Bringing Surprise Billing Under Control

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Surprise billing, or in some instances referred to as balance billing, occurs when an insured member receives care from an out-of-network provider. As a result the member receives an unexpected bill. 

A common situation in which surprise billing arises includes emergency care, where the member receives care in a facility or by providers, most often ambulance services, not considered in-network. The member’s action here is unintentional, as they likely sought out the closest care available due to the seriousness of the emergency. In fact, they may have been incapacitated and made no decisions at all regarding their care. In most cases, surprise billing in an emergency situation is resolved by the member’s carrier, however there may be a series of phone calls and paperwork needed. A hassle, but likely no additional out-of-pocket expenses for the member.

The more serious concern regarding surprise billing occurs as part of planned medical procedures where a member may receive treatment such as a surgery within an in-network hospital. While the hospital and the surgeon may be in network and were known to the patient, a pathologist, radiologist, or an anesthesiologist – someone whom the patient may never have met before – may not be within the network. In some situations, entire departments may be out of network, even though they are physically located within an in-network facility. This can be confusing for members.

As a result, the patient receives a surprise bill from those ancillary providers. In this case, the patient thought they did everything right by checking the network status of the hospital and the surgeon, but they are billed far beyond what they thought their obligation would be – hence the term surprise billing.

Surprise billing is not a chance occurrence, according to the American Bar Association, which estimates that the practice occurs in about 20% of emergency room visits involving out-of-network care. For those patients, and those who receive out-of-network services at in-network facilities, surprise billing can bring unintended consequences. By accumulating massive amounts of medical debt, patients may delay or prevent follow-up or additional needed care. 

Surprise Billing Causes

The root cause of surprise billing has two factors: the first reflects the cost differential in patient-cost sharing between in-network and out-of-network providers. In a PPO plan, a member may not completely understand that they have varying payment responsibilities depending on if the provider is in or out of network. The second factor reflects the negotiated fees with network providers that offer the carrier a discounted rate for services for the carrier’s members. Health plan contracts may sometimes prohibit providers from charging patients the difference between the negotiated rate and the full rate. But what if the provider is out of network? The simple answer – no such non-billing agreement is in effect. And healthcare providers know it. 

This means that clinicians can charge more as long as they remain out-of-network, i.e. operate in a facility that is within a network other than their own, or when they are treating patients who belong to some other network. Further compounding the issue, providers who are aware of insurance company loopholes may try to negotiate settlements at higher rates and thereby increase profit margins. To be fair to providers, not all surprise issues originate this way and may just result from the realities of today’s healthcare system.

Staffing issues are one of these realities, with hospitals relying heavily on specialists such as radiologists, pathologists, assistants and emergency medicine professionals who may happen to be out of network. 

Whether planned by providers or due to staffing shortfalls, patients are responsible for millions in surprise medical fees annually2, not to mention harassment and legal action by collection agencies for non-payment.

Two Requirements to Eliminate Surprise Billing

This is not an unsolvable problem and further, no one objects to eliminating the practice of surprise billing. But to fully resolve the issue will require two developments: legislative change and industry agreement on out-of-network compensation.

Legislative Change:

  • Mandatory Disclosure: One part of the solution could include a requirement to alert patients who are in non-emergency situations in advance whether each specialist or doctor will be within their insurance network. This information should be explained ahead of time, and patients should be given the right to choose only in-network providers at hospitals, refuse care, or look elsewhere. If they have to undergo treatment with a radiologist who performs diagnostic tests without their say, for instance, patients should always be held harmless.
  • A System-wide Ban: A more effective approach and one that would eliminate the need for mandatory disclosure would be to outlaw surprise billing in any setting, i.e. making it impossible for a member to be responsible for any cost over and above the stated costs of their healthcare (premiums, co-pays, co-insurance, et. al.). 
  • Federal/State Alignment: In December 2020, Congress prohibited surprise billing in the Omnibus COVID-19 package. The new rules leave patients harmless from balance billing and ensures that they will only be held responsible for in-network costs in both non-emergency and emergency situations where they are unable to choose an in-network provider. However, right now, federal law regarding these issues does not pre-empt state laws. We want to see universal alignment to protect members in all 50 states and the District of Columbia. 

Industry Agreement:

  • Cost-effective Resolution: At present, providers and carriers are at loggerheads over how to resolve instances of out-of-network charges. Carriers would prefer to see each case go to arbitration where the arbiter could consider benchmarks, but not be obligated to adhere to them. We agree with the insurance industry which feels that benchmarks are absolutely necessary. Further, absent of benchmarks, we would like to see an independent resolution process for disputes, not including arbitration. Costly arbitration processes can raise premiums and only accelerate healthcare inflation. 
  • Benchmarked Rates: By creating a federal benchmark, patients would receive out-of-network care covered by insurance at fair, market-based rates.  Insurance carriers and out-of-network providers in this situation would be required to use rates that are predetermined based on some sort of median in-network rate, or a multiple of Medicare. What’s needed here is providers and the industry to come to the table.

Final Thoughts

Millions of patients have been experiencing significant financial burden as a result of surprise billing, at a time when they are at their most vulnerable due to medical illnesses and emergencies. Federal and state legislatures need to prioritize the elimination of surprise billing, helping patients receive affordable healthcare and preventing financial stress when emergencies arise. The second piece of the puzzle, agreement on reimbursement between providers and the insurance industry, is just as critical to reduce insurance costs for employers and their employees.

We know that surprise billing is a real-world issue that benefits professionals face every day, complicating how they serve their employees. Innovo Benefits Group has a comprehensive understanding of the issue, and is actively lobbying on the behalf of our clients and carriers to resolve the issue. 


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1 Surprise Billing: A Window into the U.S. Health Care System, American Bar Association, September 08, 2020

2 Surprise Medical Bills Cost Americans Millions. Congress Finally Banned Most of Them, The New York Times, December 20, 2020

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