States address surprise medical charges, but N.J. plan stalls

June 21--Lawmakers in many states are moving urgently to curb surprise medical bills -- a problem that is exploding around the country as patients shoulder more of their health costs and insurers shrink the lists of health care providers they want their members to use.

A proposed New Jersey law to protect consumers appears stalled for now, but in New York and Illinois, patients are no longer at risk for unexpected bills when they receive emergency care or go to an in-network hospital or ambulatory surgery center. In Connecticut, a law taking effect next year extends those protections.

Binding arbitration is to be used in each of those states to settle the fights between insurers and out-of-network doctors or hospitals over how much should be paid. In Texas, patients can request mediation for disputed bills of more than $500 from certain specialists.

It's too soon to say how well these different efforts are working, but the pressure is on, created by the growing number of patients who find themselves confronting bills they never expected or tried to avoid in the first place by going to an in-network hospital.

"The blood is on the floor," said David Knowlton, president of the New Jersey Health Care Quality Institute, explaining the strong momentum behind last month's introduction of "The Out-of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act." The institute worked with the measure's sponsors, including Sen. Joe Vitale, chairman of the Senate Health Committee, and Assemblymen Gary S. Schaer of Passaic, Craig Coughlin of Woodbridge, and Troy Singleton of Mount Laurel. Six years of previous efforts to legislate a solution had floundered.

But lawmakers in Trenton, including fellow Democrats, had questions about the impact of the bill. Some hospitals and physician groups mounted a pointed opposition. In the end, the measure did not move out of committee.

Legislators are now focused on passing a state budget, said Schaer, but "there's a firm commitment on the part of the four sponsors to getting this done as soon as we can." An amended bill will be submitted in September, he said, with the goal of passing it by the end of the year.

'Tricks and traps'

As more consumers are stung by out-of-network expenses, "I can imagine [the problem] will get significantly worse," said Chuck Bell, programs director at Consumers Union, the advocacy group that publishes Consumer Reports and was a strong supporter of the New York law. "The system is just loaded with tricks and traps at every turn. How long are we going to put up with it?"

The worsening problem is the result of several converging trends: Some insurers, competing for customers on marketplaces created by the Affordable Care Act, have tried to push down premiums by shrinking the networks of doctors and hospitals their members can use. Hospitals that once employed the doctors who provide anesthesia, evaluate lab tests, and do imaging studies at their facilities now sub-contract those services to independent physician groups, who negotiate their own contracts with insurers and send their own bills to patients. Once admitted, patients may have no alternative, if a hospital-based specialist doesn't participate in their insurer's network.

And increasingly, doctors view balance billing -- the practice of billing the patient the amount remaining after the insurer has paid the claim -- as an opportunity to enhance their revenue, at a time when Medicare and managed-care contracts hold reimbursements for most patients in check,

While the sponsors of New Jersey's measure say they'll regroup and do a better job of clarifying the bill's details, other states have managed to forge solutions to at least some parts of the problem.

New York has the most comprehensive law, an accomplishment made possible in part because Gov. Andrew Cuomo and state insurance regulators pushed for action after finding that disputes about unexpected medical bills were the single largest source of consumer complaints. In 2012, the state published "An Unwelcome Surprise: How New Yorkers are Getting Stuck with Unexpected Medical Bills from Out-of-Network Providers," complete with recommendations.

When the regulators brought different sides to the table, consumer advocates said, compromise was quickly reached. When the governor included the bill in his budget address, a vote was forced.

The New York measure took effect in April, and requires that patients in emergency medical situations pay no more to out-of-network providers than they would have to those inside their insurance network. It sets up an independent process for resolving billing disputes between insurers and providers.

Shielding customers

Other states, such as Texas, have taken a scalpel to the problem.

There, the state shields consumers from demands for payment from six hospital-based specialists -- anesthesiologists, radiologists, pathologists, emergency physicians, neonatologists and assisting surgeons -- over whom patients have no choice. Consumers can challenge bills over $500 from those providers in mediation. Assisting surgeons were added to the list this year and the mediation threshold lowered from $1,000 through an amendment.

None of the laws in other states appears to regulate out-of-network billing by an entire hospital system, as the New Jersey measure would.

The CarePoint Health chain of three Hudson County hospitals has argued that out-of-network billings "are a survival strategy." Its executives say additional revenue from the 7 percent of its patients for whom CarePoint bills out-of-network rates makes up for the shortfalls from its treatment of Medicaid and Medicare patients. At the same time, the for-profit chain's charges for common treatments are among the highest in the country, and it recorded a profit margin of 5.7 percent in 2013, or $31.8 million.

"New Jersey seems to be an extreme case," said Jack Hoadley, a professor at the Georgetown University Health Policy Institute and lead author of a study published last week about how states are protecting consumers from unexpected charges. "The hospital situation is pretty uncommon."

In most states, the politics of getting a law passed was challenging. Connecticut may have avoided controversy on this provision by tucking its surprise-medical-bill rules into an 87-page law about even thornier health care subjects, including hospital sales and mergers, and the fees hospitals charge for outpatient care.

Other states struggled to weigh the competing interests of insurers, doctors, hospitals and consumers. In California, where a 2009 state Supreme Court decision made it illegal to balance-bill emergency-room patients, "we're talking billions of dollars of revenue," said Anthony Wright, executive director of Health Access California, a consumer advocacy group.

A measure to extend those protections to non-emergency patients who inadvertently receive bills from out-of-network physicians when they go to an in-network hospital or other facility passed the California Assembly with strong bipartisan support, and is pending in a Senate committee. "I think we have a shot at it this year," Wright said, noting several previous attempts.

More patients than ever are affected, he said, because 1.8 million mostly low-income Californians were added to insurance rolls through the Affordable Care Act. For low-income families, the consequences of an out-of-network bill can be financially catastrophic.

Hoadley points out that "every state has a different balance of power between powerful insurance companies, powerful hospitals and powerful doctors' groups that drives which way that compromise gets forged -- if indeed it does get forged."

In Texas, for example, much was demanded of insurance companies by the strong medical lobby.

Insurance directories there must reveal the percentage of out-of-network doctors at the insurer's in-network hospitals, and which hospitals totally lack network physicians in certain specialties. More than half of the in-network hospitals for one major insurer, for example, lacked a single emergency physician who was in-network, a consumer advocacy group found by using that information. A trip to the ER would automatically yield an out-of-network bill from the treating physician.

"Transparency works both ways," Hoadley said. Disclosure of fees and payments is usually a part of the new laws, but some also demand that insurers produce more timely and accurate information about who's in and who's out of their networks.

Texas does not prohibit balance billing for most patients.

Billing disputes

In other states -- as in New Jersey -- insurers, doctors and hospitals say they agree with the notion of removing the consumer from the middle of billing disputes over emergency care.

The hard question came after that, over how to determine how much the health care provider would be paid. California's proposed law doesn't specify how that would be resolved. New York set up an independent dispute resolution process in which a physician in the same specialty would decide. That physician would choose one side's final offer or tell the two sides to negotiate further.

Illinois imposed binding, baseball-style arbitration, conducted by an arbitrator chosen from a list maintained by the state insurance department. New Jersey's current proposal follows the Illinois model, but some legislators said they would prefer to leave lawyers out of it and rely on a system of peer review.

"Any one of these ways to get to that price will have winners or losers," Hoadley said. "That's why it's politically difficult."

But, he said, if the effort to forge a political compromise fails, the consumer is the one who pays the price.

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