Surprise! New #COVID19 relief bill includes ban on (most) surprise billing at last!



Over six months after House Democrats passed a robust COVID-19 relief bill (only to see it continuously blocked by Republican Senate Majority Leader Mitch McConnell), it looks like Congress is finally set to compromise on a vastly stripped-down bipartisan bill which would provide at least a small amount of relief for hundreds of millions of American families and businesses.

While the bill is underwhelming (to put it mildly) overall, it does include several important provisions, one of which is a long-sought solution to a massive healthcare problem which existed long before COVID came knocking at our door nearly a year ago: Surprise Billing.

Over at the New York Times, Sarah Kliff and Margot Sanger-Katz have written an excellent summary of the problem and the proposed solution:

Surprise bills happen when an out-of-network provider is unexpectedly involved in a patient’s care. Patients go to a hospital that accepts their insurance, for example, but get treated there by an emergency room physician who doesn’t. Such doctors often bill those patients for large fees, far higher than what health plans typically pay.

Part of the problem is that the patient is often not in any position to have any say in where they're taken or who cares for them. Obviously you can't tell the ambulance where to take you if you're unconscious, and even if you are, someone having a heart attack isn't exactly in the best frame of mind to make sure that the folks working to saving their life are in-network.

Even for scheduled surgery where you have the time to carefully check to make sure the hospital and surgeon are in-network, you can still be hit with surprise bills...for instance, the anesthesiologist might turn out to be a hired gun from some other facility, so you wake up to a massive bill from some doctor you've never heard of.

Language included in the $900 billion spending deal reached Sunday night and headed for final passage on Monday will make those bills illegal. Instead of charging patients, health providers will now have to work with insurers to settle on a fair price. The new changes will take effect in 2022, and will apply to doctors, hospitals and air ambulances, though not ground ambulances.

The one-year delay is disappointing, as are ground ambulances managing to get a pass (according to Kliff & Sanger-Katz, they're actually the largest part of the problem in volume, though not necessarily in total dollars billed), but this is still a huge deal.

The average surprise charge for an emergency room visit is just above $600, but patients have received bills larger than $100,000 from out-of-network providers they did not select.

Some private-equity firms have turned this kind of billing into a robust business model, buying emergency room doctor groups and moving the providers out of network so they could bill larger fees.

Several states have already passed similar legislation prohibiting surprise bills via one method or another. New Jersey apparently already eliminated them over a decade ago, and both Washington State and New Mexico prohibited them last year. However, the scope of what sort of bills aren't permitted varies.

Hospitals and doctors, who tend to benefit from the current system, fought to defeat solutions that would lower their pay. Insurance companies and large employer groups, on the other hand, have wanted a stronger ability to negotiate lower payments to the types of medical providers who can currently send patients surprise bills.

As I've noted many times before: For all of the anger people have towards health insurance carriers (and yes, they're still guilty of a long list of sins, believe me), at the end of the day it's healthcare providers who tend to call the shots more often than not...yet of the four major provider categories (hospitals, doctors, PhRMA and medical device makers), only PhRMA seems to get their turn of being painted as Greedy Evil Bastards®.

To a certain degree this makes sense: The hospital is a physical place where the patient is treated. The doctors and nurses are the ones actually treating the patient. Medical equipment itself is tangible. Insurance carriers, by contrast, don't actually perform surgery or inject medication into your body, and in most cases the patient never actually sees an insurance company employee in person; they're just a nameless, faceless entity. Same with PhRMA--they may make the drugs but most people don't generally interact with them directly.

Legislation nearly passed last December, but was scuttled at the 11th hour after health providers lobbied aggressively against the deal. Private-equity firms, which own many of the medical providers that deliver surprise bills, poured tens of millions into advertisements opposing the plan. Committee chairs squabbled over jurisdictional issues and postponed the issue.

I wrote about this a year ago. Sadly, it all fell apart, and it's my understanding that the main reason for the failure was, surprisingly enough...a Democrat: House Ways & Means Chair Richard Neal. A year later, it sounds like it's finally going to go through...albeit a worse version:

This year, many of the same legislators behind last year’s failed effort tried again, softening several provisions that had been most objectionable to influential doctor and hospital lobbies. The current version will probably not do as much to lower health care spending as the previous version, but will still protect patients.

There are generally two ways which have been proposed to deal with surprise bills: Either set up some sort of official benchmark reimbursement rate based on the average paid for in-network services in the area, or arbitration, where each case is negotiated individually.

So, let's say there's a surprise bill for $50,000 for some out-of-network service. Under a benchmark system, it might turn out that the average in-network charge for that service is, say, $10,000, so that would be the amount the insurance carrier has to pay the hospital/doctor. Under an arbitration system, they might end up negotiating $20,000 or whatever.

In other words, a benchmark system would be more efficient and less expensive, but the arbitration system is still a hell of a lot better than sticking the patient with the $50,000, which is what's happening today. Of course, just because the patient is being hit with a $50K bill doesn't mean that's how much the provider is being paid--many patients obviously can't pay it at all, and many more presumably end up having to pay a portion of it. The main objective is to take the patient and their family out of the line of fire and let the insurers and providers slug it out.

I'd be greatly interested in knowing just what portion of total healthcare spending (or billing, at least) is made up of surprise bills, broken out by category (large group, small group, individual market, Medicare, etc.)

For example: Total healthcare premiums for the ACA-compliant individual market added up to roughly ~$93 billion in 2019 (~13.3 million enrollees x ~$7,000/year on average). Let's say individual market enrollees were charged, say, $6 billion in surprise bills (AGAIN: I have no idea how much it actually is).

Now let's say that instead of the patients being hit with that $6 billion directly, the prohibition meant that insurance carriers negotiated them down to ~$3 billion in provider reimbursements. The insurers would presumably then raise their premiums by ~3.2% on average to cover their additional expenses.

Of course, ~70% of individual market enrollees are subsidized under the ACA, so presumably that full 3.2% would be in turn absorbed by increased subsidies, again preventing most enrollees from seeing the increased cost. Perhaps 4 million unsubsidized enrollees would see their premiums increase by ~$18/month...which is still a hell of a lot better than a random sampling of them being hit for $50K in surprise bills.

The above example is pure speculation, of course; I have no idea what the actual dollar amounts we're talking about here are (aside from the actual individual market premium total). It could be a much smaller portion...or much larger.

On the other hand, as Kliff & Sanger-Katz note, it could also have the opposite impact:

The Congressional Budget Office found that an earlier version of the plan would cause small reductions to affected providers including emergency room doctors and anesthesiologists. This would happen to providers that both do and do not send surprise bills, because taking away the option would reduce their leverage in negotiating contracts with health insurers.

In other words, the carriers would have to start eating a portion of the cost of surprise bills...but the amount they reimburse providers for other claims should be reduced somewhat as well, meaning premiums could potentially drop by more than they go up. It's also conceivable that the two would simply cancel each other out, I suppose. If the carriers have to eat $3 billion in increased out-of-network expenses but make up for it by $3 billion in reduced negotiated rates...

In any event, as imperfect as this solution may be, it's still a Very Good Thing® in the midst of a sea of awfulness, so I applaud it.

UPDATE:  (Larry Levitt is the Executive Vice President for Health Policy at the Kaiser Family Foundation):

You know who won't be protected from surprise medical bills in the legislation Congress is about to pass? People in short-term insurance plans that have been expanded by the Trump administration.

— Larry Levitt (@larry_levitt) December 21, 2020

Of course if #ShortAssPlans were included in this legislation, their premiums would likely double overnight, since they cover so little to begin with.

Interestingly, the reason they aren't included has nothing to do with them managing to lobby their way out of it (as the ground ambulances did):

Those plans typically lack provider networks, so no negotiated rate/contracts. It’s all balanced billed.

— Amy Shefrin (@AmyShefrin) December 21, 2020