in a particular geographic area, then the arbitrator can take this into account. And, if there happens to be other providers in the same geographic area – even though their market-share is super small – the final payment that the carrier or the self-insured plan must pay could very well be lower than what the monopolistic provider would otherwise charge, based on what might be considered a more “market-based” rate in the area. This could put a dent in the advantage monopolistic providers have over carriers and self-insured plans operating in the area. However, the huge market-share held by the monopolistic provider could result in a payment amount that is much closer – or the same amount – as the amount the provider originally charged because this provider is arguably charging a “market-based” rate (because this provider “IS” the market). Also, it appears that the “market-share” of the insurance carrier or self-insured plan will be considered. In this case, a provider may be limited in its ability to charge a high amount to a small carrier and especially a small self-insured plan (sponsored by a small- to mid-sized employer). In other words, it seems to me that at least smaller self-insured plans will be afforded some protections from being charged arbitrarily high amounts. We need more detail on this. Another “type” of information that can be taken into account is the training, education, and experience of the provider. In my opinion, this “type” of information is hard to analyze. What I mean is, I would assume that a particular provider that has performed millions of medical procedures would be paid a higher amount relative to a provider who is just starting out in their particular specialty or field of practice. Same goes with training. If a particular provider trained for a period of years alongside a well-renowned medical practitioner, maybe this provider should be paid more than a provider that has only been practicing for a few years. I am not really sure how education is weighed here. I mean, should a provider who went to the University of Chicago Medical School get paid more than a provider that went to the Medical School of Aruba? That seems a bit arbitrary. The third “type” of information is “other extenuating factors such as patient acuity and the complexity of furnishing the medical item or service.” Okay, I get this one. If a patient requires a significant amount of care on account of their condition, a provider should get paid more for the intensity of care. Same with the complexity of furnishing the medical item or service. If a medical procedure or the emergency care provided to a patient is unique and/or requiring specialized services and expertise, then the provider should get paid more for being able to provide such complex, and in some cases life-saving treatment. Again, these are the ONLY “types” of information that an arbitrator can take into account when determining how much of the balance bill an insurance carrier or a self-insured plan should pay a provider. An argument can be made that these “types” of information prevent an arbitrator from inflating amounts that would otherwise be considered “reasonable compensation.”

Senate HELP and House E&C Committee’s Proposal: 90-Day Cooling Off Period

The Senate HELP/E&C Committee proposal includes a provision that says this: If a provider takes an insurance carrier or self-insured plan to arbitration for a particular medical item or service provided to a particular patient, this provider is prohibited from taking the same insurance carrier or self-insured plan to arbitration for the same medical item or service provided to OTHER patients who are associated with the insurance carrier or the self-insured plan. In other words, the provider can ONLY go to arbitration with an insurance carrier or self-insured plan for 1 medical item or service provided to 1 patient within a 90-day period. The provider CANNOT go to arbitration for the same medical item or service provided to OTHER patients within this 90-day window.
- Analysis: Speaking of “limitations” placed on the arbitration process, this 90-day cooling off period is a significant barrier to entry. It is such a significant barrier to entry that the Congressional Budget Office (CBO) scores this 90-day cooling off period provision as a significant “saver.” I will talk more about CBO’s score below. BUT FIRST, let me get back to this 90-day cooling off period idea. Now, this “90-day cooling off period” is generally new to the Federal debate over how to solve the surprise medical billing problem. That is, the majority of the discussions over whether Congress should agree to a benchmark rate ONLY, or agree to an arbitration process ONLY, or agree to a hybrid benchmark/arbitration proposal did NOT include this 90-day cooling off period. However, the 90-day cooling off period is intended to solve a problem that has been discussed over the past few months. And that problem is this: The insurance carrier and employer community provided examples where providers are going straight to arbitration without even negotiating any payment for a balance bill. It was argued that these providers are abusing the system, and they are going to arbitration way too often, which simply increases administrative costs, and often times results in the provider getting paid more than what most would consider “reasonable compensation.” This argument – and the fact that some providers are indeed going back to the well of arbitration time-and-time again – convinced Committee staff that something needed to be done. Soooo, the 90-day cooling off period was added to the proposal to limit the number of providers – and the number of times these providers – could go to arbitration. Why is this a BIG deal? Again, it is a significant barrier to entry for providers that want to go to arbitration. And again, I believe it is this 90-day cooling off period that has the providers so MAD. And in particular, it has the private-equity backed providers LIVID (because there is evidence that it is the private-equity backed providers that are the providers that are going back to the well of arbitration time-and-time again). This is also a BIG deal when it comes to CBO’s score of the proposal. As I noted above, the 90-day cooling off period is a significant “saver.” What do I mean? In prior updates I told you the benchmark rate ONLY saved the Federal government $20 to $25 billion. This is because a benchmark rate ONLY would significantly reduce the amount of money insurance carriers and self-insured plans would pay to a provider in a surprise billing situation. I also told you that if the benchmark rate ONLY is somehow changed to a hybrid benchmark/arbitration approach, this would reduce CBO’s score. This is because more money would be paid to the providers relative to a benchmark ONLY rate. And, I also told you that the lower the “magic” specified dollar threshold is, the lower the “savings” to the government because even more money would be paid to the providers relative to these other proposals. BUT, even with a $750 threshold, CBO scores the Senate HELP/E&C Committee proposal as saving $22 billion. Say what?!!!?? How can a hybrid benchmark/arbitration approach with a low, $750 threshold “save” as much money as a benchmark ONLY rate would save?? Answer: CBO estimates that the 90-day cooling off period will reduce the use of arbitration to such an extent that insurance carriers and self-insured plans will NOT be paying as much money to the providers as they would be under the current system or under a hybrid benchmark/arbitration approach with a higher specified dollar amount (like $1,250 or higher). Look, this is NOT to say that insurance carriers and self-insured plans are going to be paying the providers at the median negotiated in-network rate if the surprise bills exceed $750/indexed to inflation. All this is saying is that providers CANNOT use arbitration as often as some of the providers have been using arbitration, and this will cause the providers and the insurance carriers and self-insured plans to negotiate payment amounts that are going to be higher than the median negotiated in-network rate, but lower than what the provider might get out of arbitration.

The House Ways and Means Committee Introduces a Surprise Billing Proposal to De-Rail the Senate HELP/House E&C Committee’s Surprise Billing Proposal

Yes, that is a pretty direct statement on my part, which I typically do not like to make. But, I do believe that the primary purpose of the 11^th hour release of a competing surprise billing proposal from the House Ways and Means (W&Ms) Committee was/is to stop the Senate HELP/House E&C Committee’s hybrid benchmark/arbitration proposal. So what happened?
- Analysis: Well, about 48 hours ago, the House W&Ms Committee announced that the Committee had its own surprise medical billing proposal. The solution would be based specifically on an arbitration ONLY approach. At the time of my writing this, I have NOT seen language, so I do NOT know the specifics of the W&Ms proposal. BUT, I do NOT have to see the specifics to know this: The insurance carrier and employer community will VEHMENTLY oppose the measure, while the providers will be supportive and will put ALL of their weight and muscle behind the W&Ms proposal. Let me back up a couple of steps to say this: NONE of the stakeholders like the Senate HELP/House E&C Committee proposal. What I mean is, the insurance carrier and employer community do NOT like that arbitration is a part of the proposal. AND, the provider community is LIVID over the fact that a benchmark rate is a part of the proposal (as well as the 90-day cooling off period). I know what you might be thinking: If both sides of this issue do NOT like the proposal, doesn’t that mean that the Senate HELP/House E&C Committee got it right?? Sooooo, to stop Senate HELP/House E&C Committee proposal in its tracks, the providers went to the W&Ms Committee for assistance. The providers’ “ask”: Introduce your own proposal that is arbitration ONLY. Then, convince your respective Leaderships that NO W&Ms member is going to agree to a surprise billing proposal until there is consensus among ALL of the House Committees that have jurisdiction over health care (i.e., the E&C, W&Ms, and Education and Labor Committee (Ed & Labor)). The strategy here is that the provider community – and many of the W&Ms members – know that there is NOT going be “consensus” among at least E&C and W&Ms for no other reason than the E&C Committee has put all of their bi-partisan capital behind the hybrid benchmark/arbitration proposal, while the W&Ms Committee has bi-partisan interest in an arbitration ONLY proposal. Do you think these differences are going to be reconciled over the next 72 to 96 hours?? Which is arguably the window of time that members have to come to an agreement if they want to get a surprise billing proposal into the end-of-year legislative package (which must be enacted by Dec. 20^th). An argument can be made that members have all the way until next Thursday to come to an agreement (144 hours from now). BUT, next Thursday is pretty late in the game if members – and the President – want the end-of-year package signed into law by 11:59 pm on Dec. 20^th. But, stranger things have happened.

W&Ms Proposal: CONT.

So where does this leave us? BTW, I am NOT sure.

- Analysis: If Republican and Democratic Leadership in the Senate want to get the surprise medical billing issue off-of-their-plate sooner-rather-than-later, I could very well see the Senate telling the House this: Whatever is going on between the W&Ms and E&C Committees is NOT going to impact our interest in coalescing around what the Senate HELP Committee has come up with (which is the hybrid benchmark/arbitration proposal). And as a result, we are including the hybrid/benchmark proposal in the Senate’s version of the end-of-year package. This move would more or less force the House to accept the hybrid benchmark/arbitration proposal because House members are UNLIKELY to oppose the entire end-of-year package (with funding for the government, etc.) solely because there is NO consensus between W&Ms and E&C on how to solve the surprise billing problem. So at least to me – at this stage of the game – it is ALL about what House Democratic and Republican Leadership, and what Senate Republican and Democratic Leadership, want to do on surprise billing. If the respective Leaderships do NOT want to get it done, it won’t happen. However, if the Leaderships do want this soap opera to end – and to also give their members a talking point as they go home for the year-end holidays (i.e., the Congress protected patients and lowered health costs) – this could get done. It is tough to guess which way this breaks, so I am NOT opining at this time, although my pessimism is growing by the hour.

Transparency Update

Although most – if not all – of the attention that has been given to the Senate HELP/House E&C Committee proposal has centered on the surprise medical billing proposal, the proposed legislation calls for some very important provisions aimed at increasing transparency for employers that sponsor a health plan (and to some extent, for employees enrolled in employer plans). BUT, in the interest of time and the length of this update, I am going to table a discussion of these employer transparency-related provisions until we know whether the Senate HELP/House E&C Committee proposal is going to be enacted into law (which remains unclear).
- Analysis: BUT, let me still kill you with information by posting my comments on HHS’s proposed transparency regulations that I sent out right before the Thanksgiving holiday. If you already read my comments back then, you can stop reading now. If you have not taken a look at my comments (because you were enjoying your well-deserved time off over the holiday), feel free to take a look:

FROM MY UPATE I SENT OUT ON 11/26:

Proposed Transparency Regulation: Disclosing Cost-Sharing Information

In my most recent update, I provided with you a summary of some the key components to the proposed transparency regulation, which again, requires self-insured plans – as well as fully-insured “individual” and “group” market plans – to disclose (1) specific cost-sharing information, (2) negotiated in-network rates, and (3) “historical” payments to out-of-network providers. I did not, however, have enough room to provide you with my overall thoughts on the policy set forth in the regs, along with the means through which the policy would be effectuated. Let me do that here.
- Analysis: As the title above states, let me start with the “Disclosing Cost-Sharing Information” portion of the proposed regulation: With respect to the disclosure of specified cost-sharing information to participants, the policy here is pretty much NON-controversial. What I mean is, I do NOT envision insurance carriers and self-insured employers filing a lawsuit to stop the Federal government from requiring them to disclose this cost-sharing information. In my opinion, if carriers and employers did indeed fuss over this new requirement – and, for example, file a lawsuit over being required to disclose cost-sharing information – it would be “bad form” on their part, and the carriers and the employers would be living up the recent claims that “employer-sponsored coverage is BAD, and the carriers and employers are BAD.” I mean come on, who can be against disclosing cost-sharing information to participants?? Especially when everyone knows that participants are shouldering a larger-and-larger amount of the cost of health care in the form of cost-sharing year-over-year?? Having said that though, I definitely think carriers and employers WILL make a big fuss over the means through which the policy of disclosing the cost-sharing information is being effectuated. What I mean is this: Figuring out how to disclose all of the required cost-sharing information to participants is NOT going to be easy. I want to go so far as to say that the requirements set forth in the proposed regulation are daunting, especially for small insurance carriers and small to mid-sized businesses that self-insure. Heck, the level of personalization and required customization of the cost-sharing information is going to be difficult even for large insurance carriers and large employers to comply with. BTW, from a business perspective, I wish I was a tech-savvy entrepreneur (instead of a legal and policy geek) because I think there will be a lot of business opportunities for this type of third-party service provider once these proposed rules are finalized. What I mean is, I believe that third-party service providers are going to play a HUGE role in helping both large and small insurance carriers and large and small employers with communicating this cost-sharing information to participants. In particular, it will be these third-party service providers that will build the “on-line service tool” and develop all of the necessary algorithms that will accommodate all of the required information that participants will input into the tool to spit back out a participant’s own personalized, and customized cost-sharing information…in real-time.

Proposed Transparency Regulation: Disclosing Negotiated In-Network Rates

If you want controversy, you got it with the requirement that insurance carriers and self-insured plans must disclose ALL of their negotiated in-network rates for the medical items and services covered under the plan. You have already heard the insurance carrier community cry foul. When it comes to the self-insured crowd, some of them have not quite wrapped their head around this requirement, while other self-insured employers are saying: “How can anyone be against disclosing medical prices to their participants”?? On this latter point, some of these self-insured employers do NOT want to be viewed as anti-transparency, while other self-insured employers are actually welcoming this new requirement because it will allow them to see whether the providers in a particular geographic area are ripping them off relative to other employers and insurance carriers that are also negotiating prices with these local providers.
- Analysis: The argument that will likely serve as the primary basis for a legal challenge is that the Federal government CANNOT force one private party that negotiates with another private party to disclose information that results from these private negotiations. In particular, some in the insurance carrier community have argued that the prices that carriers privately negotiate with providers is a “trade secret,” and thus, carriers cannot be compelled by the Federal government to make public their “trade secrets.” Think of Coca-Cola (Coke) when Coke was sued to reveal its “secret formula.” A court of law ruled that Coke’s secret formula was a protected “trade secret,” and the secret formula could NOT be disclosed to any third-party. While I am definitely NO expert in “trade secret” law – and the Coke example above is NOT exactly on point because the Federal government is involved here – I think I know enough to question whether the insurance carrier community (or anyone else) will actually win if they were ever to challenge the requirement to disclose negotiated in-network rates. Here is how I am thinking about this:

- - Let’s say I am BestBuy, and I negotiate with Samsung and Vizio and Panasonic to sell their flat screen TVs in my store at a specified price. Then I – as BestBuy – post this price as the price I want to charge consumers looking to buy a flat screen TV. By my posting the prices to consumers for sale, have I disclosed “how” I negotiated with Samsung and Vizio and Panasonic to come up with this specified price?? NO. All I did was post the prices I negotiated with Samsung and Vizio and Panasonic as the “sticker price” for the TVs I am selling. I am NOT disclosing a “secret formula” or any “secret negotiation tactics” I use during the negotiation process. Down the street, Circuit City, CostCo, and Flat-Screen-TVs-R-Us are doing the same thing. They are negotiating with Samsung and Vizio and Panasonic to sell flat screen TVs at a specified price. Based on certain factors specific to each of these company’s “negotiations” with Samsung and Vizio and Panasonic, this yields differences in the prices that are charged by Circuit City, CostCo, and Flat-Screen-TVs-R-Us…and also charged by me as BestBuy. Now, let’s say that I – as BestBuy – was able to “negotiate” a lower price relative to what Circuit City, CostCo, and Flat-Screen-TVs-R-Us “negotiated,” making me – as BestBuy – the lowest cost option for Samsung and Vizio and Panasonic flat screen TVs. Again, in this case, no one disclosed any “secret negotiation tactics” or “secret formula” that could be viewed as proprietary. All that ended up being disclosed was the ultimate negotiated price that consumers now have to consider when shopping for TVs on “Black Friday.” It seems like this is what is going on with this proposed regulation. That is, Insurance Carrier XYZ is negotiating with Provider ABC to determine the price that will be charged to consumers who are seeking to purchase a medical item or service from the provider. If and when this price is disclosed on a public website that can be accessed by participants, researchers, regulators, and entrepreneurs, is Insurance Carrier XYZ disclosing “how” it negotiated with Provider ABC to come up with the specified price for the medial item or service?? NO. So here, there is NO disclosure of any “secret” negotiation tactics” or any other “secret formula” that could be viewed as proprietary. Down the street, Insurance Carrier 123 also negotiated with Provider ABC to set prices that will be charged to consumers. BUT, based on various factors specific to Insurance Carrier 123, this Carrier negotiates a different price than the price Insurance Carrier XYZ negotiated. In this case, Insurance Carrier 123 did NOT disclose any “secret negotiation tactics” or any other “secret formula” that could be viewed as proprietary. All that is being disclosed is a price for medical items and services that can now be viewed – and compared and contrasted – by the public. Maybe there are smarter people than me who engage in these “negotiations” everyday who will say that it is more complicated than the crude and elementary way I am analyzing things. But, maybe not. Either way, I do NOT see where the proposed regulation is violating any “trade secret” laws and/or abrogating a contract that is negotiated between two private parties.

More on Disclosing Negotiated In-Network Rates

There are some folks out there who will say that it is NOT fair to force insurance carriers to disclose their negotiated in-network rates to consumers because their competitors will now know what their negotiated rates are. Others are saying that disclosing these negotiated prices will actually increase costs to consumers.
- Analysis: To the first point, it is important to emphasize that in every other market where goods and services are bought and sold, consumers are informed about the prices associated with the respective goods and services. And, in these markets, the sellers of these goods and services compete with one another to charge the lowest price so as to attract consumers. These sellers also compete on quality. For example, a Mercedes Benz is great quality relative to a Honda Accord, but you are paying for that quality. Many consumers are willing to pay for that quality, while others want a low cost option like a Honda Accord. In this case though, a consumer “knows” about the price and the quality, and the consumer makes an informed purchasing decision based on the information they “know.” Not so much when it comes to health care. Typically, a consumer does NOT “know” about the price and the quality of a medical item or service that they purchase. While communicating “quality” in health care is difficult, disclosing prices is generally NOT difficult. So in the case of disclosing prices, isn’t it the fair thing to do? Another question I have is this: Won’t insurance carriers benefit from communicating to consumers that they have the lowest, most competitive negotiated prices? After all, insurance carriers primarily make their money on volume. Not only from compounding all of the premium payments from policyholders, but also from a “risk” perspective (i.e., the more policyholders you have, the greater the ability to spread health risks across a whole host of lives, which allows the carrier to keep their premiums low so as to attract more consumers). Soooo, wouldn’t insurance carriers want to tell consumers that they are a better option than their competitor down the street by disclosing their negotiated rates?? This disclosure to consumers, of course, will allow a particular carrier’s competitors to know what their negotiated prices are. But why should an insurance carrier care? If, for example, a particular carrier cannot compete with its competitors on price (because, for example, maybe this carrier cannot negotiate the same low prices), this particular carrier can out-compete its competitors on customer service, or technology, or the “quality” of the provider they contract with, thereby attracting policyholders by distinguishing themselves from carriers with the lowest negotiated prices. Call me naïve, but I just don’t see why it is NOT fair to require insurance carriers to disclose their negotiated prices to consumers because their competitors will now know these negotiated prices too. With respect to whether disclosing negotiated prices will actually increase costs to consumers, I can see how this could be an issue if there are a number of different providers in a geographic location. What I mean is, Provider ABC generally does NOT know what Provider 789 negotiated with a particular insurance carrier or self-insured plan. And in this case, Provider ABC may under under-charging for a particular medical item or service, while Provider 789 may be over-charging. And if Provider ABC now knows what Provider 789 is charging – because carriers and plans now have to disclose their negotiated prices – then maybe Provider ABC increases the amount they are charging to be closer to what Provider 789 is charging. This would definitely increase health care spending. BUT, is this really going to happen? Actually, won’t the reverse happen? That is, won’t the carriers and the plans move all of their covered lives to Provider ABC because Provider ABC is charging lower amounts for medical items and services? And won’t this force Provider 789 to lower the amounts it charges so as to re-capture those covered lives that are now being directed to Provider ABC? This would actually lower health care spending.