This is the second post in our series dealing with balance billing and surprise medical billing.
In this post, we’ll dive into various regulations and protections against balance billing, what they mean, and how they affect you as the individual.
Warning – this post assumes a basic level of background and familiarity with health insurance terminology that can be gleaned from our first post on the subject here.
As a reminder before we begin, Balance Billing occurs when a medical provider bills a patient the difference between the hospital chargemaster rate and the insurance company allowed amount. For a more detailed explanation of this as well as a breakdown of the different types of Balance Billing, check out our blog post on Understanding Balance Billing.
Right now Balance Billing regulations exist at both the state and federal level, and apply to different types of insurance plans. We’ll go over the different insurance buckets, federal balance billing regulations, and an overview of the types of state balance billing regulations. Finally we’ll discuss what an ideal balance billing regulation might look like.
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Different Types of Insurance
There are 4 broad buckets of insurance plans to go over – as state and federal Balance Billing laws will apply differently to these different buckets.
Medicare and Medicaid: Medicare and Medicaid are government funded insurance plans for the elderly and indigent (respectively). Balance Billing provisions are regulated at the federal level.
Private Insurance (ACA Compliant): These are insurance plans often run by major insurance companies that are ACA compliant (which, in addition to a host of other things, provides safeguards around what types of medical care must be covered). This is the insurance that can be purchased on the government exchange and is often offered through your employer. Here, Balance Billing is regulated at the state level, and as such, protections vary greatly on a state by state basis.
Private Insurance (Non-ACA Compliant): These private insurance plans fall outside of ACA compliance (in many cases because they were grandfathered in or because they aren’t required to be ACA compliant). In many cases they provide limited protections to patients and use predatory sales techniques to dupe unsuspecting consumers into thinking they’re purchasing better coverage than they actually are (see our blog post here for more about these plans). Even if the premiums on these plans are lower, we highly recommend avoiding them if at all possible. Like with ACA Compliant plans, Balance Billing is regulated at the state level.
Self-Funded Health Plans: Also known as Self-Insured plans, these are (usually) employer sponsored health plans that pay for medical care directly through their own funds instead of through an employer. Self-Funded Health Plans are regulated by ERISA and are exempt from state insurance regulation. This means that even if you reside in a state with comprehensive balance billing protections, you may still be balance billed if you have an ERISA regulated plan.
To make things even more confusing, large insurance companies may still administer self-funded plans, even if they aren’t responsible for paying claims. So your insurance card may say Cigna, Anthem, or another large insurance company even though your employer administers a self-funded health plan.
Because ERISA is a federal law, it supercedes all state laws regarding insurance plans (as mentioned above). On top of that, remedies for injuries must be taken to the federal level rather than the state level (where state insurance commissions provide a way for a final dispute resolution).
Balance Billing at the Federal Level
While the ACA creates a host of requirements for insurance plans (such as coverage for pre-existing conditions, in-network payments for emergency care, and a host of other items), it does not deal billing on the provider side. That is, there is no regulation in the ACA that specifically addresses balance billing by providers. This means that Private Insurance (both ACA and non-ACA compliant) have no federal level legal protections against provider balance billing.
Breaking out an example in the above – the ACA requires that insurance companies cover out of network emergency room care at in-network rates. So if you go to the ER while on vacation, your insurance company must pay an in-network rate for your care. However, the hospital can still charge you the difference between their chargemaster rate and the amount they received from your insurance company.
Medicare and Medicaid have their own set of regulations separate from the ACA. Under Medicaid, providers generally cannot bill Medicaid patients if the provider has already billed and accepted payment from Medicaid.
Medicare protections are similar but slightly looser. Participating providers (providers who agree to provide medicare services and take medicare reimbursement) cannot balance bill. Non-participating providers are allowed to charge patients up to 15% of the medicare approved amount (on top of the amount they receive from Medicare). Thus while balance billing is possible depending on the situation, its significantly limited and Medicare beneficiaries are protected from price gouging chargemaster rates.
Self-funded plans, as mentioned above, are only regulated at the federal level. And since there are no federal prohibitions against balance billing (nor specific legal protections should it occur), self-funded plans may be balance billed.
There have been a few attempts by congress to pass laws dealing with balance billing, including the bipartisan Stopping Surprise Medical Bills Act and the Reducing Costs for Out-Of-Network Services Act of 2018. Unfortunately none of them have made it through both houses and past the President’s desk.
Balance Billing at the State Level
As a reminder – balance billing at the state level only applies to patients covered by private insurance plans. As mentioned above, patients with Medicare, Medicaid, or a Self-Funded plan are regulated at the federal level – even if the state the patient resides in has laws in place.
About half of all states provide for some sort of regulation against provider balance billing – with many more introducing or considering legislation to that effect.
The specific language of state by state legislation varies greatly, as does what is and is not covered. If you believe you’re being balance billed, it may be a good idea to look up your state specific legislation.
When reviewing your state balance billing legislation you should be looking to understand how it addresses the following 3 items: care Setting (emergency room vs non-emergency room), type of plan covered (HM3O or PPO), and the state method for payment (binding dispute arbitration vs a payment standard).
Care Setting (Emergency vs Non-Emergency)
An emergency care setting will provide for protections against balance billing from a) an out of network ER room at an in-network hospital (which is unfortunately all too common) and b) an out of network ER room at an out of network hospital. In these instances, balance billing is a generally blanket prohibition (vs only being able to balance bill if informed consent was provided by the consumer ahead of time).
Non-emergency care setting balance billing prohibitions are generally a little looser. In many states, the provider can balance bill if they notify the patient ahead of time that they are an out of network provider and the patient may be balance billed. In these cases, providers get around balance billing issues by burying an out of network disclosure statement in the mountain of paperwork that patients must sign before receiving treatment.
Type of Plan (HMO or PPO)
In most states that address balance billing, both HMOs and PPOs are covered. However there are a few states with legislation that either covers HMOs and not PPOs or provides lesser protections against balance billing to patients with PPOs.
This can get a little confusing but its important to understand, as this may mean that you’re not protected against balance billing because of your plan type – even if you live in a state with balance billing protection laws on the books.
Payment Method (Dispute Resolution or Standard of Payment)
State level balance billing laws almost always provide for requirements for what an insurance company must pay the hospital in a potential balance billing situation. While you as the patient aren’t responsible for this, understanding the standard can be useful as a way to push against the hospital or insurance company in a balance billing situation.
States with a Dispute Resolution method have a binding arbitration process set up that insurance companies and providers must go through if they can’t come to an agreement on the amount to pay for a bill.
States with a Standard of Payment provide for a method of calculating a fair rate for payments (since there is no contract between an insurance company and an out of network provider, the concept of an ‘in-network rate’ can be somewhat nebulous). This can be a percentage of the Usual and Customary rate, the average of in-network reimbursements, a multiple of medicare, or the combination of any of the above.
Regulating provider balance billing is a major issue and something that absolutely needs to be taken care of at the federal level and cover all health insurance plans. The state by state and insurance plan by insurance plan leads to significant confusion and issues. At the very least any bill should provide for the following:
- Prohibition of balance billing for out of network emergency care in all instances (beyond the in-network cost-sharing amount allowed by the patient’s insurance plan)
- Prohibition of balance billing for non-emergency out of network care when the patient was not clearly informed ahead of time of the specific care that was out of network (beyond the in-network cost-sharing amount allowed by the patient’s insurance plan)
- Holding patients harmless for any balance billing that may occur
- Covering all health insurance plans – from HMOs and PPOs to self-funded plans (though this last one may need to be done separately through ERISA)
- Calculate required insurance company reimbursement rates based on the average of in-network rates for the same procedure in the same area
Part (b) above is a big step forward over existing legislation that’s been introduced. Usually the requirements for patient notification of non-emergency out-of-network care are loose and result in patients signing statements along the lines of “I acknowledge that some of the services provided may be out of network and I may be responsible for additional charges”. While this level of specificity may put a large burden on providers – surprise out-of-network care is a significant problem that is difficult for patients to protect against.
If you think you’ve been balance billed – we’d love to hop on the phone to discuss the situation and figure out a path forward. Call us at 877-245-4244 to talk with one of our experts.
Braden founded Resolve after experiencing first hand how unfair the system is for patients. Prior to Resolve, he built and ran Operations for a renewable energy company and then built and ran Product, Growth, and Operations for a VC-funded edtech company. He received his MBA from Dartmouth’s Tuck School of Business and BA in Philosophy from the College of William and Mary. When not trying to lower healthcare costs he can be found outdoors mountain biking, skiing, or hiking with his dog.