For several years, state legislatures have wrestled with the conflict among insurance companies, enrollees in insurance companies’ health plans and health care providers regarding reimbursements to non-contracted providers.  Health company representatives claim that non-contracted providers (especially facility-based physicians such as emergency physicians, anesthesiologists, pathologists, radiologists and neonatologists) submit claims for professional services which are exorbitant and are far above the “usual and customary” payments for these services. 

When the insurance company pays the non-contracted physician an amount which the physician deems to be far less than what is “usual and customary”, the physician is frequently left with no option but to send a “bill for the balance” between what the insurer is willing to pay and what the physician states is the real “usual and customary” reimbursement for professional services provided.  The insured patient expects that his insurance company will pay physicians appropriately and that the patient will not be placed in the position of receiving and being forced to pay a “balance bill”.

While insurance companies claim that non-contracted physicians demand unrealistically high reimbursements, physicians often counter that the reimbursement rates offered by the insurers are neither “reasonable nor customary” and are arbitrarily low—based on the obvious bias that insurers have in keeping physicians’ reimbursements low and insurers’ profits high.  The result is often an impasse which results in the balance-billing” of the patient for professional services rendered by non-contracted physicians which were not reasonably reimbursed by the insurance company.

For several years, the state of California has played a leading role in attempts to resolve the “balance-billing” issue in ways which protect the patient (consumer) from the obligation to pay for medical charges which were not reasonably paid by the insurer.  Unfortunately, some of these attempts have been ill-considered and would have exacerbated the problem.  On July 25, 2006, Gov. Arnold Schwarzenegger issued Executive Order S-13-06 which banned “balance-billing” by physicians and also directed the California Dept. of Managed Care to address the determination of fair-value for non-contracted provider services and also to establish an independent dispute resolution process to ensure that non-contracted providers who deliver reasonable services are paid the “reasonable and customary” value.  After a storm of protest from the provider community, the next day the Governor rescinded his Executive Order and the state indicated it would follow a formal rulemaking process complete with hearings as it moves forward to attempt to resolve the “balance-billing” issue.

On Feb. 23, 2007, California State Senator Perata introduced Senate Bill 981.  This bill would require that payment for covered emergency services be made at the lesser of the physician’s billed charge or the “interim payment standard”.  The interim payment standard is defined as 250% of the January 1, 2007 published Medicare rates for services provided by emergency physicians by region in California.  This bill provides a mechanism for physicians who are not paid according to the provisions of this bill to file complaints with the state Dept. of Managed Care which would require the “at fault” insurance company to make specified payments and to take appropriate “enforcement action” against the insurance company. 

The bill also prohibits a non-contracting emergency physician from seeking payment from individual enrollees of a health plan and requires the physician to seek payment exclusively from the health plan.  The bill also requires the creation of an Independent Dispute Resolution Process and issue determinations within specified time periods.  This bill was passed by the California Legislature but was then vetoed by Gov. Schwarzenegger. 

The result of this veto is that the California  Dept. of Managed Care still maintains that “balance-billing is “illegal” as stated in a communication on Oct. 15, 2008 which declared that as of that date, “balance-billing is an unfair billing practice” and is prohibited.  This determination is under challenge in the California courts at the present time in a lawsuit brought by the California Medical Association as well as the California Chapter of ACEP which states that the Cal. Dept. of Managed Care is a regulatory body for HMOs but it does not have authority to regulate physicians.  A decision is expected by a California Superior Court on this issue during the week of Nov. 17, 2008.  Following this decision, the case will likely be appealed to a higher court.  Thus, the issue of “balance-billing” by non-contracted physicians is still in limbo in California.

The state of Texas has also seen bills filed in past sessions which ranged from a total prohibition on “balance-billing”—with fines and possible loss of licensure for physicians who violated this prohibition— to bills which would have required insurers to pay the full amount of physicians’ bills and to seek recoupment from the patient of the difference between the billed charge and the insurer’s “allowable reimbursement”.  Neither of these extremes of solutions has found favor with the legislature.

Recent legislative efforts have focused on “transparency” of billing by requiring that health plans inform their insureds that, although a particular hospital or ambulatory surgical clinic may be “contracted” with the plan, some physicians—especially hospital-based physicians—may not be contracted with the plan and that therefore the patient may be subject to a “balance-bill”.  Hospitals are required to inform prospective patients that a physician or other health care provider may not be a participating provider with the health plan, even though the hospital is participating.

Hospitals also have obligations to provide patients with an estimated total cost of their inpatient hospital care for elective procedures and an itemized list of the hospital’s charges, if requested.  Hospitals are also required to provide “a conspicuous written disclosure to a consumer at the time the consumer is first admitted to the facility that:

A.    provides confirmation whether the facility is a participating provider under the consumer’s third-party payor coverage on the date services are to be rendered

B.     informs the consumer that a physician or other health care provider who may provide services to the consumer while in the facility may not be a participating provider with the same third-party payors as the facility.

Facility based physicians who are not contracted with a given third-party payor must send a billing statement that:

1)     contains an itemized list of the services provided along with the date of provision of the services

2)     contains a plain language explanation that;

a.       the facility-based physician is not within the health plan provider network

b.      the health plan has paid a rate, as determined by the health plan, which is below the facility-based physician billed amount;

c.       contains a telephone number to call to discuss the statement and discuss any payment issues;

d.      contains a statement that the patient may call to discuss alternate payment arrangements

e.       contains a notice that the patient may file complaints with the Texas Medical Board and includes telephone numbers and addresses to do so

A committee was formed to investigate the problem of “balance-billing and inadequate insurance company provider panels” at the direction of the past Texas Legislature.  This committee will provide a report to the new session of the legislature early in January 2009. 

Some interesting data regarding the “balance-billing” problem include the fact that 90% of Texas physicians are contracted with insurance companies—so less than 10% of claims are subject to “balance-billing”.  Emergency Medicine is the specialty with the highest percentage of non-contracted physicians.  There is a huge variation in what different health plans consider to be “usual and customary” reimbursements for the same physician service.

It is expected that “transparency” will be the focus on the next Texas legislature, in regard to the adequacy of the health plans’ provider networks, the adequacy of health plan educational efforts in explaining which providers are “in-network” and which are not—and the ramifications of “out of network providers”, as well as efforts to require health plans to reveal their “medical loss ratios”.  The medical loss ratio is the percentage of each premium dollar that actually goes to pay providers for their services—with the balance of each premium dollar retained by the health plan for expenses, bonuses, dividends to stockholders, etc.  In the case  of Medicare, only about 8% of each premium dollar is retained for administrative expenses and 92% is their “loss ratio”, which goes to pay for professional services to their enrollees.  For other commercial insurers, their loss ratios may be as low as 65%--so 35% of the premium dollar is retained by the insurance company.

In the Louisiana Legislature last year, the Commissioner of the La. Dept. of Insurance backed a bill to prohibit balance-billing.  This bill was defeated in the legislature.  Despite the fact that in the period from 2005-2007 the DOI received only 51 complaints regarding balance-billing, the DOI intends to support a similar bill to prohibit balance-billing  in the new legislative session.  Various physician groups are working to craft a proposed solution to this problem which would be acceptable to La. providers.

The Louisiana Insurance Commissioner has requested that providers and insurance companies meet and propose an acceptable solution to resolving the “balance billing problem”. He has stated that if a solution is not forthcoming, he will again propose a prohibition on balance billing in Louisiana during the next legislature.

Articles negative to providers’ balance billing patients are appearing in national magazines and newspapers across the country. The only reasonable conclusion can be that there is a concerted effort on the part of insurance companies to position themselves to fight balanced billing wherever possible. It will be important for providers to continue to keep themselves informed and become involved when necessary to fight the trend toward limiting reasonable payment for their services.