By: Ron E. Peck

As a member of the health benefits community, I – like many of you – have heard about the proposed “No Surprises Act.”  Many representatives of our health insurance and benefits community have reached out to me asking whether this “new law” will make balance billing “illegal,” and thus enable plans to leave their networks behind and pay claims solely based upon a Reference Based Pricing (“RBP”) methodology.

Before we dive into what the No Surprises Act is (and isn’t), let’s first – as of the time this missive is being drafted – recognize that it is presently “a bipartisan, bicameral deal in principle.”¹   The “Committee leaders” are on record as having said that they “… look forward to continuing to work together to finalize and attach this important new patient protection to the end-of-year funding package,” and that they are “… hopeful this legislation will be signed into law…”  Despite Congress’ vote to pass the bill, which includes the No Surprises Act, unless and until it is signed into law by the President, it isn’t a law of the land (yet).

A wise person plans for anything and everything, however, so let’s proceed under the assumption that this “deal” will in fact become law.  The question (then) is whether, as mentioned above, the No Surprises Act outlaws balance billing.  The answer is no; not even close.

The name of the proposed law is literally the no “surprises” act, and the above mentioned Committee leaders specifically state that, “Patients should not be penalized with these outrageous bills simply because they were rushed to an out-of-network hospital or unknowingly treated by an out-of-network provider at an in-network facility.”  

This proposal relates solely to “surprise” balance bills.  

One trend, seen from both government and media, is to confuse the term “balance billing” with the more specific term, “surprise” balance billing.  In a nutshell, every brown squirrel is a squirrel, but not every squirrel is a brown squirrel.  Similarly, every surprise balance bill is a balance bill, but not every balance bill is a surprise balance bill.  
 
A surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount a provider charged for out of network (“OON”) services, provided in response to an emergency, where the patient didn’t choose the provider (nor did they have the ability to choose).  Alternatively, a surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount an OON provider charged when the patient treated at an “in network” (“IN”) facility, but a specific healthcare professional at the facility – that provided services to the patient – is independently OON.
 
When a plan pays a usual and customary or “RBP” rate (often a percent of Medicare, or some other objective pricing metric) to a non-contracted provider, and the provider subsequently seeks payment from the patient of an amount that is in excess of the maximum allowable amount paid by the plan, this is balance billing.  If the scenario doesn’t fit into the one of the two definitions explained above, then that balance bill is not a surprise balance bill, and – for the time being – the “No Surprises Act” is moot.  

Further complicating the situation, most RBP plans do not utilize any network at all.  This in turn nullifies one, if not both, of the scenarios that give rise to a “surprise” balance bill.  

Specifically, when there is no network, a patient cannot find themselves in a situation where they visit an IN facility, only to have an OON provider provide services.  This is because there are no IN facilities at all.

Further, depending upon how lawmakers interpret the interplay between the proposed rules and emergency services, it may be that an RBP plan will not benefit from protections afforded to patients in response to “emergency” situations either.  Recall that the rule, and definition of surprise balance billing, envisions a scenario where a patient is whisked away to an OON provider in an emergency situation.  The theory is that the patient “would have chosen” an IN provider had they had the chance.  Yet, with an RBP plan that has no network at all, the patient could not have chosen an IN facility – emergency or not.  In other words, with an RBP plan that has no network at all, the fact that the need was urgent (an emergency) has no impact on whether the patient is treated at an OON facility.

Benefit plans that do utilize networks should pay close attention because this proposal will impact them.  Additionally, despite the above, even RBP plans and plans that don’t use a network should also pay attention – not because the proposal will impact them (it won’t), but because the way with which the rule addresses surprise balance bills may be a glimpse into the future, and a hint as to how lawmakers would seek to deal with all balance bills – not just surprise balance bills.

With this in mind, one item that should cause payers to tremble is the fact that, in direct opposition to the philosophy underpinning RBP, the “No Surprise Act” does not reference any objective payment standard.  In other words, there is no universally agreed upon standard the parties can use in determining a fair payment.

The initial hope is that payers and providers will try to resolve payment disputes on their own.  This initial “step” in the process, heralded as a novel step forward, does nothing more than document what most payers are already trying to do and have been trying to do for some time.  When a patient is balance billed, a benefit plan rarely ignores their plight, and already seeks to resolve the matter with the provider – despite the plan not “technically” having an obligation to pay anything more.

Herein lies my concern – when the provider has a right to pursue payment from a patient (balance bill), and a payer has a right to cap what they will pay, both parties have something the other wants.  The provider wants to be paid promptly, by the plan (whose pockets are far deeper than the patient’s).  The provider recognizes that they aren’t guaranteed payment from the patient, and thus they are incentivized to work with the plan – applying the old adage that “a bird in the hand is worth two in the bush.”  The plan, meanwhile, wants to protect their plan member from balance billing.  Thus, even though they have paid all they are required to pay, the plan is compelled to pay more to protect the plan member.  As a result, as mentioned above, both parties have something the other wants, and have a reason to negotiate in good faith.

In a new world, where the plan will be required to pay more – either a smaller amount proposed by the plan, a larger amount proposed by the provider, or some negotiated amount in between – the “threat” of the plan walking away without paying anything additional (a right the plan presently has) is stripped away, giving the provider more negotiation power and the plan less power than is presently the case.  For this reason, the proposed rule hurts rather than helps negotiation efforts.

How could this be allowed to happen?  As one reviews the proposed rule, one realizes that certain assumptions are in play.  First, that benefit plans universally underpay claims when they are OON.  Second, that benefit plans will never negotiate or pay anything additional when a participant is balance billed.  As such, a law is required that will scrutinize what the plan paid and will force the plan to pay more.

For plans that already pay an objectively fair amount for OON claims, and already engage in good faith negotiations to protect patients from balance bills, these assumptions should be offensive, and the resultant rule should horrify.

Further worrisome is the so-called arbitration that ensues if a negotiation fails.  The style of arbitration is “baseball arbitration;” a process where the arbiter is stripped of their power to steer the parties toward a middle ground and is instead forced to pick one of two amounts – one proposed by each party.  As a result, benefit plans are cautioned against offering a too-small amount (including nothing additional), even if it seems fair to them, for fear of offending the arbiter and losing before they even begin.  Of course, the counterpoint to that is that one does not negotiate against themselves.  Many will not want to offer a too high amount, for fear that they will call their original payment (and logic behind the payment) into question, as well as embolden providers to increase their rates in response.

This, then, leads to another concern.  If payers will be forced to pay “something” additional, why should providers avoid increasing their rates?  

All involved in this proposal explicitly agree that this process is more favorable to providers.  It’s why they supposedly added so-called “guardrails” to help ensure that the arbitration process is not abused.  

First, payers and providers must engage in 30 days of negotiations, prior to requesting arbitration within 48 hours of the final day’s passage.  This supposed guardrail only benefits providers.  Presently, “pre-rule,” plans that have paid the maximum amount according to their controlling document seek only to negotiate to protect their plan member from balance billing.  They, until now, gained nothing from paying more.  Providers, on the other hand, are seeking financial gain.  Prior to this rule, the threat that the plan could walk away, and the provider could be forced to pursue the patient – and likely get nothing additional – was an incentive to negotiate in good faith.  Now, with the arbitration “light” shining at the end of the 30 day “tunnel,” providers will demand 100% of billed charges, refuse to negotiate, and simply await arbitration – knowing that they will either be rewarded with between a little more and a lot more payment from the plan.  At best, they can assert a right to 100% of billed charges and win that amount in arbitration.  At worst, they will get an amount the plan proposes (which is still more than the plan’s original payment – and thus more than the provider could potentially expect to get – should negotiations fail – pre-rule change).  In other words, in a world where payers will be forced to pay more, and providers are not punished for charging excessive amounts, there is no downside to charging more, ignoring negotiations, and waiting for arbitration.

A rule that some say will prevent the overuse of the arbitration process is that the losing party will be responsible for paying the administrative costs of arbitration.   Of course, those in our industry recognize that – for the reasons explained above – even if the provider loses (and is forced to pay the costs of arbitration) the additional payment from the plan of the lesser amount presented by the plan plus the already marked up rates initially paid by the plan, will outweigh the occasional loss and corresponding administrative costs.  

Arbitrators, meanwhile, have the flexibility to consider a range of factors, but unfortunately – none of those factors are objective.  They will be forced to limit their examination to only factors raised by the parties, and – significantly – not what the provider usually accepts from other payers.  Additionally, the arbitrator is not supposed to review the billed charges (the chargemaster rate), but – assuming the provider is seeking payment of their charges in full via arbitration – that limitation is irrelevant.

Optional factors that an arbitrator could consider include, among others, the level of training or experience of the provider or facility, quality and outcomes measurements of the provider or facility, market share held by the out-of-network health care provider or facility, or by the plan in the geographic region, patient acuity and complexity of services provided, and teaching status, case mix, and scope of services of the facility.  We question whether the payer will have an opportunity to challenge these metrics, or – as it appears to be presented – whether this is simply an open invitation for the provider to justify their demands.

Additional factors that the arbitrator may consider, and which are both beneficial to payers as well as uniquely worrisome, are any good faith efforts by the provider to join the plan’s network, past contracted rates, and the median in-network rate paid by the plan.  

On the positive side, this will hopefully prevent the billed charges from being deemed the “starting point” or misrepresented as what is “usually paid” by benefit plans.  Generally speaking, States that have implemented regulations limiting surprise balance bills that take such median rates into consideration generally see smaller amounts being paid than in States that do not take median rates into consideration.

On the flip side, knowing this information may be used against them in the future, will providers seek to contract for more with networks, to avoid creating a lower floor should they be forced to fight for OON payments at a later date?  As for plans that do not even have a network, such as an RBP plan, how will these metrics apply to them?

This focus on networks, as well as in and out of network status, is a red herring.  No payer should be forced to pay an abusive amount because they did or didn’t lock themselves into a contract at some earlier date, or with someone else.  Each service provided by a provider should entitle that provider to fair compensation.  If, four years prior, I agreed to pay $100,000 for an automobile that had a sticker price of $30,000, that mistake should not doom me to a lifetime of overpayments.  If I paid $100,000 for a car worth $30,000, my wife shouldn’t be forced to do the same when she is purchasing a car.  We should be allowed to pay a fair price for the service we are purchasing – in a vacuum and based solely on the value of that service, and that service alone.

“As we have stated many times before, the AMA strongly supports protecting patients from the financial impact of unanticipated medical bills that arise when patients reasonably believe that the care they received would be covered by their health insurer, but it was not because their insurer did not have an adequate network of contracted physicians to meet their needs,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in a letter to congressional leaders.²

This statement from the American Medical Association’s leadership exposes two worrisome philosophies.  First, that it is reasonable and appropriate to expect benefit plans to agree, via contract, to pay a provider whatever that provider wants – regardless of how excessive or abusive those prices may be.  Second, that benefit plans should be forced to create and expand networks until they have no bargaining power and thus cannot exercise any cost controls whatsoever.  I would ask Mr. Madara what he believes constitutes an “adequate” network.  25% of providers?  50%?  100% of providers?  As that network grows, in-network status loses its exclusivity, and steerage of plan participants is spread, thinning the number of patients visiting each provider and lessening the value of in-network status for the providers.  This in turn justifies the providers demanding more payment, and lesser discounts.  

This philosophy, shared by the AMA and providers alike, exposes a baseline assumption that has become prevalent in our nation, and serves as a foundation for a flawed system.  No other type of insurance is “forced” to contract with providers.  Whether it be homeowner’s insurance, auto insurance, or any other form of insurance – insurance pays the fair value of the loss, and the objectively reasonable cost of repair or replacement.  Yet, here we see the American Medical Association’s leadership stating that benefit plans should be punished for not contracting with providers, before a service is even provided, and failing to agree to pay whatever the provider chooses to charge when the time comes.  Imagine if your auto insurance carrier was forced to contract with every auto manufacturer, agreeing to pay whatever the car maker charges at the time an insured needs a new car, without knowing what those prices will look like at the time the contract is signed.  Imagine how automobile manufacturers could and would abuse that one-sided deal, and what that would subsequently do to your premiums.  

The bottom line?  With this new rule, providers are not punished for failing to contract with payers.  Payers are punished for not contracting with providers.  This puts all of the negotiation power in the hands of the provider.  They know they can leave the “networking table” without a deal and collect their lump of flesh later.  The payer, however, now is desperate to get a contract signed – and will sign a deal, no matter how abusive – to avoid the punishments they will suffer when they dare to allow a provider to be OON.

Before this review can be concluded, it is important to recognize that this assessment has been mostly negative.  Hopefully you will forgive the author his gloomy tone.  Many people see that surprise balance billing is being identified as an issue – and that, in and of itself, is a good thing.  Unfortunately, the approach presented by the No Surprises Act minimizes the importance of examining objective metrics, is over reliant upon networks, and ignores amounts providers accept as “payment in full” from other payers – including Medicare and Medicaid, as well as actual cost to charge ratios.  Rather than drill down to the question of what constitutes “fair” compensation, the process will instead ask what constitutes the “most common” compensation.   Looking at the current state of the healthcare industry, one would be justified in expressing concern over future dependence upon past “averages.”  

Hopefully arbitration won’t take place in a vacuum, despite the analysis above.  Furthermore, there are other reasons for optimism.  Much of the proposal depends upon future rulemaking.  There is an opportunity to further define how the rule will be applied through the regulatory process.  Stakeholders are encouraged to analyze the rule, contemplate how it will impact them, and propose solutions to shift the end result to a more equitable conclusion.  This is not the end, but rather a foot in the door.  

Consider also the inclusion of air ambulance claims.  For too long this subset of healthcare has been allowed to operate without limitation and gotten away with unfettered billing practices.  By being included in this proposal, we are turning the corner and taking one step in the right direction.

Lastly, while the rule isn’t perfect, it does also require providers to exercise a new level of transparency – notifying patients when they may be treated by an out of network provider, and requiring the use of a waiver that is (hopefully) more robust than the traditional intake forms signed by patients today.

Thus, in closing, while the No Surprises Act is far from perfect, there exists an opportunity to adjust it through the regulatory process and it shines a light on some issues that have been hidden for too long.

^{1. https://www.help.senate.gov/chair/newsroom/press/congressional-committee-leaders-announce-surprise-billing-agreement}

^{2. https://www.ama-assn.org/delivering-care/patient-support-advocacy/proposed-no-surprises-act-favors-commercial-health-plans}