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);
For members who find themselves in these involuntary situations, balance billing
raises questions about member protection, cost containment and physician
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:
Some states already have adopted components of this solution; but adopting the three components together would comprehensively address the issue.
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.
States have adopted different approaches to address the issue, with varying success:
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.