Niloofar Asgari, MPA Staff Writer, Brief Policy Perspectives

Anyone who has interacted with the American healthcare system knows how stress-inducing paying for healthcare can be. This stress is magnified when families are unable to anticipate the charges that appear on a medical bill due to unclear health network designations. This issue is broadly known as “surprise billing.” Surprise billing refers to the phenomenon where someone seeking health coverage is shocked at the costs they are responsible for paying out of pocket. Primarily, surprise billing occurs when patients receive treatment from out-of-network doctors, suppliers, and hospitals in emergencies. Surprise billing can also happen when visiting a medical professional for non-emergency treatment. While their impact affects all Americans with health insurance regardless of coverage or illness, surprise charges are especially burdensome for low-income Americans and those with severe health conditions. More than half (57%) of U.S. adults received a bill for medical services they thought was covered by insurance. Additionally, 18% of all emergency visits and 16% of in-network hospital stays result in a surprise medical bill. Understanding the causes of surprise billing can help us understand potential solutions to the problem.

Causes of Surprise Billing

The two main contributors to surprise billing are hospitals and insurance companies. These entities play the most extensive role in determining the prices that patients pay for their healthcare. Hospitals and their staff determine which insurance policies are accepted and determine the price of treatment before they begin negotiating with insurance companies. Insurance companies are responsible for determining the specifics and costs of policies and the final cost of treatment after insurance.

Surprisingly, many doctors and ambulance operators do not work at the in-network hospital where patients seek treatment. Although hospital administrators encourage doctors and other staff members to accept the same insurance policies, they are not required to do so. Therefore, consumers are forced to either investigate which hospitals and doctors are in-network before treatment or spend hours on the phone trying to fight exorbitant charges after receiving out-of-network care. These arduous tasks place more of a burden on American patients.

Likewise, premiums and balance billing in the insurance industry also contribute to surprise billing. Broadly defined, balance billing occurs when insurance companies charge the patient for any provider balance remaining after the allowed insurance payments have been made. For example, if a hospital bill originally cost $20,000, and the allowable insurance payment is $15,000, the patient would be responsible for the remaining $5,000 balance. Depending on the terms of a patient’s health insurance policy, the remaining balance could be relatively low and affordable, or expensive to pay.

Efforts to Resolve Surprise Billing

Statewide efforts have been instrumental in confronting surprise billing. In March 2014, the New York legislature passed the Emergency Services and Balance Billing Law, which protects patients who seek emergency care without a reasonable choice between an in-network and out-of-network provider. Since taking effect in 2015, the law has been lauded as a leading model for other states and as a successful attempt to control prices.

In Florida, patients are only responsible for in-network costs and the remaining costs are negotiated between insurance companies and physicians. This negotiation occurs even if they received care from an out-of-network doctor. However, Californian lawmakers require out-of-network doctors to only charge in-network prices to patients and establish an independent arbitration process to settle the remaining balance.

The federal government has also expressed in resolving surprise billing. In a time when Congress seems to be more divided than ever, representatives are reaching across the aisle to solve this critical issue. In May 2019, Sen. Maggie Hassan (D-NH) and Sen. Bill Cassidy (R-LA) introduced the STOP Surprise Medical Bills Act, which would ensure that patients are only responsible for in-network costs for emergency and non-emergency treatments. Sen. Lamar Alexander (R-TN) and Sen. Patty Murray (D-WA) followed by introducing the Lower Health Care Costs Act, which specifically targets hospitals engaging in anti-competitive practices that disproportionately raise prices on patients with private insurance. In July 2019, Reps. Frank Pallone (D-NJ) and Greg Walden (R-OR) from the House Energy and Commerce Committee jointly introduced the No Surprises Act (H.R 3630), which curbs balance billing practices and mandates the Department of Health and Human Services to administer state grants that help maintain databases with payment information from insurers.

Notably, disagreements mostly revolve around what level to pay the out-of-network providers, and whether to allow arbitration. Doctors and hospitals have an incentive to support policies such as arbitration because it ensures their continued compensation by incentivizing out-of-network status. While insurance companies naturally negotiate prices with doctors and hospitals, insurance companies greatly benefit from benchmarking efforts since it limits the amount they owe to providers. Patients are also greatly benefited by a benchmarking since it can help maintain affordable healthcare cost limits.

In a remarkably bipartisan fashion, Congress and the executive branch agree that action must be taken to end surprise billing. Regardless of party affiliation or a state’s socio-economic context, politicians who want to get re-elected have an incentive to act for their constituents’ sake.