The Truth Behind Unanticipated Medical Bills and Solutions that Protect Patients

The American Society of Plastic Surgeons supports state and federal efforts to protect patients who receive unanticipated medical bills. We believe this can only be achieved through a comprehensive solution that safeguards patient access to necessary specialty care. As Congress works to advance policy, we offer insight into the dynamics at play in this complicated issue.

Why do patients receive unanticipated medical bills?

In recent years, insurers have offered plans with low monthly premiums and high annual deductibles. In this situation, the patient is required to pay all medical expenses until they reach their out-of-pocket maximum (sometimes more than $15,000). However, many patients don't realize they are responsible for those expenses, given that they pay a monthly premium. When insurance companies fail to educate their customers about the limitations of their policy, patients are "surprised" when they are directly billed for care they thought their insurance policy would cover.

In other instances, a patient whose insurance plan does not cover out-of-network care may still receive care from an out-of-network provider. Without limited out-of-network benefits, the insurance plan will not cover any portion of these expenses, regardless of whether it's an emergency or scheduled care. For non-emergencies, the provider and facility should inform the patient prior to surgery that they are out-of-network so that the patient knows they will be billed directly for all services provided. However, in emergencies, this disclosure is not possible until the patient is stabilized. If an out-of-network physician cared for the patient during the emergency, the patient's insurance policy may not cover the cost of that care. Therefore, the patient will be directly responsible for the full medical bill, which may come as a surprise to that patient.

How does that differ from a balance bill?

For patients who have out-of-network benefits, the health plan agrees to pay for a percentage of the care and the patient is responsible for the rest. In this situation, the plan determines the amount it believes the care should cost, also known as the usual and customary rate. To make this easier, let's say that amount is $1,000. Since the patient has out-of-network benefits, the plan offers to pay a percentage of that amount (e.g., 60% = $600). The patient is then responsible for the remaining percentage (e.g., 40% = $400), also called coinsurance. If the patient didn't realize they were responsible for a portion of the out-of-network payment, this $400 bill from the provider could be an unanticipated medical expense.

However, the plan determined the initial cost of care ($1,000) without consulting the provider. If the provider believes that the cost of care was actually greater (e.g., $1,200), then the patient is responsible for their coinsurance ($400) plus the remaining difference ($200). This difference is called a balance bill.

How can we protect patients from out-of-network emergency care bills?

Emergency care is much different than scheduled out-of-network care, which can more easily be avoided through proper payer, provider and facility communication to patients. In emergency situations, however, federal requirements under EMTALA mandate that the patient receive stabilizing treatment, regardless of their ability pay. In other words, a physician is not allowed to discuss network participation, or even insurance coverage, with a patient because it could jeopardize the patient's health. In these situations, a plastic surgeon's first and only priority is to ensure a patient's well-being and provide all necessary care.

As out-of-network emergency care is not an informed choice by a patient, we recognize the need to protect patients from these medical expenses. Patients should not be billed directly for this care. Instead, federal law should require an automatic assignment of benefits for all out-of-network emergency care so physicians can negotiate appropriate reimbursement directly with carriers. Through an assignment of benefits, a patient is completely removed from the billing process and will not receive an unanticipated medical bill for emergency services.

Why doesn't the physician always participate in the same insurance network as the hospital?

Most physicians are not employees of the hospital and, therefore, negotiate completely independent contracts with insurance carriers. Depending on the hospital system, most physicians hold hospital privileges that allow them to see patients and perform procedures at the hospital. These privileges may also require the physician to treat patients who require care in the emergency room. Hospital privileges should never be tied to the physician's insurance network participation, as the hospital and physician independently contract with the insurance carrier.

Much like hospitals, physicians typically strive to be in-network because it grants them access to an increased pool of patients and allows for more timely payment through fewer payment disputes with the carrier. However, solo practitioners and small group practices (including 61% of ASPS plastic surgeons nationwide) have less leverage and negotiating power during these discussions compared to a hospital. While the hospital may negotiate a fair contract with adequate reimbursement, the physician may determine that they cannot contract with the carrier because the amount offered is less than the market value or even cost of those services. In these situations, the physician may not participate in the same network as the hospital.

How can we better educate patients before they receive non-urgent out-of-network care?

Patients deserve to be fully informed in advance of receiving out-of-network care, and ASPS believes health insurance carriers, facilities and providers are all responsible for communicating this information. In purchasing their health insurance policy, a patient relies on their health insurance plan for accurate information to help guide their health care decisions. As such, insurers should take the lead in protecting their customers from unanticipated bills by clearly articulating the patient's cost-sharing responsibilities, including any copays, deductibles and coinsurances. Plans should educate patients about the limitations of their policy and whether the plan will cover out-of-network care and, if so, at what percentage. The patient should be explicitly informed that they will be responsible for the remaining expenses, regardless of their monthly premium. The plan should offer an accurate list of all participating providers so that the patient can make an informed decision on whether to see an in-network or out-of-network provider.

Facilities, such as hospitals, are well-positioned to inform patients of potential interactions with out-of-network providers and offer patients an opportunity to adjust their treatment plan. Facilities should provide patients with access to a directory of employed providers and those with privileges, as well as the providers contact information. The facility can easily post information on which plans it participates with, offering full transparency to the patient on the facility's network status.

Its incumbent upon all physicians to inform a patient prior to non-urgent treatment if a provider does not participate in the patient's network. In recent years, this has become common practice through the use of a single page informed consent. This initial conversation allows the patient to make an educated decision to receive care from the provider at their own expense or choose to see another provider who participates in their network.

What do physicians consider fair reimbursement for out-of-network care?

It's imperative that the insurance carrier always reimburses the physician at a fair market value. ASPS believes the 80th percentile of billed amounts is representative of the market rate for out-of-network physicians who have been unable to fairly contract with the carrier. The 80th percentile of a third party, independent charge database, such as FAIR Health Inc., means that 80 percent of all charges are equal to or lower than the presented amount. This results in the outliers – the highest 20 percent of all charges – being removed from consideration.

Many states are already using a percentile of billed amounts collected by FAIR Health, including:

• Connecticut: 80th percentile of billed amounts is utilized as the benchmark for the usual customary standard for emergency services;
• New York: 80th percentile of billed amounts is designated as the benchmark for consumer cost transparency and dispute resolution;
• Pennsylvania: "usual and customary" is defined as 85th percentile of billed amounts for in the state's workers' compensation program; and
• Alaska: 80th percentile of billed amounts is used as the benchmark for the usual customary standard for emergency services.

Insurance carriers across the U.S. are currently using a percentile – usually 80th – to determine appropriate reimbursement for out-of-network expenses, including Aetna, Emblem Health, Oxford Health Plan and UnitedHealthcare . Support for the 80th percentile paradigm has also been adopted by the National Council of Insurance Legislators (NCOIL) within its model legislation, which defines the "usual, customary and reasonable rate" as the 80th percentile of billed amounts based on an unbiased charge database. Clearly, the 80th percentile is in line with current industry standards.

What's wrong with basing reimbursement on allowed amounts?

Allowed amounts are determined only by the insurance company, with no outside input from the federal government, providers or patients on whether the methodology is representative of the cost of care. Since insurance companies claim that their methodologies are proprietary, we will never know how they determine these allowed amounts. If carriers continue to block access to those methodologies, there will be no way to hold them accountable for the reimbursement they offer. Following the Ingenix investigation in New York, the New York Attorney General "found that having a health insurer determine the 'usual and customary' rate – a large portion of which the insurer then reimburses – creates an incentive for the insurer to manipulate the rate downward." It would be catastrophic if this rate manipulation took place on a national scale.

Furthermore, allowed amounts are only intended to reimburse in-network providers, who receive increased access to patients, decreased billing disputes and more timely payment in exchange for this agreed upon amount. Keep in mind that the agreed upon amount is different for every physician, even within the same specialty and within the same county, as it takes into account a host of other factors. Utilizing a percentile of allowed charges, which is aggregated among all in-network providers, forces nonparticipating providers who were unable to fairly contract to accept a discounted rate with none of the benefits.

This dynamic leaves the provider at the will of the carrier and removes all incentives for the carrier to offer fair reimbursement since the carrier ultimately has final say on the reimbursement amount. This is not a fair dynamic, especially since 61% of ASPS plastic surgeons are solo or in group practices of 2-5 physicians. As small businesses, these practices already face an uphill battle during contract negotiations with the carriers. A predetermined out-of-network payment rate set on allowed amounts would remove much of the negotiating power left for these small businesses and leave many of physicians with limited leverage in contract discussions with large health insurance carriers.

Can we base reimbursement on Medicare instead?

No. Medicare was created to provide reliable, quality care for elderly, disabled and end-stage renal disease patients. For this reason, utilizing Medicare rates for private payer insurance is structurally unworkable, especially since Medicare does not have rates for certain important areas of care (i.e., pediatrics or obstetrics). Moreover, Medicare rates have historically been adjusted to favor and/or encourage specific types of care (e.g., primary care) over others (e.g., specialized services), creating a bias for reimbursement that is not actually based on the cost of services provided. This is actually an anti-market rate that consciously seeks to skew payments in order to prop up certain providers rather than accurately reflect the value of services.

Medicare's fee schedule is also politically-derived, based more on the congressional budget than on the cost of providing care. Therefore, it's no surprise that Medicare often reimburses providers at less than the cost for many services. Providers continue to accept Medicare patients in their commitment to serve their communities. However, they are able to care for these patients, even at a loss, because this loss is balanced by the appropriate reimbursement provided by private insurance. If private insurance is permitted to base reimbursement on Medicare rates, it will be increasingly challenging for physicians to make ends meet.

Is there a state model that works best?

The New York State Surprise Bill Law, enacted in 2015, is the most successful out-of-network state policy in place, protecting patients while requiring providers and carriers to compromise on an achievable solution. The law protects patients from unanticipated emergency care bills by ensuring that they are not liable for amounts over their in-network cost-sharing amount, regardless of the provider's network status. Moreover, if a patient receives treatment from an out-of-network provider and there were no in-network providers available, or if the provider did not notify the patient as required by law, the patient is only responsible for their in-network cost-sharing amount and may assign claims to the out-of-network provider, who must seek all additional reimbursement directly from the insurer.

New York determines fair reimbursement for out-of-network services as:

(i) "Usual and customary cost" means the eightieth percentile of all charges for the particular health care service performed by a provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the superintendent. The nonprofit organization shall not be affiliated, financially supported and/or otherwise supported by a health insurance company.

To ensure fees paid to out-of-network providers are both fair and unbiased, New York utilizes FAIR Health, Inc., as its independent nonprofit organization. FAIR Health is one of only six organizations certified by the Centers for Medicare & Medicaid Services (CMS) under its Qualified Entity (QE) Program to receive Medicare Parts A, B and D claims data for all 50 states and the District of Columbia. FAIR Health has the nation's largest unbiased collection of privately-billed medical claims data, Medicare claims data and geographically-organized healthcare cost information. This produces relevant, reliable and regionally-specific cost information. In turn, it allows states to avoid using opaque insurer data and protects patients from exposure to potential corruption.

For non-urgent unanticipated medical bills, the patient may assign their benefits to the provider, completely removing the patient from the billing dispute. This allows the provider and carrier negotiate fair reimbursement. If the parties cannot agree upon appropriate reimbursement, the carrier and provider may enter the state's binding independent dispute resolution (IDR) process . If the patient does not assign their benefits, the provider may bill the patient, who can submit their bill to the IDR before owing any amount. If the patient is uninsured, they may also submit their bill for review under the IDR before paying the provider.

During the dispute resolution process, reviewers, who have experience in healthcare billing, reimbursement and usual and customary charges, consult with a licensed physician in active practice in the same or similar specialty as the physician in question. Through baseball arbitration, the IDR selects one of amounts submitted by the carrier or physician. For disputes between the patient and provider, the IDR determines a reasonable fee.

Finally, the law includes network adequacy provisions for health plans. Traditionally, HMOs in New York were required to offer adequate networks and hold patients harmless for certain out-of-network services. However, most preferred provider organizations (PPOs) and exclusive provider organizations (EPOs) did not have to comply with similar requirements. The Surprise Bill Law changed that by adding comparable standards and protections for patients in PPOs and EPOs. Health plans in New York must be certified as having provider networks that can fulfill the needs of their patients without the need to seek out-of-network care. If a plan has an inadequate network that does not offer enough geographically-accessible providers then patients may seek and obtain out-of-network treatment without paying higher out-of-network costs.

How can Congress improve network adequacy so that patients have access to necessary medical services?

State laws on network adequacy vary greatly in requirements, enforcement and philosophy. Since the promulgation of 82 FR 18346 in April 2017 – a rule that all but abdicated the federal government's network adequacy enforcement responsibility to the states and private organizations – there is little federal enforcement to ensure that states appropriately protect patient access to high-quality care through high-quality insurance products. Enforcing network adequacy requirements is essential to protecting American healthcare consumers.

To ensure that patients have in-network access to necessary specialty care providers, we urge Congress to reverse 82 FR 18346 and instead incorporate specific, quantitative standards that require insurers to:

• Design adequate networks with a specific minimum number of active primary care and specialty physicians available, adjusted by appropriate population density and geographically-impacted factors;
• Maintain accurate and timely physician directories, with robust enforcement to prevent carriers from continuing to provide patients with inaccurate directories;
• Promote transparency by providing accurate and timely fee schedules to patients and physicians;
• Ensure patient choice by offering out-of-network options when their network does not offer access to physicians the patients' need; and
• When there are no specialists in a network who can meet a patient's need and a non-network provider must deliver specialty care, insurers should compensate those providers at their full fee. In these cases, the insurer has created an inadequate network, and they, not the patient, should bear the entire responsibility of ensuring patient access outside what is available in the network.