Surprise Medical Bills: Finding the Middle Ground

Published July 29, 2019

Surprise medical bills tend to arrive in the mail unexpectedly, weeks to months after a patient visits a doctor or hospital outside of the insurance network. The “surprise” comes to the unlucky patients in the form of large bills that they usually are not prepared for, due to be paid in a few weeks’ time. According to research from the University of Chicago, 57 percent of Americans have received at least one unexpected bill that they believed was covered by insurance. While there are other reasons a patient may receive this type of bill, the most prevalent is due to receiving care from an out-of-network provider or hospital. As health insurance plans and benefits become increasingly more difficult to maneuver, many of these situations stem from patient and provider confusion around network tiering, prior authorizations, covered services, up-to-date provider data, etc. In most cases, insurers are not contractually obligated to cover expenses associated with out-of-network care. Subscribers agree to these terms when they enroll in their health plans.

Nevertheless, there has been considerable public outrage over these types of surprise medical bills. Lawmakers with their fingers to the political winds have taken notice and seek to find a solution to this flawed system.

The Legislative Bandwagon

The U.S. Congress has already introduced several pieces of legislation aimed at surprise medical bills. The most recent, a bipartisan effort was announced in May 2019, with the encouragement of the President. The major differences among all of the proposed bills hinge on the question of whether insurance companies have the discretion to challenge coverage based on the necessity of hospital charges. Outside of this one disparity, the features of the current proposed laws are analogous to each other.

Emergency Care

The latest legislation also focuses on emergency care, which is the source of many surprise medical bills. Many patients misunderstand how their coverage works, and assume that emergency care is a covered expense, with the exception of their co-pay or deductible. Emergency care coverage becomes even more confusing in situations where an ER physician requests a consult with a specialist. For example, the treating physician may need to consult with an ear, nose, and throat (ENT) specialist for a patient with a broken nose or a neurologist for someone who has just had a stroke. This ENT or neurologist may not be in the patient’s network, even if the hospital and ER doctor are. At some point the patient will receive a “surprise” bill from the specialist who was not covered, making the patient responsible for all or part of the entire amount. The new legislation would compel insurers to cover out-of-network emergency room consults.

Because of the volume of patients with various benefit arrangements who are admitted to the ER on a daily basis, treating physicians are almost never aware of a patient’s plan design. In many cases, ER physicians are urgently trying to treat a sick or injured patient and have no choice of whether the available on-call specialist is in-network or out-of-network. As emergency rooms are notoriously hectic, physicians do not have the capacity to contact the billing department for every patient consult. Should the new proposed laws be enacted, insurers would be compelled to pay for these types of out-of-network consults.

Fair Notification

One point of contention regarding this new legislation relates to finding a middle ground between surprise medical bills and blanket coverage for all emergency visits. If patients are notified prior to receiving treatment that certain services may not be covered, the element of surprise may be eased upon receiving the associated bill.

Fair notification may take the form of a sign in the emergency room alerting the patient to the possibility of out-of-network charges. Another option is requiring a member of the billing department to inform patients, or their next of kin, about the policy. However, it is uncertain whether patients can reasonably expect busy emergency room doctors and staff to establish and implement a system that would provide fair notification. In addition, if fair notification is provided, there is a chance that patients could refuse necessary medical care upon being made aware of the expenses they may later face.

The Downsides of Legislation

Insurance companies create payment networks for two reasons: to steer their members toward high-quality providers and to reduce costs. The legislative efforts currently in process would force insurance companies to cover costs regardless of quality and price. If given the option, while a patient may voluntarily choose a low-cost local emergency room, there is still a possibility that the same patient would seek treatment in a high-cost hospital, increasing the likelihood of receiving treatment from an out-of-network provider. Insurers would have no way of managing this type of spending behavior on the part of their plan members. As a result, premiums would increase for all members. With the current climate of rapidly rising healthcare costs, this outcome would not benefit anyone.

Furthermore, the new legislation will probably do little to stem the tide of overuse of emergency services by patients who don’t have emergent medical problems. To the contrary, the knowledge that all emergency room care will be paid for is likely to stimulate non-emergent use of emergency services.

Possible Upsides to the Legislation

Medical bills are a significant cause of personal bankruptcies in the U.S. Even patients with the richest coverage risk financial ruin in the wake of an illness in the family. The new “surprise medical bills” legislation may help prevent some of these bankruptcies.

The new laws could potentially compel hospitals and doctors to be more transparent regarding their fees. Price transparency can help steer policyholders toward providers whose charges are more affordable if they are required to pay. More doctors and hospitals may be willing to negotiate with patients for uncovered costs. Finally, price transparency may help reduce some of the large cost disparities between regions — and even between hospitals.

Given the sheer volume of legislation before Congress, it is likely that some form of surprise medical legislation will pass this year. In the best-case scenario, Americans will no longer be stuck with crippling hospital bills, and premiums will stay relatively stable.