State regulates 'surprise' out-of-network hospital bills

Margaret Beck
Insurance Insights
Amit Kumar and his son, Ray, work on a do-it-yourself electronics project. Ray, who has autism, responded quickly to the standard treatment, but the family's health plan in Virginia, Anthem Blue Cross and Blue Shield, said it was not included or not medically necessary. The family moved to Irvine, Calif. over Christmas 2021 solely because California more strictly regulates coverage.

Surprises can be fun if followed by a party with your friends, and maybe even cake and ice cream. But it’s not so much fun when it surrounds medical bills.

In 2017, the state passed a law that prohibits surprise medical bills from out of network providers when seeking non-emergency care from an in-network facility. For example, you need surgery, you choose a facility that is in your health plans preferred provider network. You are relieved that you won’t have to worry about how everything is covered.

Then the bills start rolling in. You find that anesthesiologist or lab are not contracted with your hospital. This used to be a regular occurrence in the North State and you would be left with substantial additional out of pocket costs.

Fortunately the 2017 California bill protects you. It states that you would pay only the in-network cost sharing amounts and you may not be balanced billed. There is a fact sheet to explain the process available online at bit.ly/3h2k8iX.

However, this bill did not protect individuals covered under an employer self-funded plan. Self-funded plans are regulated by the U.S. Dept. of Labor.

A new federal law took effect on Jan. 1 that extends these types of protections to all citizens and filled in the gap for the six million Californians covered under self-funded plans: www.cms.gov/nosurprises.

But as they say, the devil is in the details.

The American Hospital Association and American Medical Association are challenging the way in which the law is administered. The rules are set to direct the health plans and providers to negotiate the payment between themselves, leaving the insured to pay only the in-network copays and co-insurance.

If the health plans and providers cannot agree, the process moves to arbitration. Both sides provide their best offer and the arbitrator chooses the winner, leaving the loser with the reduced amount as well as the arbitration cost — between $200 and $500.

The Biden administration put heavy emphasis on the in-network negotiated rate at the standard for the process. These AMA and AHA lawsuits allege this is unfair and not in the spirit of the law since Congress did not specify weighting this factor.

Health and Human Services Secretary Xavier Becerra stated in interview if the arbitration process were “wide open” costs would go up, so a system that “provides the guideposts to keep us efficient, transparent and cost-effective” was established.

As the law stands now, the Congressional Budget Office projects the Federal "No Surprises Act" could lower premiums by about 1% and reduce the federal deficit by $17 billion.

Couched in the concept of being unfair to the medical provider, these lawsuits also allege that it gives insurers an advantage when negotiating with providers. But the other scenario is — with the consolidation of medical groups — an area could end up with just one anesthesia group for example, and the group could simply refuse to negotiate.

California has some meaningful experience with this type of regulation. In a four year period the Department of Managed Health Care resolved 1,006 consumer complaints about balance and surprise billing, yielding near $1 million to 467 enrollees. I suspect there are many more potential claimants who don’t even know this law exists.

Here we have one more small step in reforming our very cumbersome and inefficient health care system. Remember that it's important to know your deductible, copays and out of pocket limits on your health plan. The “No Surprises” laws don’t cover the fact that you didn’t understand your plan.

A note to Anthem Blue Cross EPO Network Insureds: As of Jan. 1, the following University of California Health Hospitals will no longer be covered.

  • Benioff Children’s Hospital, also known as Children’s Hospital and Research Center of Oakland
  • University of California San Francisco Medical Center
  • UCSF Children’s Hospital
  • UC Davis Medical Center

Remember that EPO means Exclusive Provider Organization, so if you go out of network there is zero coverage. A letter has gone out to policy holders explaining the continuity of care process for those already undergoing treatment at these facilities.

Margaret Beck has been a licensed insurance broker since 1978. Call her at 530-225-8583.