How a Federal Law to End Surprise Medical Billing Will Change Existing State Policies

Janet Solie, 62-year-old retired physician assistant from Calabasas, Calif., went to a lab at an in-network hospital in Los Robles with complaints of acute abdominal pain, only to later be slammed with a large ER bill. 

“The physicians who supervised the inpatient lab were out-of-network. Now I had $5000 of fees that my insurance had paid less than $1000. The rest was balance billed to me,” said Solie.  

This practice is known as “balance billing,” where the insurer refuses to pay the higher out-of-network rate demanded by the doctor, and the patient ends up responsible for the difference.  

Solie is not alone, as currently one in five patients in the U.S. get hit with a surprise bill often ranging from $500- $100,000. The bills typically follow emergency room visits, ambulance rides to the hospital outside of a coverage network or receiving care from specialists not considered in-network.  

“How can that be that I’m going to a covered hospital and yet services there are not covered?” Solie asked physicians and her insurance company after being informed that the hospital she went to was covered by insurance, but the lab was not because it wasn’t contracted with anyone. 

To try to protect patients against surprise billing, Congress included the “No Surprises Act” in the omnibus spending bill that was passed and signed into law by President Trump on December 27, 2020. 

However, many states have already enacted their own policies to limit surprise billing, and those practices are now being adjusted to meet the federal policy, effective on January 1, 2022. 

“More than half of states, including almost all of the largest states, have enacted laws regulating surprise billing. By and large, these take a similar structure to prohibit surprise out-of-network billing, by requiring insurers to treat the out-of-network service as if in-network for patient cost-sharing purposes and mandating some minimum out-of-network payment from insurer to provider,” said Loren Adler, associate director, USC-Brookings Schaeffer Initiative for Health Policy.  

In 2018, the State of New Jersey sought to resolve the issue of surprise billing by offering a final-offer arbitration system to resolve payment disputes. However, Adler and researchers of the study found that, “basing arbitration decisions or a payment standard on unilaterally set provider-billed charges appears likely to increase health care costs relative to other surprise billing solutions and perversely incentivizes providers to inflate their charges over time.” 

New York also set up a similar arbitration system to New Jersey, but there have been similar questions as to whether those policies are potentially increasing the cost of health care for those insured, instead of reducing it.  

“By creating a very lucrative out-of-network options for affected specialists in these states, those providers can then demand higher prices to come in-network or just collect the generous out-of-network rates, and these higher payments are ultimately passed through to enrollees in the form of higher premiums,” explained Adler. 

California implemented its own policies to limit the practice of balance billing, and Solie was able to locate state legislation to use as leverage to negotiate her surprise bill, as the state policy mandates that an enrollee or insured recipient receive covered emergency services from a non-contracting hospital.  

“When I started writing letters to the insurance companies citing California’s specific bill, all things dropped. That physician bill from 2019 disappeared and they never billed me again,” said Solie.  

Before the No Surprises Act was signed in 2020, a number of private equity-backed physician staffing companies used surprise billing as a type of business model and sought to change the outcome of the legislation.  

“TeamHealth and Envision, the two largest emergency physician staffing companies, control roughly 20% of the emergency medicine physician market and the evidence strongly suggests they were profiting off of the leverage derived from surprise billing,” said Loren.  

TeamHealth, currently has 16,000 doctors and advanced practice clinicians care for roughly 30 million patients annually across the country, ranging in specialty services from emergency medicine, anesthesiology, orthopedic surgery, ambulatory care, etc.  

 “At the height of the COVID-19 pandemic, TeamHealth deployed physician and clinician coverage at escalated levels that allowed us to respond immediately to patient surges. It was a costly undertaking, but we would not allow the alternative – understaffed and unprepared emergency departments amid a global pandemic,” said a TeamHealth spokesperson. 

In February of 2019, a bipartisan working group of six U.S. Sens. Bill Cassidy, R-La., Michael Bennet, D-Colo., Todd Young, R-Ind., Tom Carper, D-Del., Lisa Murkowski, R-Alaska and Maggie Hassan, D-N.H., sent letters to various health insurers and providers asking for detailed information regarding billing and payment procedures as the working group began considering legislation to tackle the issue of surprise medical billing.  

TeamHealth received one such letter from senators and issued a response to Congress which was met with media criticism that the company slammed patients with surprise bills in 2017, and questions about whether the company actually practices balance billing. 

In the letter to Congress, TeamHealth’s CEO Leif Murphy wrote, “balance billing is our only available source of contract negotiating leverage.” 

But TeamHealth told TWN that they, “do not put [their] patients in the middle of any out-of-network payment disputes. Even in the face of extortive, punitive and collusive pricing behavior by the largest commercial insurance plans, TeamHealth has remained committed to its practice of not balance billing patients.”  

The company went on to say that “any reported balance bills, which are currently 0.04% of patient bills, are investigated and corrected so patients are not held responsible for clerical errors, whether they are on the part of TeamHealth or the insurer.”  

Although the company says it, “strongly supports the No Surprises Act as an independent dispute resolution process for insurers and providers to resolve billing disputes in a fair and equitable manner,” they didn’t deny funding $58.8 million dollars towards a campaign called “Doctor Patient Unity,” along with Envision Healthcare, which tried to push the No Surprises legislation in a different direction.  

“Big health insurance companies aggressively lobbied Congress to exploit a national crisis by advancing legislation that would pad their record profits at the expense of America’s doctors. Their legislation would have brazenly imposed a 20% pay cut on our medical professionals, risking hospital closures and making it harder for patients to get the critical care they need,” said a TeamHealth spokesperson. 

“It’s not exactly surprising that the largest staffing companies who seem to have been exploiting surprise billing would spend big and lobby hard to stop surprise billing legislation, particularly the more consumer-friendly proposals that initially were put out by the Senate Committees,” said Adler.  

A 2019 discussion draft from the House of Energy and Commerce Committee, along with proposals from the HELP Senate Committee, helped to shape the legislation for the No Surprises Act.  

However, the draft, according to research by Adler, failed to cover things like lowering the payment standards between emergency and specialty physicians and the facilities they practice at, setting an out-of-network standard that should be below or at market rate, addressing ambulance bills, or addressing bills for non-physician providers, such as “facility-based providers.”  

The proposal also allowed existing state surprise billing laws that include a payment standard or arbitration process to supersede the new federal law, for the fully insured plans that states can regulate.   

Adler says that the initial draft would have allowed for state laws that are worse for consumers, but the Act should close those gaps.  

“If surprise billing legislation ended up increasing what out-of-network providers can expect to collect even further, this could further increase premiums. I think the No Surprises Act is written pretty well to avoid this outcome and should place some modest downward pressure on premiums, but it is admittedly uncertain given uncertainties with how the arbitration process will shake out,” said Loren.  

The Congressional Budget Office estimates that the No Surprises Act would reduce premiums by between 0.5% and 1%, and current state policies will continue to apply to those enrolled in fully-insured health plans. 

But Adler says come 2022, he suspects that many states will adapt their state laws to match the federal protection, primarily for reasons of administrative simplicity.