This analysis is part of USC-Brookings Schaeffer Initiative on Health Policy, which is a partnership between the Center for Health Policy at Brookings and the University of Southern California Schaeffer Center for Health Policy & Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.
“Surprise” out-of-network bills are widely seen as an unfair aspect of today’s health care markets. Patients are unfairly surprised when they are billed by a provider not in their insurer’s network where they had no reasonable opportunity to choose a network provider. Not only are these patients charged the full, not-negotiated “chargemaster” rate, they usually must also must pay a greater portion of the charges because it is out-of-network care.
More recent work from the USC-Brookings Schaeffer Initiative on Health Policy related to this topic can be found here:
- Federal surprise billing legislation does not violate the constitution
- Network matching: An attractive solution to surprise billing
- Breaking down the bipartisan Senate group’s new proposal to address surprise billing
- Analyzing the House E&C committee’s bipartisan surprise out-of-network billing proposal
- Analyzing Senator Hassan’s binding arbitration approach to preventing surprise medical bills
- Analyzing new bipartisan federal legislation limiting surprise medical bills
In addition, the balance bill they pay typically is not protected by the insurance plan’s maximum out-of-pocket (commonly referred to by policy wonks as a “MOOP”) limit. Both blue and red states have already started taking steps to protect consumers from these potentially devastating bills, but as we have outlined before, federal action is needed to protect all American consumers. The following two federal actions could offer distinct forms of protection from surprise bills – from requiring that any amount paid toward a surprise bill must count toward the maximum out-of-pocket limit to holding patients financially harmless for any cost above in-network amounts. In this blog, we explain the details of each action, and discuss the merits, risks, and limitations of these reforms.
|Patient Protections from Surprise Out-of-Network Bills|
|2018 ACA Benefit and Payment Parameter Rule||The Patient Freedom Act|
|Applies In-Network Cost Sharing (Co-pays, Coinsurance, and Deductibles)||The ACA requires that insurers limit to in-network rates the cost sharing they charge patients for emergency care, but the ACA does not limit what providers may balance bill patients for this care.|
|Limits Insurer Liability||The ACA outlines what insurers must pay toward out-of-network emergency care.|
|Limits Patient Liability||Partially||Partially|
|Prohibits Balance Billing||No||Partially|
|Applies In-Network Cost Sharing (Co-pays, Coinsurance, and Deductibles)||No||No|
|Limits Insurer Liability||No||No|
|Limits Patient Liability||Partially||No|
|Prohibits Balance Billing||No||No|
2018 ACA Benefit and Payment Parameter Rule
The ACA prevents all but grandfathered health plans from charging patients any more than their standard in-network cost sharing amounts for emergency care. However, the ACA does not prevent emergency care providers themselves from balance billing patients, and it has no protection for surprise billing for non-emergency care. However, in setting requirements to maintain “qualified health plan” (QHP) status in the federal or state exchanges, the Centers for Medicare and Medicaid Services (CMS) issues a “benefit and payment parameter” rule each year that contains modest additional protections. The 2018 rule (page 89) does so by requiring that patient cost sharing for certain surprise bills at least count toward a health plan’s maximum out-of-pocket limit.
Senior Research Assistant
Assistant Director and Senior Research Analyst - Center for Health Policy, Brookings
Nonresident Senior Fellow - Economic Studies, USC-Brookings Schaeffer Initiative for Health Policy
The surprise bill provision of the Cassidy-Collins’ Patient Freedom Act
The Patient Freedom Act of 2017 is one of the bills pending in Congress to reform the ACA. Tucked in this particular bill is a provision that protects patients from surprise medical billing in emergencies, simply by limiting the amount an out-of-network provider can charge (although this would not pre-empt existing state protections). The bill outlines these limits by category of service: 85 percent of usual, customary, and reasonable rates (UCR) for physician services, as defined by the insurance department of the state in which services were furnished; 110 percent of traditional Medicare rates for hospital services; and, for drugs and biologics, the lesser of two times the acquisition cost or acquisition cost plus $250.
Each of these federal actions can lessen the risk or mitigate the impact of surprise medical bills for insured Americans, a problem that has long plagued private health insurance beneficiaries in America, but individually will not completely protect consumers. As we have recommended before, a more comprehensive federal solution is necessary to protect consumers from balance billing. Any solution should cover emergency and non-emergency services, patients should be held completely harmless beyond normal cost sharing, and payment guidelines and dispute resolution process should be clearly outlined for physicians, hospitals, and insurers. Update: After closer examination of the legislative language in the End Surprise Billing Act of 2017, the bill’s intents and impacts are unclear, and as such, this blog’s discussion of that bill has been removed.
The Initiative is a partnership between the Economic Studies program at Brookings and the USC Schaeffer Center for Health Policy & Economics, and aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.