Millions of Texans vulnerable to surprise medical bills despite legislative efforts

Millions of Texans will remain unprotected from surprise medical bills despite state lawmakers this year passing one of the nation's most aggressive pieces of legislation to curb such bills.

Senate Bill 1264, signed into law in June and effective Jan. 1, stops patients from being blindsided by exorbitant medical bills for emergency services, services provided at in-network hospitals and other facilities, and for lab work.

But the new state law only protects about a third of the 14 million Texans who are vulnerable to surprise medical bills because it only applies to those who have insurance regulated by the Texas Department of Insurance -- usually teachers, state employees, those who work for small businesses and individuals who buy their own insurance.

Roughly 9 million Texans, mostly those with employer-funded insurance plans that are regulated by the federal government, are not covered by the law.

"Consumers are rightly frustrated at the fact they chose an in-network facility or an in-network provider and receive a bill that is hundreds of dollars more than it would have been. We're trying to fix this bait and switch," said Stacey Pogue, senior policy analyst with the Austin-based, progressive Center for Public Policy Priorities.

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Surprise medical bills are usually high-dollar charges for medical services that patients didn't know were outside of their health insurance network. They happen most often in emergency situations and with anesthesiologists and ambulance rides. A combination of factors are to blame for surprise bills, including the growing cost of health care and breakdowns in negotiations between insurers and physicians.

With state lawmakers exhausting almost all avenues to solve the issue, patient advocates are pushing Congress to pass bills that would hold patients harmless for surprise medical bills in emergency and nonemergency situations.

"I worry primarily about those who work for big employers ... for Dell or any other big electronic manufacturers in Austin," said Ken Janda, a Houston-based health consultant and professor at Rice University. "That is why the activity in Washington is so important, because that will fix the other big piece of the puzzle."

Out-of-network charges

Christine Sederquist, a Leander resident who also serves on the City Council, received more than $4,000 in anesthesia bills after her 12-year-old son's appendix suddenly burst while on a summer trip to California three years ago. Even though the hospital was in-network and UnitedHealthcare covered the surgery, the insurance company told Sederquist anesthesia was not a covered benefit and she would have to prove why it should be covered.

Sederquist provided the American-Statesman with copies of a claim statement from UnitedHealthcare.

After months of going back and forth with the insurance company and with the help of the human resources department at her husband's job, the charges finally were reduced.

Because Sederquist's insurance plan through her husband's employer, Electronic Arts, isn't regulated by the Texas Department of Insurance, her family is susceptible to another surprise bill.

"On the face of it, you can see how ridiculous it is," Sederquist said. "Of course, a 12-year-old getting his appendix out needs anesthesia, and, of course, you can't check to see if somebody is in-network. It should be a no-brainer to anybody that has to be covered. When you're ... trying to get everything back to normal, you shouldn't receive notices and bills that just shock you."

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Texas has some of the nation's highest rates of out-of-network charges associated with hospital stays and emergency visits that could lead to surprise bills, according to a 2017 Kaiser Family Foundation analysis of claims from large employer insurance plans. More than a quarter of hospital stays in Texas led to an out-of-network charge, tying the state with Kansas for the third-highest rate nationally. Thirty-eight percent of emergency visits in Texas led to an out-of-network charge, the highest rate among all states.

The number of requests to the Texas Department of Insurance for help with surprise medical bills has grown each year since the agency started offering the service in 2009, totaling 9,843 through fiscal 2018. With a month left in fiscal 2019, the agency has received 7,701 more requests for help with surprise medical bills.

"You have this whole breakdown in contracting between insurance companies and physicians groups, and there's plenty of blame to go around, but what always happens is that consumers get trapped in the middle with a surprise medical bill," said Blake Hutson with AARP Texas, which has been advocating for legislation to eliminate surprise billing.

Sharing blame

A contributing factor to the high rates: Patients often assume if they choose a hospital covered by their health insurance, the doctors at the hospital also will be covered. But state law restricts hospitals from directly employing physicians, so a hospital being in the health plan's network has no bearing on a doctor being in the network.

Doctors are left out of network for a few other reasons.

Some physicians have joined large practices and, in some cases, those practices have adopted business models in which they prefer to be outside the network of health plans' covered providers so they can charge higher fees to patients, Hutson said. Meanwhile, insurance companies prohibit in-network physicians from charging additional fees to patients.

"Essentially, a physician could be getting their full bill charges if they are out-of-network, which would be more than a negotiated rate with an insurance company if they were in-network," Hutson said.

David Fleeger, an Austin physician and president of the Texas Medical Association, said there are only a handful of physicians in Texas who prefer to be out-of-network so they can charge exorbitant fees to patients.

Fleeger said that insurance companies intentionally limit the number of doctors in their network.

"Those rates are so low that the physician can't actually run their business profitably. They can't pay their overhead let alone make a margin that will be their salary, so they have to reject that offer and they're therefore out of network," Fleeger said.

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Health insurance company executives said that they're forced to limit the number of doctors in their networks or doctors would negotiate higher rates, putting more costs on patients.

They also said insurance networks aren't as strongly tied to surprise billing as doctors make it seem. A 2016 Commonwealth Fund study of large and smaller insurance networks showed a 3 percentage point difference in the rate of surprise billing.

"If it were a network adequacy problem, then research would show that surprise billing was different by the network and it would also be a problem across the board," said Jamie Dudensing, CEO of the Texas Association of Health Plans. She added that the bulk of surprise billing happens in three service areas: anesthesia, hospital emergency rooms and free-standing emergency rooms.

Hutson said free-standing emergency rooms, which are not affiliated with hospitals, have contributed to the problem in Texas. About 200 free-standing emergency rooms have cropped up in Texas since the state started licensing them in 2009 as a means to lower hospital emergency room wait times and fill a need left by rural hospital closures.

Lawmakers, patient advocates and insurance companies have accused free-standing emergency room operators of being opaque about their prices and insurance plans they accept.

State legislation passed this year requires free-standing emergency room operators to disclose to patients the average cost and fees for a treatment and which health plans consider their facilities in-network.

Rhonda Sandel, board president of the Texas Association of Freestanding Emergency Centers, said in a statement that insurance companies are more to blame for surprise billing.

"Over recent years, insurance corporations in Texas and elsewhere have systematically worked to erode the rights of people seeking medical care, particularly emergency care," Sandel said. "Providers of care refer to surprise billing by its truer name -- surprise undercoverage, the result of insurers selling junk health plans to unsuspecting consumers."

Legislative limitations

Over the last decade, Texas lawmakers have targeted surprise medical billing, adopting among the stiffest regulations in the country, unusual for a Republican-dominated state. Other states that have approved comprehensive legislation are Washington, Colorado and New Mexico.

In 2009, then-state Rep. Kelly Hancock, a North Texas Republican, authored a bill, passed into law, that allowed people with state-regulated insurance plans to pursue reducing surprise bills through Texas Department of Insurance's mediation service. As state senator, he filed bills in 2015 and 2017 that expanded the service.

The agency's mediation service has saved Texas patients more than $46 million in out-of-pocket health care costs since 2015, when the agency began tracking this data.

Even so, most Texans don't know about it, Hancock said.

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When Hancock was charged with a surprise bill of more than $1,000 last year for therapy services related to a shoulder injury, he decided to put his legislation to work. He went through the agency's mediation process and although his bill was lowered, he found the process too cumbersome for the regular Texan, so he proposed SB 1264.

"I wanted to personally experience the way everybody else does, and so that's the reason I did it and what prompted me to say, 'We can do better than this,'" Hancock said. "We can take the patient out of this, which is what we did."

Under SB 1264, a patient never receives a surprise bill, and it's up to the provider to ask for arbitration from the Texas Department of Insurance to resolve the cost differences between insurer and provider.

A bill authored this year by Sen. Larry Taylor, R-Friendswood, adds another layer of protection that applies to all insured Texans. The legislation prohibits the failure to pay a surprise medical bill from hurting one's credit report. Although patient advocates say the legislation essentially removes the main ramification for not paying a surprise medical bill, it doesn't prevent patients from receiving a bill.

Hancock understands the limits to his legislation and had authored another bill this past session to allow nonstate-regulated insurance plans to opt into the Texas Department of Insurance's mediation services. It passed the Senate but died in the House.

He plans on pitching it again next session.

Ambulance bills

SB 1264 also does not protect against surprise ambulance bills nor would the bills being considered in Congress. Ambulance charges are among the most common surprise medical bills because they often are not covered fully by insurance.

Jaime Lee, who has state-regulated insurance as a part of her job at the Texas Realtor Association, was charged $1,700 for two ambulance rides last year, charges she wasn't expecting. She provided the Statesman with copies of two bills.

Minutes after her son was born at St. David's South Austin Medical Center, doctors noticed parts of his body weren't receiving oxygenated blood. Within hours, the baby was in an ambulance on his way to the neonatal intensive care unit at St. David's Medical Center 8 miles away. To have another medical team double-check his condition, the baby was then taken three days later by ambulance to Dell Children's Medical Center.

Lee's son eventually received surgery to repair two holes in his aorta and is fully recovered. Lee and her husband ended up dipping into their savings to pay thousands of dollars in medical bills associated with the delivery and her son's surgery. The couple would have had to pay more if not for a patient advocate, a benefit offered by her job, who was able to negotiate with the insurance company and providers for lower bills -- except those from the ambulance company.

"We had no say in that decision. These are life-and-death, critical situations ... you're not thinking about the billing or if this is going to cost more over that," Lee said. "I almost feel like we were done a disservice. Our baby got excellent nursing and medical care, and it's just the fallout after the fact."

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