Balance Billing by Non-Par Physicians Under Involuntary Situations

The issue

Balance billing occurs when physicians bill their patients more than what the insurer
pays for their services. Since contract and state law generally prohibit participating
(par) physicians from balance billing members, it often occurs in situations involving
physicians who do not participate (non-par) with a health plan, and therefore do not
accept pre-negotiated health plan rates. Usually members understand they must use
par physicians to minimize out-of-pocket expenses. But even a savvy consumer can
end up being treated by a non-par physician and receive a large bill for the
difference between the physician’s charge and the amount paid by the health plan.1
This typically occurs when a member:

Selected a par hospital (or non-par hospital in the case of an emergency);

  • Received services from a hospital-based, non-par physician (most commonly in anesthesiology, emergency, pathology and radiology); but
  • Did not have an option to select the hospital-based physician (i.e., the hospital selected the physician for the member).

For members who find themselves in these involuntary situations, balance billing
raises questions about member protection, cost containment and physician
transparency.

The Aetna perspective

An effective solution should protect members from balance billing, as well as provide a more transparent and less costly reimbursement system of hospital-based, non-par physicians. Aetna recommends the following combination approach:

  • Prohibit non-par physicians from balance billing members. We support measures that protect members from physician/health plan billing disputes.
  • Require health plans to pay non-par physicians at 125 percent of Medicare for that specialty/geography. A prescribed rate of 125 percent of Medicare creates payment transparency.
  • Establish arbitration as the exclusive remedy for physician disputes. A mandatory arbitration process saves time and money; binding decisions eliminate appeals.

Some states already have adopted components of this solution; but adopting the three components together would comprehensively address the issue.

Fast facts

  • Californians who received emergency room care during a two-year period were balance billed an average of $300; about half paid their bills.2
  • In 2008, the average amounts billed by hospital-based, non-par physicians for anesthesiology, emergency, pathology and radiology services in par hospitals to Aetna members exceeded Medicare by several hundred percent: 488 percent (FL); 396 percent (IL); 464 percent (LA); 346 percent (OH) and 358 percent (WA).3
  • The Supreme Court in California recently upheld California’s prohibition against non-par physicians balance billing HMO members for emergency services.4

Containing costs

Health plans reduce cost and improve quality through network-based plans, by contracting at negotiated rates with physicians who meet certain quality standards. However, hospital-based physicians often negotiate exclusive relationships with hospitals, but not the plans with which the hospitals contract. As a result, members who select a par hospital to save costs can be billed by the hospital’s non-par physicians, who generally bill at higher rates than par physicians. For example, in Louisiana, non-par pathologists billed an average of 459 percent of Medicare, while par pathologists billed an average of 295 percent of Medicare for services rendered to Aetna members.5 Because this practice can add substantial cost to the health care system when members and/or health plans pay these balances, many policymakers are currently considering solutions.

State approaches

States have adopted different approaches to address the issue, with varying success:

  • Enhance transparency by providing consumer information about non-par charges (e.g., physician network and charge data, an estimate of cost sharing amounts, etc.).6 Disclosure based laws provide pertinent information, but do not address the reasonableness of physicians’ charges or prohibit balance billing.
  • Create a dispute resolution process (i.e., arbitration) for reimbursement of services rendered by non-pars.7 A dispute resolution process can be more timely and efficient than most civil remedies. However, unless it is the exclusive remedy available, a party dissatisfied with an arbitrator’s decision may use a different forum (i.e., civil action).8
  • Establish the reimbursement rate for non-par services (e.g., X percent of Medicare, a fee schedule, etc.).9 Setting a rate based on an external standard provides transparency and less room for disputes. The California HealthCare Foundation study supports use of a percentage of Medicare instead of the frequently debated “usual and reasonable” standard.10

Federal perspective

Medicare: Balance billing by non-par physicians is capped at 9.25 percent of the Medicare Fee Schedule applicable to physicians in the physician program;11 and 93 percent of providers enroll in the physician program, agreeing not to balance bill.12

Legislation: Under the Affordable Care Act passed in 2010, out-of-network providers may balance bill patients for the difference between the providers' charges and the amount collected from the plan or issuer.  But the regulations indicate that out-of-network emergency services must be reimbursed at the greater of the in-network rate (or median rate if there is more than one), the applicable out-of-network reimbursement, or 100 percent of the Medicare rate. HHS Guidance issued on 9/20/10 clarified that this calculation requirement is not triggered if plan/issuer is contractually responsible for the balance billed amounts (less member cost share) or a state law prohibits balance billing, so long as plan/issuer provides adequate and prominent notice of the member’s lack of financial responsibility for such amounts.

1 Rau, Jordan, “Insurer Okayed Out-of-Network Care for Heart Patient But Family Faces Huge Bill,” Washington Post
(January 19, 2010).
2 “Unexpected Charges: What States are Doing About Balance Billing,” Health Policy Institute, Georgetown University;
National Academy for State Health Policy, (p.4) April 2009.
3 Internal Aetna Data Analysis based on 2008 claims.
4 See Prospect Medical Group v. Northridge Emergency Medical Group (January 8, 2009).
5 Internal Aetna Data Analysis based on 2008 claims.
6 LA, OR, NJ, TX, and WI have adopted this approach.
7 CA and FL have adopted a voluntary dispute resolution system; DE’s process is mandatory.
8 “Unexpected Charges: What States Are Doing About Balance Billing,” (p.12).
9 MD, MI (Medicaid dental), NJ (Medicaid hospitals), TN (Medicaid hospitals).
10 “Unexpected Charges: What States are Doing About Balance Billing (p. 15).
11 “Unexpected Charges: What States Are Doing About Balance Billing,” (p.17).
12 Medicare Payment Advisory Commission, “Report to Congress: Medicare Payment Policy,” (p.84) March 2008.
13 Patient Protection and Affordable Care Act (H.R. 3590), Section 1302.