C A L I FOR N I A H EALTH C ARE F OU NDATION Unexpected Charges: What States Are Doing About Balance Billing Prepared for California HealthCare Foundation by Jack Hoadley and Kevin Lucia Health Policy Institute, Georgetown University Sonya Schwartz National Academy for State Health Policy April 2009 About the Authors Jack Hoadley, Ph.D., is a research professor at Georgetown University’s Health Policy Institute. Kevin Lucia, J.D., M.H.P., is an assistant research professor at Georgetown University’s Health Policy Institute. Sonya Schwartz, J.D., is a program manager for the National Academy for State Health Policy. Acknowledgments The authors would like to thank the various stakeholders interviewed for this project and are especially appreciative of the generous help provided by the state regulators who detailed the legislative and regulatory environment in their states. Thanks also to Karen Pollitz and Jen Thompson (Georgetown) and Neva Kaye and Alan Weil (NASHP) for their contributions. About the Foundation The California HealthCare Foundation is an independent philanthropy committed to improving the way health care is delivered and financed in California. By promoting innovations in care and broader access to information, our goal is to ensure that all Californians can get the care they need, when they need it, at a price they can afford. For more information, visit www.chcf.org. ©2009 California HealthCare Foundation Contents 2 I. Introduction 3 II. How Does Balance Billing Happen? An Introduction to Balance Billing Why Does Balance Billing Occur? How Often Does It Happen? Scenarios Likely to Result in Balance Billing 6 III. tate Restrictions on Balance Billing in Private S Markets Balance Billing by Network Providers Balance Billing by Non-Network Providers State Approaches to Protecting Patients from Balance Billing by Non-Network Providers; Stakeholder Perspectives 1 0 IV. Considerations for State Policymakers Factors That Can Be Included in a Clearly Defined Payment Standard Structure for Monitoring and Enforcing Balance Billing Protections Avenues for Member Education, Disclosure, and Transparency Dispute Resolution Mechanism for Arbitrating Payment Disagreements Comprehensiveness of Balance Billing Protections The Market Environment 1 5 V. Conclusion 1 7 Appendix: Balance Billing and Medicare 1 8 Endnotes I. Introduction To most consumers , health insurance the competing interests of MCOs and health care means protection against large bills from health care providers in determining an appropriate, equitable providers. But in some situations involving managed payment; most laws seem to impose higher costs on care organizations (MCOs), the provider expects a one group or the other. The fundamental conflict is higher payment than the amount the health insurer how to protect MCO members while establishing is willing to pay. The result can be a bill for the a clear means of determining a payment level remaining balance, sent to the patient — a practice appropriate for both MCOs and providers. known as balance billing. This paper provides context on the extent of Most people with private health insurance are out-of-network service utilization and the potential covered by an MCO, a category that includes both problem imposed by balance billing, and then health maintenance organizations and preferred describes how some states have responded. It shares provider organizations. MCO members take comfort observations based on an examination of state laws in the belief that if they follow MCO rules they and interviews with regulators, providers, MCOs, will not face costs greater than their premium and and consumer advocacy organizations that may be required cost sharing (copayments, deductibles, and helpful for policymakers considering balance billing co-insurance). MCOs have networks of providers legislation in California and elsewhere. with whom they have negotiated reimbursement contracts. For the most part, members understand that they must use these network providers to minimize their out-of-pocket expenses. However, even a careful consumer can end up being treated by an out-of-network provider. When this happens, the patient is at risk of receiving a bill from the provider for the difference between the provider’s charge and the amount the MCO is willing to pay. In some cases, patients face hundreds of dollars in charges — referred to as balance bills —  above their expected cost sharing. Many states have struggled to produce legislative or regulatory solutions to address balance billing. To date, relatively few states have passed laws protecting patients from balance billing by out-of-network providers. Those laws appear relatively successful in protecting MCO members from large balance bills. But they have been less successful in navigating 2 | C alifornia H ealth C are F oundation II. How Does Balance Billing Happen? An Introduction to Balance Billing negotiated rate that is generally below their usual Balance billing is when a provider seeks to collect charges. Providers also agree to “hold harmless” from an MCO member the difference between the (i.e., not to balance bill) members for the difference provider’s billed charges for a service and the amount between the contracted rate and their typical billed the MCO paid on that claim. charge.1 This benefits providers by offering a steady flow of insured patients for whom they are paid Key Concepts promptly and directly by the MCO. Balance bill: A bill sent to an MCO member by a provider to collect the difference between the Why Does Balance Billing Occur? provider’s charge and the amount paid by the MCO (does not include the copayment, deductible, or How Often Does It Happen? co-insurance). There are many reasons why a provider may choose Assignment: A patient can request that payment be not to contract with an MCO. The decision may made directly by the MCO to the provider. Assigned be based on a clinical preference or economic claims are normally submitted directly to the MCO consideration. In the absence of a contract between by the provider, making it easier for the provider to receive payment. an MCO and an out-of-network provider, there is Mandatory assignment: An MCO must pay a no negotiated reimbursement rate.2 When outside provider directly for services when a member assigns the network, providers expect to receive their billed a bill to the provider. Depending on state law, payment charges for services provided. Some providers use on assignment may or may not be available for non-network providers. balance billing as a mechanism to put pressure on the plan in negotiations to join the network at a Hold harmless: An MCO must make certain that the patient does not receive a balance bill from a provider. favorable rate. Since patients who are balance billed are more likely to complain to the government, MCOs may agree to pay a higher rate or even the full Before the rise of managed care, consumers billed charges to reduce the possibility of regulatory with insurance typically expected some balance attention. Balance billing also allows providers billing. Under traditional indemnity insurance, the the potential to recoup their full billed charges, insured person paid the provider directly and then though collecting the amount from the patient is sent the bill to the insurer. The insurer reimbursed often a challenge and may not be successful. Some the patient, minus any cost sharing, up to a certain providers require payment in advance of providing amount. If the reimbursement was below the a service — a situation that makes it particularly billed charge, then the patient would not be fully difficult to avoid a balance bill. But not all providers reimbursed. Today, most privately insured people are collect balance bills. Some report that they would covered by an MCO, which contracts with a network prefer not to balance bill their patients because it of providers to offer medical services to members. intrudes on their clinical relationship. Nevertheless, In return, providers agree to deliver services at a state regulators and consumer advocates report Unexpected Charges: What States Are Doing About Balance Billing | 3 that some patients pay the balance of the bill even other professional providers) was $1,289, in addition when not required under state law or the terms of to the average patient cost-sharing amount of $433. their insurance contract — perhaps out of a sense of At an individual health care service level (such as a obligation or to avoid the risk of debt collection or an single procedure), potential balance billing amounts adverse credit report. associated with a facility substantially exceeded MCOs use the benefit of “prompt, fair, and those associated with a physician or other provider. direct payment” as a primary incentive to encourage For example, the average potential balance bill for providers to join a network.3 Insurers argue that an emergency department service was $27 for a paying out-of-network providers their billed charges physician as opposed to $188 for a facility. Among creates a disincentive for providers to join the plan’s the 476,000 claims for emergency department network. Unless required under state law, some services in the study’s sample, about 18 percent were MCOs will not reimburse out-of-network providers out of network. Potential balance bills for inpatient directly (on assignment), instead sending the settings were much larger. Among the 57,000 reimbursement to patients and forcing the providers inpatient stays in the study sample, 17 percent to bill the members. included some out-of-network service. The potential An analysis conducted for the California balance bill for hospital stays averaged $6,812 when HealthCare Foundation by Thomson Reuters among all professional and facility charges for inpatient a sample of 1.2 million Californians with employer- services delivered during a stay were aggregated. sponsored, fully or partially capitated commercial These findings show how often patients land insurance for 2006 found that almost 11 percent of in situations where they do not choose a network the study population used out-of-network services at provider and tally the potential added costs they may some point during the year. incur. The California Association of Health Plans The greatest proportion of out-of-network reported in 2007 that 1.76 million Californians utilization involved a hospital admission or who visited emergency rooms in a two-year period emergency department visit without resulting were balance billed by providers for an average of admission. Researchers calculated the gap between $300 each; about half of these patients paid the bill.4 out-of-network provider charges and provider Anecdotal reports have called attention to specific reimbursement under the plan provisions in order to cases where individuals have received bills, but measure the potential magnitude of balance billing. otherwise information on the actual frequency or Reimbursement was tracked by summing payments magnitude of balance billing is unavailable. made by the plan or any third party (such as a secondary insurer) and patient cost sharing (in the Scenarios Likely to Result in form of copayments, deductibles, and co-insurance). Balance Billing The data do not indicate if patients were balance In general, MCO members face balance billing billed or, if they were billed, the extent to which only when treated by an out-of-network provider. providers sought to collect the full cost. Members can avoid this by seeking care through Among the 11 percent of the population with network providers, and should expect balance billing some out-of-network services, the average potential when they choose out-of-network care. However, balance bill amount (across facilities, physicians, and through no fault of their own, patients sometimes 4 | C alifornia H ealth C are F oundation end up being treated by out-of-network providers physician is not part of the network. That situation is and may face balance billing. further discussed below. Care from an Out-of-Network Provider on Care from an Out-of-Network Physician at an Outpatient Basis a Network Hospital Sometimes a member selects an out-of-network MCO members typically do not expect to face provider for outpatient care. For example, a patient balance bills when receiving inpatient care at a may want to see a well-regarded provider outside the network hospital, especially when they choose network. In a preferred provider organization (PPO) a hospital that is in the network. Nonetheless, or other open-network plan, the member typically members may encounter out-of-network providers would face higher cost sharing and the likelihood at network hospitals — such as anesthesiologists of being balance billed. In a closed-network health providing services during surgical procedures — and maintenance organization (HMO), this type of face the possibility of balance billing. While care would be uncovered and the member would radiologists, anesthesiologists, and pathologists are be responsible for the entire bill. In either case, hospital-based physicians, they are almost never consumers should be aware of the consequences hospital employees and may or may not contract of seeking care outside the network, and most with the same MCOs as the hospital. In addition, providers inquire about insurance coverage when the members may receive services from out-of-network appointment is made. providers if their network physician consults with Even when an MCO approves a referral to an an out-of-network specialist. For example, before out-of-network provider and agrees to treat the care a patient is cleared for surgery, a non-network as a network service, a member may still face balance cardiologist may be consulted to evaluate whether the billing, depending on the MCO’s payment rules. For patient is capable of tolerating the surgery. example, some PPOs approve the use of an out-of- network provider for care but reimburse the provider using their network fee schedule. Since the non- network provider is under no obligation to accept the PPO’s fee as payment in full, a member may receive a balance bill. Care from an Out-of-Network Hospital in an Emergency In emergency situations, a person often goes to the closest hospital with an emergency room. If the hospital does not contract with the member’s MCO, the member may face balance billing. If a patient is treated in an emergency department at a hospital that does contract with the member’s MCO, the patient could still receive a balance bill if the treating Unexpected Charges: What States Are Doing About Balance Billing | 5 III. tate Restrictions on Balance Billing in S Private Markets Balance Billing by Network Providers payments, fining HMOs for underpayment and Contracts between participating providers and late payment of claims, offering dispute resolution MCOs typically include hold harmless provisions to mediate disputes between providers and HMOs, that protect members from being balance billed by a and initiating a fair claims payment initiative.8 In network provider for covered services. In consenting September 2008, the California Legislature passed to these provisions, participating providers two bills that directly addressed balance billing of generally agree not to seek reimbursement from a privately insured MCO members, but only one was patient beyond payment of applicable cost-sharing signed into law: AB 1203, which was approved in requirements such as copayments, co-insurance, or 2008 (Chapter 603), prohibits in some situations deductibles for services covered by the HMO.5 In non-contracting hospitals from billing patients for most states, including California, state law requires care after the patient is stabilized.9 The second bill —  hold harmless provisions in contracts between SB 981, which was vetoed in 2007 — would have HMOs and participating providers.6 States may also addressed balance billing by emergency room require this type of language in contracts between doctors.10 In the past, California has attempted providers and PPOs. various legislative and regulatory approaches to addressing balance billing of MCO members. Balance Billing by Non-Network A 2006 survey published by the American Health Providers Lawyers Association identified nine states with laws In California, the Department of Managed Health that prohibit non-network providers from balance Care (DMHC) has a longstanding interpretation billing members of HMOs.11 The nine states were that state law prohibits balance billing by non- Colorado, Delaware, Florida, Indiana, Maryland, network providers. This position, with regard to New York, Rhode Island, West Virginia, and emergency services, was upheld by the California Wisconsin. In addition to these nine, Connecticut Supreme Court on January 8, 2009, although it has language in statute that, if interpreted broadly, left unresolved payment issues between the MCOs may restrict balance billing of HMO members by and the providers.7 At the direction of Governor some out-of-network providers.12 Protections vary Schwarzenegger, DMHC enacted a regulation significantly from one state to another.13 that took effect October 15, 2008, prohibiting balance billing of HMO members by network and State Approaches to Protecting Patients out-of-network providers for care administered from Balance Billing by Non-Network in emergency room settings. In the meantime, in Providers; Stakeholder Perspectives addition to pursuing legal action against a provider This project selected four states with laws that take group for improper balance billing, DMHC has varying approaches to balance billing. The four —  attempted to address the “root causes of balance Colorado, Florida, Maryland, and Texas — were billing” by assisting providers in recovering chosen because they offer unique policy approaches 6 | C alifornia H ealth C are F oundation to balance billing. Researchers conducted a insurers hold PPO and HMO members harmless systematic review of the statutory provisions and protects consumers from paying beyond standard interviewed key stakeholders in each state, including network cost sharing for care received from non- regulators from relevant departments and agencies, network providers at network facilities. In Florida, hospitals, physicians, MCOs, and consumer advocacy HMO members are protected from being balance organizations.14 Because the project entailed only a billed by non-network providers for emergency care small set of interviews, it is not a fully representative by a law that provides reimbursement guidelines and assessment of stakeholders, but the interviews should direct payment of non-network providers by HMOs. capture the essence of stakeholder perspectives. The In Maryland, a general restriction against balance objective of this project was to identify promising billing of HMO members for “covered services” is options for policymakers wishing to protect MCO supplemented by standardized reimbursement rates members from balance billing by non-network for hospitals and non-network providers. Finally, providers. Texas recently passed “transparency” legislation Each of the four states profiled differs in its that attempts to ensure HMO and PPO members approach to protecting consumers from balance have access to data, such as pricing and network billing by non-network providers and, depending participation information, needed to estimate their on the stakeholder perspective, its degree of success financial liability for medical services. (Table 1, page 16). In Colorado, a requirement that State Profiles Colorado: MCOs Required to Hold Members Harmless from Balance Bills Colorado law requires that if an MCO (in this case, a PPO or an HMO) does not maintain an “adequate” network, then the MCO must arrange for a patient to see an out-of-network provider at no greater cost than if the member had been treated by a network provider.15 A separate state law requires that patients who receive care from an out-of-network provider at a network facility must be held harmless by the MCO for costs above what they would have faced for treatment by a network provider.16 Under state law, there is no explicit rule against an out-of-network provider balance billing a patient. But since the patient must be held harmless, the MCO is essentially responsible for resolving the bill before the provider pursues action against the member, thus precluding a balance bill. Typically, the MCO either pays the billed charges or comes to an agreement with the provider for less. In most situations where consumers might face balance bills, HMO and PPO members are not asked to pay them. In interviews, however, stakeholders emphasized that members are not protected from receiving a balance bill but are, because they are held harmless, protected from paying such a bill. Even so, the Colorado Division of Insurance reports some anecdotal evidence that members sometimes receive balance bills and may not understand their right not to pay.17 Although Colorado law does not impose reimbursement standards for these situations, MCOs generally comply by paying out-of-network providers’ billed charges. In addition, under the state mandatory assignment law, MCOs must pay these providers directly when a patient assigns a bill to the provider. For out-of-network providers, the combination of direct payment and receipt of billed charges appears to eliminate the need to balance bill MCO members. Colorado MCOs argue that the combination of the requirement that they pay billed charges and a broad mandatory assignment law acts as a disincentive for providers to join managed care networks. In support of this, regulators point out that some MCOs are having difficulty contracting with some specialty groups, even when the MCO has network agreements with the hospitals in which these providers practice. MCOs further suggest that the current regulatory Unexpected Charges: What States Are Doing About Balance Billing | 7 State Profiles, continued Colorado, continued framework hampers their ability to negotiate discounted rates with network providers and ultimately may increase insurance costs for everyone. In addition, MCOs point out that with fewer network providers, members of self-insured plans that are not protected by state law may be more likely to receive balance bills. Florida: Balance Billing Restrictions with Payment Rate Requirements in Emergency Settings In general, out-of-network providers in Florida may not balance bill an HMO member when an HMO is liable for services covered and authorized by the HMO.18 When services are provided for an emergency condition or to evaluate if such a condition exists, a separate law makes the HMO liable and restricts the non-network provider from balance billing the member. Florida law specifies that in these emergency situations, HMOs must pay non-network providers the lesser of: (1) the provider’s billed charge, (2) the usual and customary provider charge (not specifically defined in statute) for similar services in the community where the services were provided, or (3) the charge mutually agreed to by the HMO and the provider.19 HMOs must make these payments directly to the non-network provider of emergency services.20 The Florida stakeholders interviewed agreed that HMO members are protected from balance billing in most situations. Regulators indicate that the law has been effective for HMO members. Complaint data support this conclusion. Florida reports only 24 complaints for the year between June of 2007 and June of 2008, although the number of actual consumer calls may have been significantly higher. However, state law does not protect PPO members from balance billing by out-of-network providers. Regulators suggest that PPO members face the same concern HMO members did before the state intervened with legislation. One regulator cited “repeated complaints and concerns from PPO policyholders,” particularly where the PPO has no contract with a provider. Florida providers of emergency room services are guaranteed their “provider charges” (billed charges) or their “usual and customary” fee. In addition, emergency physicians are guaranteed direct payment from the HMO on assigned claims. Florida’s emergency physicians successfully lobbied against including the term “reasonable” in the state’s rate setting standards, in part because of their concern that insurers have used that term to justify reimbursing providers at rates below what providers believe to be usual and customary. Providers indicate concern, however, that even though the statute excludes the term “reasonable,” some HMOs are setting reimbursement rates too low (i.e., only 120 percent of the Medicare rate). The law establishes clearly that out-of-network providers cannot balance bill HMO members for covered, authorized care for which the HMO is “liable.” Outside of the emergency setting, HMOs have the opportunity to negotiate reimbursement rates with out-of-network providers. Generally, the industry finds that this works well. However, in the emergency setting, the inability to make advance agreements leads to debate about the term “usual and customary.” Providers and HMOs continue to debate the definition of the term on an individual basis and in the court system. Florida has a dispute resolution process, but it has not proved helpful in many cases. Maryland: Balance Billing Restrictions with Payment Rate Requirements In Maryland, out-of-network providers may not balance bill an HMO member for a “covered service.”21 In general, a covered service is one authorized under the terms of a contract.22 Emergency care and out-of-area urgent care are generally considered covered services. Because hospital rates are set by the Maryland Health Services Cost Review Commission, hospitals must be paid at this rate. Under Maryland law, reimbursement rates for covered services provided by non-network physicians to HMO members are also standardized. In general, an HMO must pay the greater of (1) 125 percent of the rate it pays in the same geographic area for the same service to a provider under written contract or (2) the rate it paid in 2000 to a non-contract provider in the same geographic area for the same service. For trauma physicians providing care at a trauma center, a Medicare-based rate is substituted for the HMO’s contract rate. Thus payment is the greater of (1) 140 percent of the rate paid by Medicare for the same covered service to a similarly licensed provider or (2) the rate paid by the HMO in 2001 in the same geographic area for the same covered service to a similarly licensed provider. 8 | C alifornia H ealth C are F oundation State Profiles, continued Maryland, continued Stakeholders interviewed in Maryland report that consumers are generally protected from balance billing by out-of- network providers for care that has been authorized by the HMO. This restriction has been in place for over 20 years, and most providers are aware of the rule. Inappropriate balance billing, though it does happen, is minimal. The Maryland Insurance Administration received 37 balance billing-related complaints from HMO members in 2006 and 27 in 2007. The state is considering a proposal to make changes to these rates.23 Providers, however, expressed serious concerns about reimbursement rates, complaining that some HMOs manipulate the standards so that rates are most advantageous for the HMO. For example, providers report that in setting rates for a specific geographic area, some HMOs look to the lowest rate they paid a single provider in that area, even if that provider’s billed charge was significantly less than that of most other providers in the area. One physician suggested that current payment standards in Maryland may be a factor in driving providers to other markets. HMOs, by contrast, were satisfied with the law, suggesting that the same approach might work in the PPO market. Texas: Increased Transparency with Regard to Balance Billing In Texas, MCO members are not protected, per se, from balance billing by non-network providers.24 In part as an alternative to a direct ban on balance billing, Texas in 2007 passed SB 1731, which attempts to increase transparency by providing consumers access to data, such as pricing and network participation information, needed to estimate their financial liability for medical services. Specific reporting and disclosure requirements are placed on facilities, physicians, and insurers, including MCOs. For example, MCOs must disclose, in writing, whether a network facility uses non-network providers and that a member may be balance billed by a non-network provider. In addition, this law requires state regulators to publish a “Consumer Guide to Health Care” providing, among other information, (1) pricing information and variation among providers, (2) information on the correlation between billed charges and actual charges, (3) member liability for costs, and (4) advice to members for obtaining cost information in advance of treatment.25 When the legislation is fully enacted, MCO reporting requirements will provide detailed data, including billed charges and reimbursement rates for a variety of medical services. Aggregated data will be made available online. In addition, regulators are collecting additional data from MCOs to show the extent to which members receive care from facility-based, non-network providers. This one-time effort will be evaluated to see whether it might help consumers understand situations that could lead to balance billing.26 SB 1731 is yet to be fully implemented, and stakeholders report concerns about how effective this law will be in helping MCO members evaluate their risk for being balance billed by non-participating providers. For example, one stakeholder questioned how valuable this information would be for patients receiving emergency room services, without a per se restriction against balance billing. Another considered the challenges the state faces in gathering and presenting these data in a way that would allow patients to accurately evaluate their potential financial risk for medical care. Unexpected Charges: What States Are Doing About Balance Billing | 9 IV. Considerations for State Policymakers T his section draws upon the experience included in a recently vetoed bill in California.27 of states with laws regulating balance billing. Under this approach, the Medicare fee is the baseline Although it is difficult to draw firm conclusions, for a rate structure, but a multiplier is applied so that some considerations may be useful to state actual payment levels are higher than Medicare’s. policymakers. California’s approach would have set an interim payment rate at 250 percent of the Medicare rate for Factors That Can Be Included in a 2007 for the California region.28 In Maryland, the Clearly Defined Payment Standard rate is much lower. For trauma care, insurers pay the Whether legislation starts from a hold harmless higher of their historical rate or 140 percent of the approach or a direct ban on balance billing, the Medicare rate. path to a satisfactory solution encompasses the The advantage in using the Medicare Fee establishment of a clear, state-defined reimbursement Schedule approach is that the underlying relative standard. The availability of a well-defined payment value scale (RVS) used by Medicare is reasonably rate avoids placing all the leverage on either the well accepted as a means of avoiding reliance on provider or the MCO side, as occurs without a submitted charges. The Medicare RVS sets a value for payment standard. Such approaches are found in the work and practice expense entailed in delivering some existing state laws, such as in Florida and a given service, measured relative to all other services. Maryland, but the results in these states have left The relative value is the same regardless of the type or some stakeholders dissatisfied. Florida law indicates location of the physician delivering the service, but that providers should receive “the usual and the multiplier used to determine the actual fee can customary provider charges for similar services in vary by payer or geographic location. Although some the community where the services were provided,” issues regarding the fairness of relative fees are still and part of Maryland’s formula is based on the being debated, many private payers use the Medicare rate paid by the HMO in the same geographic Fee Schedule as the basis for payment. area. Such standards may create as many problems Policymakers considering the Medicare Fee as they settle. MCOs and providers debate the Schedule approach would need to decide on a standards for establishing “usual and customary” fees, multiplier as low as the 140 percent multiplier and providers claim that some Maryland HMOs used in Maryland or as high as the 250 percent in manipulate the historical rate standard. These California’s vetoed bill. Policymakers should consider examples illustrate the challenges that policymakers local market circumstances and regional variations face in trying to identify an approach for setting in making this decision. A subsidiary question is rates. whether all specialties should be treated equally. Even The Medicare Fee Schedule offers another basis though the theory of the Medicare Fee Schedule for setting rates. It is part of the approach used in says that relative values are determined to reflect the Maryland for paying trauma physicians, and was relative work involved across specialties, local market 10 | C alifornia H ealth C are F oundation circumstances might call for variations. For example, The challenge with enforcement is that such emergency physicians argue that their higher level of legislation affects both providers and MCOs. uncompensated care should support higher rates for Approaches such as hold harmless provisions are them. aimed at MCOs, while direct bans on balance billing are aimed at providers. Ideally, the insurance Structure for Monitoring and Enforcing department, with jurisdiction over MCOs, would Balance Billing Protections coordinate with the board of medicine, which In passing legislation that restricts balance billing, regulates providers.29 In reality, state medical states should consider a comprehensive means of boards typically focus on licensure and medical implementing, monitoring, and enforcing the law. practice and rarely, if ever, become involved in States may need more information than consumer billing disputes. Since state insurance departments complaint data to determine whether providers and generally lack jurisdiction over providers, improper MCOs are compliant with balance billing laws. Many balance billing may go unchecked. In Maryland, consumers who are faced with a balance bill pay it to the Health Education and Advocacy Unit in the avoid problems, while others may call their MCO. office of the attorney general has used the state’s But few know to contact the state. State regulators Consumer Protection Act to claim jurisdiction over recognize that many consumers are unaware of unlawful balance billing of consumers. This office existing protections and that complaint data may works closely with the insurance department to underestimate the extent to which consumers investigate and mediate unlawful balance billing are inappropriately balance billed. In addition, practice by providers and MCOs. Several observers depending on how the state documents complaints, have suggested that this coordinated effort has helped the information collected may not provide the level drive down the number of balance billing complaints of detail policymakers need. For example, a state in Maryland. In California, two regulators oversee may identify whether a caller is covered under a different segments of the health insurance industry, state-regulated plan but not identify the exact type further complicating monitoring and enforcement.30 of plan. To supplement consumer complaint data, Policymakers seeking to address balance billing Maryland also monitors provider complaints. A trend should consider collaboration among agencies may prompt a market examination by the Maryland that have jurisdiction over implementation and Insurance Administration or an investigation by enforcement. the attorney general’s office. Texas, looking beyond complaint data, recently directed MCOs to report Avenues for Member Education, data regarding the number of claims where members Disclosure, and Transparency were seen by facility-based, non-network providers Many MCO members are not well informed of as well as the billed charges and reimbursed rates their payment responsibilities when seeing an out- on those claims. Policymakers should recognize the of-network provider. Members may find guidance limitations of relying only on consumer complaint in the summary plan description or certificate of data and consider other mechanisms to monitor coverage provided by their plan, but many do not compliance with a state balance billing restriction. read these documents. Further, without exact pricing information for a specific service (i.e., how much Unexpected Charges: What States Are Doing About Balance Billing | 11 the provider will charge and how much the MCO Dispute Resolution Mechanism for will pay), it is difficult for members to determine Arbitrating Payment Disagreements their financial liability for a balance bill. Regulators In 2000, the Florida Legislature created the Statewide report that most consumer calls about balance Provider and Health Plan Claim Dispute Resolution billing are resolved with a discussion about what is Program to “provide assistance to contracted permitted under law and a review of the terms of the and non-contracted providers and managed care consumer’s coverage policy. However, regulators also organizations for resolution of claims disputes that note that consumers, unaware of their rights, may are not resolved by the provider and the managed unwittingly pay the balance bill. care organization.”34 Providers were encouraged by Some states require that MCOs provide the possibility of resolving billing disputes without certain information to members about payment the high cost of litigation. In 2002, the program responsibilities when receiving out-of-network care. was expanded to mediate provider disputes with In Colorado, MCOs must disclose when the member plans other than HMOs. Although participation may be balance billed by an out-of-network provider, is optional for providers, the review organization’s the “usual, customary, and reasonable rate” that an determination is binding on both parties with the MCO pays for a service, and how the member can losing party paying the cost of the review. Since obtain the rates the MCO pays to an out-of-network the program’s inception, Florida has contracted provider.31 In addition, the MCO must inform with a private company (Maximus) to review members of any “material change” to the MCO claims disputes. Since 2005, the number of claims network.32 Even with these requirements, regulators submitted for review has declined significantly, in Colorado noted that consumers might not know from 175 cases in 2005 to 59 in 2006 and just 15 that the law protects them from paying balance bills in 2007. Some observers suggest that providers from out-of-network providers in a network facility.33 grew dissatisfied with early rulings, which generally A 2007 Texas law takes a transparency approach by favored MCOs. Of the nine cases that were fully requiring providers and MCOs to make available reviewed in 2005, Maximus found for the MCO in pricing and network participation information to two cases and split the decision in the other seven.35 help members estimate their financial liability for In the split decisions, providers were awarded out-of-network services. In addition, regulators significantly less than what they sought. Hospitals are collecting “reimbursement data” from MCOs, have all but abandoned using the process. Similarly, including billed charges and rates for a variety of few physicians have turned to the program in recent medical services, and will make this information years (one interviewed for this project called it a available online. Policymakers may want to consider “tortuous process”). California has an independent disclosure requirements for MCOs and providers dispute resolution process that has seen little to promote transparency and ensure that members activity.36 Although some see dispute resolution as understand their rights and responsibilities with a valuable component of balance billing legislation, regard to member liability for out-of-network care. policymakers may want to limit their expectations for its usefulness. 12 | C alifornia H ealth C are F oundation Comprehensiveness of Balance Billing in this paper.37 For example, the Colorado law that Protections requires MCOs to hold members harmless regarding Most state protections against balance billing apply costs above what they would have faced had they only to members of HMOs, not PPOs. These been treated by a network provider does not apply different regulatory approaches may be justified, to members of self-insured plans even if they use as the PPO model is designed to offer patients the a managed care model to administer the plan. flexibility of going outside the network for care. The Regulated plans typically include those sold on the option to see out-of-network providers, even with individual market and employer-sponsored plans greater out-of-pocket costs, is a primary reason for for companies (especially smaller firms) that choose choosing a PPO over an HMO. However, some not to self-insure. Certainly, there is the possibility regulators point out that balance billing complaints that a state solution to balance billing, especially one are not received exclusively from HMO members. that has a large impact on provider networks, may PPO members may not complain about balance bills ultimately affect members of self-insured plans to for elective services from out-of-network providers, the extent that they use the same provider networks but, like HMO members, they may be unhappy as MCOs. However, policymakers should be aware with balance bills from out-of-network providers that state legislation would not directly apply to a seen in emergency situations, or from hospital-based large segment of their insured population and should physicians in connection with care at a network consider the impact of this limitation. Furthermore, hospital. In addition, many states do not maintain it is unclear whether providers or consumers the same network adequacy standards for PPOs as understand what type of plan is involved and thus for HMOs, so PPO members may be more likely to whether state laws might apply. This limitation could seek specialty care from out-of-network providers. compromise broad efforts to educate MCO members Colorado has extended the same balance billing about their rights. protections to both HMO and PPO members. Both HMO and PPO members in Colorado who receive The Market Environment care from an out-of-network provider at a network A state must consider its unique market environment facility are held harmless by the plan from any higher when crafting laws to protect consumers from costs. Some stakeholders interviewed in other states balance billing. For example, when a single MCO expressed interest in seeing either stronger network dominates the state’s insurance market, providers adequacy standards or balance billing protections who choose not to join its network run the risk of extended to PPO members. reducing the number of insured patients they may Another limitation, imposed by the federal be able to see. As a result, dominant MCOs are more Employee Retirement Income Security Act, prevents likely to have large provider networks and can reduce states from regulating self-insured employer health the likelihood of balance billing in the absence of plans. Approximately 55 percent of covered workers legislation. But even in such markets, physicians in nationally — 30 percent in California, or roughly some specialties (such as anesthesiology) may choose 5 million Californians — are enrolled in self-insured to stay out of the dominant MCO’s network. In a employer health plans and therefore are not affected market with a dominant MCO, physicians have less by the state balance billing restrictions described bargaining power to obtain favorable contracted Unexpected Charges: What States Are Doing About Balance Billing | 13 rates. The reverse may be true where physicians payment amount may want to take into account in a particular specialty are organized into larger these variations in uncompensated care volume by groups and obtain greater bargaining leverage. In location or provider type. such situations, physicians may stay out of networks and insist on collecting their full billed charges. California’s tradition of organizing physicians into large groups may increase their leverage with MCOs, but it adds complexity by building in an additional organizational layer when MCOs delegate risk — and thus payment rates — to the physician groups. Policymakers need to understand their state’s market environment in establishing how best to protect consumers in addressing balance billing. For example, market differences might influence the relative effectiveness of the hold harmless approach versus direct bans on balance billing. When providers are not paid for services delivered to those without insurance, they tend to cover the cost of that uncompensated care through higher charges to other payers. Since payment rates set by public and private payers are lower than providers’ billed charges, balance bills can help cover the cost of uncompensated care. On the other hand, billed charges may be well above the amounts needed to cover actual costs.38 If uncompensated care volume is higher for physicians in some geographic areas or specialties, their incentive to collect balance bills is considerably higher.39 For example, emergency physicians may experience more uncompensated care (and more Medicaid patients) since they are required under federal law to provide certain services to any patients who come to the emergency room. One emergency physician interviewed for this report suggested that physicians might be willing to see balance billing restricted if they received some compensation for the 30 percent of patients who pay nothing today. Those who set policies to restrict balance billing and to set payment levels where services are provided in the absence of a contracted 14 | C alifornia H ealth C are F oundation V. Conclusion T he few states with balance billing disputes between MCOs and providers. Identification laws have been relatively successful in developing of a fair payment standard for out-of-network and implementing policies to protect MCO members claims continues to impose a significant challenge. from unexpected bills when using out-of-network Rate standards such as “usual and customary” are health care providers. States typically ban balance complicated by longstanding disagreements between billing by providers or require that MCOs hold MCOs and providers. An external standard, such as their members harmless from balance billing. Either Medicare’s fee schedule, although with higher levels approach generally ensures that the member is not than paid by Medicare, offers an approach that might liable for balance bills. But no matter how states prove more acceptable to both sides. choose to address balance billing and the related payment standards, it will be important to recognize each state’s particular market environment. The relative market strength of MCOs and providers, together with the need to cross-subsidize low public program payments and costs associated with treating the uninsured, may influence the effectiveness of different policy approaches such as direct bans or hold harmless requirements. Successful state policies appear to require additional strategies to enhance their effectiveness. Some important strategies that states are likely to find valuable include: (1) ensuring patients are educated by regulators, MCOs, and health care providers about balance billing policies and potential member liability when seeking out-of-network services; (2) monitoring member, MCO, and health care provider complaints; and (3) incorporating an enforcement program that promotes collaboration between MCOs, providers, consumers, and regulators. As part of monitoring and enforcement, states may choose to consider a formal dispute resolution program. The success with those programs to date, where they have been tried, is quite limited. State policies considered for this report, however, have been less successful in preventing payment Unexpected Charges: What States Are Doing About Balance Billing | 15 Table 1. Examples of State Laws Protecting Patients from Balance Billing by Non-Network Providers* R eg u l atory S cope of law Bi llin g scenario, by service framewor k Covered cov ered co vered but not and and authoriz ed , A uthorized , E R, at an A uthoriz ed , on an on an E R, at a out-of - at a Type of outpatient outpatient networ k networ k networ k P lans setting Type of care basis basis facility facility facility Colorado HMOs All Arranged by No Yes Yes No Yes • Hold harmless and insurer, in cases • Assignment PPOs of inadequate network Network Covered hospital services Florida HMOs All Services for No Yes Yes Yes Yes • Hold harmless which HMO is • Assignment† “liable” • Standardized ER Emergency care reimbursement services (ER services only) Maryland HMOs All Covered No§ Yes Yes Yes Yes • Hold harmless services • Assignment‡ • Standardized reimbursement *Although this project selected four states with laws that take varying approaches to balance billing, this exhibit excludes Texas (which does not restrict balance billing, per se, by non-network providers, but instead relies on an approach intended to make information more available to consumers). Colorado’s law was enacted in 2006, but the 2006 legislation restated an interpretation that had been in place earlier. Florida passed legislation dealing with emergency services in 1996 and added broader protections in 2000. Maryland enacted legislation protecting balance billing by non-participating providers starting in 1989, and the current framework for reimbursement was established in 2002 and 2003 with amendments in 2005. †Florida law requires HMOs to pay directly out-of-network providers that provide emergency services to HMO members (Florida Statutes § 641.513[5][2008]). ‡In Maryland, although there is no general mandatory assignment law, the state balance billing law requires HMOs to pay directly out-of-network providers that provide “covered services” to HMO members. §If the HMO contract does not require authorization for the out-of-network services, then Maryland law would prohibit the out-of-network provider from balance billing. In Maryland, a “covered service” is generally considered authorized if it was included under the health benefit package of the HMO and provided by the out-of-network provider, in accordance with the member’s contract, per referral, or otherwise approved by the HMO or a provider under contract with the HMO (Annotated Code of Maryland, Health-General § 19-701 [d][2][i][ii][iii]). 16 | C alifornia H ealth C are F oundation Appendix: Balance Billing and Medicare Most Medicare beneficiaries have traditional Medicare general. Reviews can also be initiated in response to coverage that resembles indemnity insurance. From the beneficiary complaints. start of the Medicare program in 1965, physicians were As a result of these policy changes, 99.4 percent of permitted to decide on a claim-by-claim basis whether to all Medicare claims were paid on assignment in 2006, submit bills on assignment and accept Medicare’s fee as so balance billing has become a rare event in Medicare. payment in full or to bill the patient directly, leaving the Apparently, the small size of the allowed balance bill patient responsible for the balance bill amount. In the means that the advantages of being able to submit bills as program’s early years, physicians accepted assignment for assigned claims mostly outweigh the value of collecting over half of all claims, with the share rising to about two- an extra payment from the beneficiary. In fact, 93 percent thirds by the mid-1980s. As of 1985, Medicare-allowed of physicians now enroll in the participating physician charges were usually below the billed charges (85 percent program, thus agreeing never to balance bill.42 of the time), with a typical balance bill of about one- fourth of the billed charge.40 In 1984, Medicare initiated a participating physician program in which physicians agree to accept assignment for all beneficiaries. In return the doctors are listed in published directories (now available on the Web) and receive a slightly higher allowed charge on their claims. About one in four physicians initially signed up for this program, with participation rising to over 50 percent by the early 1990s.41 Legislation in the 1980s also placed limits on the actual charges by physicians, somewhat limiting the size of balance bills. But even with these changes, more than half of all beneficiaries were paying balance bills at some point each year. Furthermore, a 1988 survey of Medicare beneficiaries found that a majority did not understand concepts such as assignment and participation and rarely discussed these matters with their doctors. In 1989, Congress completely revamped Medicare’s approach to paying physicians, including changes to the rules for balance billing. The legislation limits balance billing amounts to no more than 9.25 percent of the Medicare Fee Schedule amount received by those in the participating physician program. The program monitors the claims of nonparticipating physicians; if frequent violations are found, more intensive monitoring follows, and more serious cases can be referred to the inspector Unexpected Charges: What States Are Doing About Balance Billing | 17 Endnotes 1. “Hold harmless” provisions are standard in most contracts deductible amounts, copayment amounts, co-insurance between managed care plans and network providers and amounts, and amounts for non-covered services.” See in most states are required by law in HMO contracts. See Kentucky Revised Statutes Annotated § 304.17A-527(1)(a) Lucas, C., et al. 2006. Fifty State Survey of Balance Billing (2008). In Michigan, although the term “hold harmless” Laws. American Health Lawyers Association. is not specifically stated, “an affiliated provider contract shall prohibit the provider from seeking payment 2. Generally, except when authorizing care in advance, an from the enrollee for services provided pursuant to the HMO will not reimburse an out-of-network provider provider contract, except that the contract may allow at all, leaving the patient responsible for the entire bill. affiliated providers to collect copayments, co-insurances, If the care is authorized by the HMO, the situation is and deductibles directly from enrollees.” See Michigan comparable to an in-network service and the patient Compiled Laws Service § 500.3529(3)(2008). should not face balance billing. By contrast, members of PPOs or similar open-network plans generally may 6. In California, a law governing HMOs states that “(a) choose to receive services from a network or out-of- every contract between a plan and a provider of health network provider and receive reimbursement from the care services shall be in writing, and shall set forth that PPO. But when care is received out of network (unless in the event the plan fails to pay for health care services authorized or in an emergency), the patient may expect to as set forth in the subscriber contract, the subscriber or pay a higher cost-sharing rate and may be balance billed. enrollee shall not be liable to the provider for any sums owed by the plan. (b) In the event that the contract has 3. Mandatory Assignment of Benefits. Anthem Fact Sheet, not been reduced to writing as required by this chapter or January 2006. On record with authors. that the contract fails to contain the required prohibition, 4. California Association of Health Plans. October 24, the contracting provider shall not collect or attempt to 2007. “CAHP Calls For Ban On ‘Balance Billing.’ ” collect from the subscriber or enrollee sums owed by the News release and related fact sheet (www.calhealthplans. plan. (c) No contracting provider, or agent, trustee, or org/documents/pr102307.pdf, www.calhealthplans.org/ assignee thereof, may maintain any action at law against a documents/balance%20billing%20fact%20sheet.pdf). subscriber or enrollee to collect sums owed by the plan.” 5. In Kentucky, for example, “A managed care plan See California Health and Safety Code § 1379 (2008). shall file with the executive director sample copies of Note that this statute addresses written contracts as well any agreements it enters into with providers for the as a contract that “has not been reduced to writing.” provision of health care services. The executive director The California Department of Managed Health Care shall promulgate administrative regulations prescribing (DMHC) has interpreted this language, along with other the manner and form of the filings required. The provisions of the Knox-Keene Act, as a total restriction agreements shall include the following: (a) A hold on balance billing of HMO members by emergency harmless clause that states that the provider may not, providers, even by non-network providers. See Lucas, under any circumstance, including 1. Nonpayment of Fifty State Survey, p. x, p. 5. moneys due the providers by the managed care plan, 7. Prospect Medical Group Inc. v. Northridge Emergency 2. Insolvency of the managed care plan, or 3. Breach Medical Group, 45 Cal. 4th 497 (Cal. January 8, 2009). of the agreement bill, charge, collect a deposit, seek 8. California Department of Managed Health Care. August compensation, remuneration, or reimbursement from, 2008. “DMHC Builds on Efforts to Protect Patients or have any recourse against the subscriber, dependent of from Unfair and Unexpected Bills.” Press release subscriber, enrollee, or any persons acting on their behalf, (www.hmohelp.ca.gov/library/reports/news/prbbregs.pdf). for services provided in accordance with the provider agreement. This provision shall not prohibit collection of 18 | C alifornia H ealth C are F oundation 9. In addition, SB 697 (Chapter 606), prohibiting health care provided by a licensed ambulance company (N.Y. care providers from balance billing members of two state Insurance Law § 3221[I][15] [Consol. 2008], N.Y. programs (Healthy Families and Access for Infants and Insurance Law § 3216[i][24] [Consol. 2008] and N.Y. Mothers), was signed into law in 2008. Insurance Law § 4303[aa] [Consol. 2008]) and end-of- life care exclusively for those with terminal cancer (N.Y. 10. In addition, AB 2220 was passed by the legislature Insurance Law § 4805 [Consol. 2008] and N.Y. Public in 2007, but vetoed by the governor. Although it did Health Law § 4406-e [Consol. 2008]). Finally, a state not address balance billing directly, AB 2220 would protection may apply to all settings, as in Maryland, or have established a process for mandatory mediation only in limited settings, as in Indiana, which protects in physician-HMO contract negotiations where the HMO members from balance billing by out-of-network physician sees more than 5 percent of the HMO’s providers only in emergency care settings. A state may members and a hospital contracting with the HMO take a broader approach to protecting patients from requests the physician enter into a contract negotiation balance billing by also regulating provider reimbursement with the HMO. in these situations. For example, West Virginia law 11. For more information about these specific laws, see Lucas, requires payment of the “provider’s normal charges” for Fifty State Survey. Some states, such as Virginia, have emergency care services. Four other states (Delaware, read into state law a protection for HMO members from Florida, Indiana, and Maryland) also provide statutory balance billing by out-of-network providers in certain guidance for reimbursement rates of out-of-network situations, although this is accomplished by interpretation providers in certain circumstances. Finally, Delaware and not expressly stated in statute. See Virginia Bureau and Florida make available a formal dispute resolution of Insurance. June 16, 2008. Administrative Letter system to help resolve reimbursement issues between 2008 – 09, Commissioner of Insurance to All Health providers and insurers. Some states have also sought to Maintenance Organizations Licensed in Virginia and increase the transparency around provider payments with Interested Parties (www.scc.virginia.gov/division/boi/ better information for consumers on what they should be webpages/adminlets/08-09.pdf). paying and what they can expect their insurers to pay. 12. In Connecticut, questions of interpretation remain about 14. Researchers conducted 33 interviews from May through a statute sometimes reported as prohibiting non-network September 2008. Most interviews were conducted by the providers from balance billing HMO members. two senior investigators on the project, with another team Connecticut specifies under Connecticut General Statutes member taking notes. § 20-7f(b) (2008) that “it shall be an unfair trade practice 15. Colorado Revised Statutes § 10-16-704(1) and (2) (2008). for any health care provider to request payment from an enrollee, other than a copayment or deductible, for 16. Colorado Revised Statutes § 10-16-704(3) (2008). medical services covered under a managed care plan.” A This statute codifies the Colorado General Assembly’s recent court ruling suggests a very broad reading of this intent to require MCOs to hold patients harmless for statute to include restricting balance billing of HMO covered services received from non-network providers members by out-of-network providers. See Charles D. at in-network hospitals. Interestingly, in 1997, the Gianetti, M.D. v. Fortis Insurance Company et al., 2007 general assembly passed legislation later interpreted by Conn. Super. LEXIS 838. the Colorado Division of Insurance (CDI) to do the same. This regulatory interpretation was challenged by 13. Some states, such as Delaware and Colorado, also extend insurers and ultimately overturned by a Colorado Court protections to PPO members. A state protection may of Appeals ruling in 2006. That year, almost 10 years broadly apply to all covered services, as in Maryland, after the original legislation, the general assembly passed or apply only to a limited number of services, as in legislation that confirmed that the CDI had “correctly New York, where the protection only applies to two interpreted” the original legislation. specific types of services: pre-hospitalization emergency Unexpected Charges: What States Are Doing About Balance Billing | 19 17. In 2005, public hearings conducted by CDI noted that general’s opinion concluding that, in the absence of “some consumers in fully insured plans may not know of such a contract, “the Act does not prohibit a physician the law and may pay balance-billed charges.” See Report who is not under contract with an HMO from balance by the Colorado Division of Insurance on the issue of billing.” However, this opinion does not consider balance billing. 2005. p. 2. On file with author. “whether state law permits a network facility to require non-network physicians with privileges at the facility 18. Florida Statutes § 641.3154 (2008). to honor the facility’s hold harmless agreement with an 19. Florida Statutes § 641.513(5) (2008). HMO.” See Attorney General of Texas. March 2003. 20. Florida Statutes § 641.513(5) (2008). Per discussion with Opinion No. GA-0040 (www.oag.state.tx.us/opinions/ the Florida Office of Insurance Regulation, February opinions/50abbott/op/2003/pdf/ga0040.pdf). 2009. 25. Longley, Dianne. February 18, 2008. Health Care 21. Annotated Code of Maryland, Health-General §19-710(i) Pricing Transparency For Consumer: Senate Bill 1731 and (p) (2008). Implementation. Presentation prepared by the Texas Department of Insurance; House Research Organization 22. Annotated Code of Maryland, Health-General § 19-701 (d) Bill Analysis for Senate Bill 1713 (www.hro.house.state. (2)(i)(ii)(iii) (2008). tx.us/pdf/ba80r/sb1731.pdf ); Enrolled Summary for 23. Annotated Code of Maryland, Health-General § 19-710.1 Senate Bill 1731 (www.legis.state.tx.us/billlookup/ (b)(1)(ii) (2008). In a recent draft report, the Maryland billsummary.aspx?legsess=80r&bill=sb1731). Task Force on Health Care Access and Reimbursement 26. For more detail, see Texas SB 1731 (2007). recommended a change in the statutory rule regarding these reimbursement standards. Generally the 27. SB 981 (2007). recommendation would set reimbursement for evaluation 28. Earlier versions of this legislation had different payment and management services as the greater of 140 percent of standards. One defined the interim payment rate as the the Medicare fee or 125 percent of the average network 50th percentile of submitted Medi-Cal charges related rate. Procedures, tests, and imaging services would be to emergency care and adjusted annually for inflation. reimbursed at 125 percent of the average network rate A later version used the 50th percentile of physician (using an average is intended to address the concern charges as collected for a commonly used commercial that some MCOs use the lowest fee paid in an area). See database. By contrast, the regulation (28 California Code Maryland Department of Health and Mental Hygiene. of Regulations §1300.71.39 [2008] [wpso.dmhc.ca.gov/ December 2008. Draft Report of the Task Force on regulations/docs/regs/19/1221585440921.pdf ]) issued Health Care Access and Reimbursement. Final Report and by the Department of Managed Health Care in 2008 Recommendations. Recommendation #3, p. 34 builds on the existing requirement that plans pay the (www.dhmh.state.md.us/hcar/pdf/nov2008/nov25/draft_ reasonable and customary value of the services rendered hcar_final_report.pdf). Proposed legislation, consistent as stated in the department’s explanation of its regulation with the recommendation, was recently introduced to the (www.oal.ca.gov/pdfs/notice/13z-2008.pdf ). 424th session of the Maryland General Assembly. 29. California’s situation is more complex because two 24. Under a Texas law, PPO members have virtually no different agencies regulate health plans. protection against balance billing. There is not a “per se” rule restricting non-network providers from balance billing HMO members, but the Texas Department of Insurance interprets the HMO Act to allow an HMO to contract with a physician practicing in a network facility to honor the facility’s hold harmless agreement. This interpretation is limited by a 2003 Texas attorney 20 | C alifornia H ealth C are F oundation 30. Oversight of health insurance carriers in California is We recently submitted 10 provider complaints to this divided between two state departments. The Department independent review and findings should be available in of Managed Health Care regulates health care service mid-November.” (www.hmohelp.ca.gov/library/reports/ plans whose products have historically emphasized news/tpbbeffpub.pdf). service delivery through HMOs. The California 37. National Opinion Research Center. December 2008. Department of Insurance has jurisdiction over health California Employer Health Benefits Survey. California insurers whose products have historically emphasized HealthCare Foundation (www.chcf.org/topics/ the financial protection aspects of insurance, rather than healthinsurance/index.cfm?itemID=133543). service delivery. Roth, Debra L., and Kelch, Deborah Reidy. December 2001. Making Sense of Managed 38. For physicians, unlike institutional providers, the concept Care Regulation in California. California HealthCare of actual costs is not well defined because compensation Foundation. to the physician — the physician’s net income — is a major component of actual costs. Still, it is clear that 31. Colorado Revised Statutes §10-16-704(2)(d),(e) (2008). uncompensated care means a reduction in physicians’ 32. Colorado Revised Statutes §10-16-704(2.5)(a) (2008). income. 33. Report by the Colorado Division of Insurance on the 39. In states with low Medicaid payment rates, high Medicaid issue of balance billing. 2005. p. 2. On file with author. caseloads may have the same effect. 34. Florida Agency for Health Care Administration. 2008. 40. Physician Payment Review Commission. March 1, Statewide Provider and Health Plan Claim Dispute 1987. Medicare Physician Payment: An Agenda for Reform: Resolution Program: Annual Report 2008 Annual Report to Congress. (www.fdhc.state.fl.us/mchq/managed_health_care/ 41. Physician Payment Review Commission. 1992. sphpclaimdrp/annualreport2008.pdf). Monitoring the Financial Liability of Medicare Beneficiaries. 35. The number of cases reviewed in full was significantly 42. Medicare Payment Advisory Commission. March 2008. less than the number of applications. For example, of Report to the Congress: Medicare Payment Policy. 175 cases submitted in 2005, only 14 were found to be eligible for review; the rest were ineligible because they did not meet basic eligibility criteria or had incomplete data. Ultimately, after three parties withdrew from the process, only 11 cases were fully reviewed. By the time of the printing of the Annual Report 2006, only nine cases were completed with final decisions posted. Florida Agency for Health Care Administration. 2006. Statewide Provider and Health Plan Claim Dispute Resolution Program: Annual Report 2006. 36. DMCH Director Cindy Ehnes stated in a prepared statement issued October 14, 2008, regarding balance billing regulations: “The DMHC has also made available a fair, fast, and free way for providers to solve their claims disputes, through our Independent Dispute Resolution process. Unfortunately, physician advocates have discouraged their members to use this process, opting instead for other avenues. Therefore, the DMHC is conducting a test to prove its effectiveness. Unexpected Charges: What States Are Doing About Balance Billing | 21 C A L I FOR N I A H EALTH C ARE F OU NDATION 1438 Webster Street, Suite 400 Oakland, CA 94612 tel: 510.238.1040 fax: 510.238.1388 www.chcf.org