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New Rule Gives Insurers Upper Hand in Surprise Billing Battles

A new rule outlines how payors and providers will dispute payment rates – and puts doctors at a disadvantage.

By Wendell Potter

Surprise billing – the problem of patients receiving bills from physicians and air ambulance services that don’t contract with their insurance company – has been an issue for years.

It’s a tricky problem, because regulators have to consider how to protect patients from big bills, while not giving too much power to insurance companies, which often employ policies that also hurt consumers and physicians.

But at the end of the Trump administration, it appeared that a fair and workable solution that even had bipartisan support was struck. The No Surprises Act was passed and signed into law, and will take effect on January 1, 2022.

No Surprises Act: A new approach to balance billing

When services are provided by an out-of-network physician who is working at an in-network hospital, insurers cover substantially less, and sometimes none, of the care. This leaves patients on the hook, despite their care being covered and the hospital in-network. This process is called balance billing.

When this situation occurs, the No Surprises Act forces insurance companies to pay benefits at the in-network level, and to pay the check directly to the physician group.

The law also implemented a fair, independent dispute process if the physician felt that the payment they received was not right. This is a good bill and a good law, and a shining example of how our government could get things right.

At least it was—until the Department of Health and Human Services, the Department of Labor, the Treasury, and the Office of Personnel Management got ahold of it.

New rule gives insurers major leverage

In October 2021, these agencies distributed a new rule that gave insurance companies and doctors more details on how the dispute process would work, which included some big changes.

The changes make this process anything but fair. It gives way too much power to insurance companies who, given their past track records, are likely to abuse that power.

In fact, even before the ink was dry, one big insurer, Blue Cross Blue Shield of North Carolina, sent a letter to several hospital-based physician groups demanding an immediate—and in many cases deep—reduction in reimbursement in anticipation of the January 1 implementation of the rules.

Why did BCBSNC slash rates? The answer is that their average reimbursement will be used in disputes – so insurers have an incentive for that rate to be as low as possible.

How the updated law determines a fair rate

Providers will now have to show evidence that the value of the care provided is substantially different from what the insurance company paid – otherwise, the dispute will go toward the insurers.

In other words, doctors will have to show that a payment was below average in order to receive comparable reimbursement.

This might seem reasonable, but it creates a big concern. Average reimbursement rates are calculated by the insurance company without any transparency or oversight.

As a result, insurers may be incentivized to push providers out of network in order to drive down their average payments, which is exactly what the American Society of Anesthesiologists says BCBSNC is doing. The ASA and other physician organizations have good reason to believe that the BCBSNC letter is just the first of many letters that doctors will be getting from insurers in the near future.

When payors pick the rate, providers are at a disadvantage

Think of it like this. Let’s say you’re a home builder. When you finish a home, you sell it to the highest bidder. In this example, the government is worried about housing prices, and it thinks some builders might be price gouging.

To combat this, lawmakers pass a bill that says you must sell your house to any buyer who brings you three comparable prices from the general area, and that you must accept as payment the average of those three price comps.

But imagine that the prospective buyer got to choose the three comps.  The buyer would of course pick the three lowest comps, meaning you might be forced to sell your house below the cost of building it. And that, of course, would be terrible and unfair.

Well, that’s exactly what is being done to the No Surprises Act.

Meanwhile, insurance companies rake in record profits

These are big corporations that certainly don’t need or deserve any protection or assistance.  In the middle of the Covid-19 pandemic when many industries were facing economic disaster, health insurers enjoyed windfall profits. Many of the for-profit insurance companies saw their earnings double in 2020 compared to just one year prior. It might make a cynical person wonder which lobbyist talked to whom and what was discussed or promised.

It’s good news that patients will be protected from being balanced billed. But this interpretation of the bipartisan law is ultimately bad for everyone.  Giving insurance companies more power typically drives costs up, not down, and that’s the last thing this country needs.

Regardless of how it happened, physicians have good reason to see the rules as a defeat snatched from the jaws of victory. As a result, rich insurance companies will just get richer, and hardworking doctors who were on the front lines of COVID-19, staffing the ER and intubating patients, will get bear the consequences.

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