Think your health insurance will protected you from surprises? Think again.
Beast named Surprise
Surprise billing may also be referred to as “balance billing.” Balance in the sense that the patient is stuck with paying what the insurance company does not pay.
♦ The No Surprise Act was signed into law in 2020. It protects consumers with most types of private health insurance coverage from certain surprise medical bills. It went into effect on January 2022.
Medicare beneficiaries were already protected against surprise bills from providers and facilities that participate in Medicare. Non-participating providers are still a problem for unsuspecting patients.
♦ The new federal legislation goes a long way toward reining in surprise billing from non-network providers who are likely to be practicing in your network hospital or urgent care.
Learn more about the new legislation at the news article - Surprise Billing Gets a Surprise
Financial disaster waiting
• In the worst case, the insurance company denies the claim and the patient is responsible for paying all. These bills are a surprise.
Surprise billing has been spreading like a plague across America. People who are insured and thought their insurance would pay are finding huge bills in their mailbox.
The aggressiveness with which many providers pursue the collection of balance bills is cruel and cold-hearted like a wild beast chasing a meal.
♦ As healthcare costs skyrocket, insurance companies are working to find ways to shift more costs to patients.
• In 2017, Anthem Blue Cross took everything to a new level. They announced they would no longer pay emergency room charges if the patient used an ER for a non-emergency reason. They said this would apply to policies in Georgia, Kentucky and Missouri.
In the first 6 months of 2017, Anthem denied over 12,000 emergency room claims in just a three state area. Anthem acknowledged they may have gone a bit overboard. They claim that following an appeal they eventually paid about half the claims.
Federal law requires insurance companies to pay emergency room charges if the patient visited the emergency room with a problem that a “layperson” could think was a true emergency.
The Affordable Care Act reinforced this requirement upon insurance companies. Under a “true emergency” a patient has the right to seek care at any facility even if that facility is not in-network.
• The way around the law is for insurers to interpret what is a “true emergency” and what a “layperson” should understand is a situation requiring an emergency room setting.
Most people understand that you don’t go to the ER for the sniffles. The average person though would be hard pressed to understand if chest pains are serious or not.
June 2019 - December 2020
The Senate Health Committee, chaired by Sen. Lamar Alexander (R-Tenn.), introduced legislation to ban surprise medical bills through a cap on the pay physicians, hospitals and air ambulances can collect for out-of-network care.
Hospital groups are staunchly opposed to any kind of reimbursement cap. Air ambulance companies are crying but few people feel sympathy for them. Air ambulances have made headlines for particularly high balance bills and aggressive collection tactics.
The House Energy and Commerce Committee has proposed a similar legislation that would cap the pay for out-of-network care at a regional insurer's typical negotiated rate.
Senator Alexander has expressed his preference for a policy option called the "in-network guarantee." Physician groups bitterly oppose that option, which would force hospitals to bring their doctors into their insurance networks, or eat up the extra cost.
This all went nowhere until finally in December 2020 a Covid-19 relief bill plus government funding bill presented an opportunity to tag on "surprise billing" legislation.
The last couple of years have seen more states trying to enact laws to combat surprise billing practices. To date, 33 states have some form of protection in place.
Most state laws are not comprehensive in that they do not protect people in all situations. Some states limit protection to emergency situations only.
|Better Protection||Limited Protection|
|New Jersey||North Carolina|
|New York||Rhode Island|
Getting less for your money
Insurance companies all across America are selling policies that cover less than they used to. Even policies sold through the Marketplace and which must meet minimum requirements are leaving people with huge unexpected bills.
♦ The common theme is that as costs rise, more is pushed onto the patient to pay.
Policies with large deductible are now very common, especially for individual plans. Most plans are now written to so that emergency room charges (when covered) are shifted into the deductible. This can be devastating if a person has a high deductible plan.
♦ Skimpy health insurance plans were given the green light in 2018. People will purchase skimpy plans thinking they cover much more than they actually do. These plans will only make the problem of surprise billing even worse.
Balance billing is a surprise
The most common example of surprise billing comes from a practice called balance billing.
There are countless tragedies intertwined with this practice. So many so, that it is prevalent to call this practice unethical.
• Health insurance plans negotiate fee schedules with network providers.
These fees always result in a discount from the providers’ full charges. In many cases, this discount can be huge.
The negotiated fee for the service is called the allowed amount.
♦ Network providers cannot bill the patient more than the allowed amount.
Out-of-network providers are not obligated to accept the allowed amount.
• Out-of-network providers can and do bill the patient for the full amount no matter how absurd the charge.
The patient’s insurance has no control over the provider because they have no contract with the out-of-network provider.
The patient can try to negotiate a discount. The higher the bill the better the chance it can be sharply reduced.
The odds are that if you are reading this article you or some you know was adversely affected by this practiced.
♦ Author T. Spencer said it best, “Insurance is defined in its simplest terms as protection. But when balanced billing is permitted, protection fails.”
Surprise bills are common
♦ A 2015 Consumers Union poll found that nearly one-third of privately insured Americans have received a surprise medical bill within the past two years.
This situation can easily occur following an emergency visit to the hospital.
Most people know beforehand the closest hospital in their plan’s network so they go there thinking costs will be controlled.
It is only after they return home and several weeks have passed that they start receiving bills from various doctors and other professionals, some of whom they probably never even met face to face.
♦ It is common for the emergency room physician to call upon other providers to assist in evaluating your condition and providing care.
There is no guarantee that any of these other providers participate in your insurance plan.
♦ It has been estimated that 68% of all hospitals contract out their emergency services.
♦ A study reported in the New England Journal of Medicine that patients have a 20% chance of encountering an out-of-network provider when they visit the ER of their in-network hospital.
Emergencies put everyone in the position of having no control over who treats them yet we are responsible for all charges.
Unknown providers could include anesthesiologists, radiologists, pathologists, surgical assistants, and many other professionals.
All will submit bills separate from the hospital facility.
♦ In some cases, entire departments within an in-network hospital may be operated by subcontractors who do not participate in the same network as the hospital.
For patients with out-of-network benefits — PPO and POS type plans, there will be large differences between coinsurance for in-network and that for out-of-network.
Often, in-network coinsurance is 20% while out-of-network coinsurance is 40%.
To have to pay 40% of allowed charges after having entered an in-network facility is extremely difficult to fathom.
♦ On top of that, many plans with in-network and out-of-network benefits require you to pay your deductible first.
The out-of-network deductible is almost always much larger than that for in-network.
Getting hit with more deductible and a higher coinsurance than expected while using an in-network provider leaves most people enraged and many in financial distress.
Ambulance services - a different kind of beast
♦ Ambulance services have become the newest surprise billing beast.
It is not uncommon to be hit with thousands of dollars in charged for a short ride to the hospital.
• Most ambulance services are run by private companies and venture capital firms where maximizing profits is the first priority.
A few ambulance services may be in your plan's network but you won't know until the bills start coming in.
And if your ambulance ride turns out to be for a non-emergency event your plan is more likely these days to refuse to pay anything.
Action from Federal Government
Several federal standards have been adopted or proposed to address the problem of surprise medical bills for people with private health insurance and also for people with Medicare.
These steps have helped Medicare patients to some extent. But for the vast majority of people with private health plans these efforts have been inadequate.
Federal law called ERISA — Employer Retirement Income Security Act of 1974 — regulates company and union health plans that are "self-funded." ERISA law does not prohibit balance billing.
About 60% of workers get their insurance this way.
♦ The Affordable Care Act requires non-grandfathered health plans, in and outside of the Marketplace, to provide coverage for out-of-network emergency care services and apply in-network levels of cost sharing for emergency services, even if the plan otherwise provides no out-of-network coverage.
• What this means —
An HMO plan might normally cover 80% of allowed charges for in-network care and nothing for out-of-network care.
The ACA requires the HMO to pay 80% of allowed charges for an out-of-network emergency room visit. Only if a true emergency.
♦ The Act does not prevent an out-of-network provider from balance billing.
CMS proposes changes
The Centers for Medicare and Medicaid Services (CMS) proposed in 2015 some changes to try address surprise medical bills related to non-emergency services for individuals covered by Marketplace plans.
The changes would apply when an individual receives care that is part of Essential Health Benefits from an out-of-network provider in an otherwise in-network setting.
• The example posed —
Anesthesia care for surgery performed in an in-network hospital. Under the proposal, plans would be required to apply out-of-network cost sharing for such care toward the plan’s annual out-of-pocket limit for in-network cost sharing.
This benefits people with PPO and POS plans.
• The proposal does not seem to have any effect on HMO and EPO plans that do not cover out-of-network services anyway.
At best this proposal shows the CMS is concerned about surprise bills but does not know how to go about controlling the problem.
The House proposes changes
♦ In October 2015, the End Surprise Billing Act was introduced in the House.
The bill among other things would have placed some restrictions on balance billing in the case of emergency services.
The political climate at the time caused the bill to go nowhere.
► At the end of December 2020, a compromise was reached in committee and a Surprise Billing fix magically appeared attached to a government funding and Covid-19 relief bill.
As of this writing, President Trump has not signed the relief bill so this legislation is in a bit of limbo. Should he sign the bill this legislation would not take effect until January 2022.
♦ Update: President Trump signed the legislation late Sunday night (December 27th).
What are the states doing?
Some states have laws or rules that provide at best modest protection from out-of-network medical bills when receiving emergency care.
Very few states have attempted to rein in surprise bills and balance billing for non-emergency situations.
♦ New York State has one of the best laws against surprise billing. It took effect March 31, 2015.
The law addresses HMOs because of the restrictive nature of these plans and the high incidence of surprise bills from out-of-network providers.
New York’s goal is to protect consumers from surprise bills when services are performed by a non-participating (out-of-network) doctor at a participating hospital or ambulatory surgical center.
It also protects consumers when a participating doctor refers them to a non-participating provider.
The new law contains protection from bills for both emergency services and also non-emergency services.
♦ New York has been trying to tame the beast for many years.
In 1992, New York passed a bill requiring insurance companies to cover everyone (even the sick), long before Obamacare.
It resulted in getting people insured but it also resulted in huge premium increases.
Time will tell how New York’s latest effort turns out.
Where to now …
Surprise medical bills are a financial burden for everyone.
The vigor with which many providers pursue the collection of balance bills makes them look cruel and cold-hearted.
The problem of surprise medical bills is likely to continue and may get worse as insurance companies sell more and more plans with narrower and narrower provider networks.
♦ Consumers will be increasingly hard pressed to avoid surprise bills.
Policy makers are afraid to act out of fear that consumer protections from surprise bills could drive up insurance premiums.
Resistance from insurers and providers is expected to continue to delay reforms as each group attempts to shape future laws to benefit themselves.