Patients slammed by surprise hospital and physician charges will win with any of the bipartisan balance billing bills moving through Congress. Each bans the practice.
But any legislation that requires payers and providers to settle their payment disputes solely through negotiation and arbitration should be rejected. Such a solution will bake in the exorbitantly high prices charged by hedge fund-owned, out-of-network emergency department providers. And that, in turn, will eventually get passed along to consumers in the form of higher health insurance premiums.
The alternative is some form of price-setting, which was included in the original legislation considered by the House Energy & Commerce and Senate Health, Education, Labor & Pensions committees. Those bills said if payers and providers can’t resolve differences over who’s in-network and what prices out-of-network providers can charge, then the payers—insurers, self-insured employers, and national employer and union plans covered by ERISA—would simply pay a benchmark rate pegged to in-network prices in a region.
Hospitals and physician groups are waging war against benchmark pricing. They fear their negotiated private payer rates will eventually revert to that mean.
“A default payment rate would remove incentives for health plans to contract with providers or to offer fair terms,” American Hospital Association CEO Rick Pollack wrote to House leaders last week. It will result “in a huge windfall to commercial insurance companies at the expense of the nation’s community hospitals.”
It’s a legitimate concern. But growing insurance industry profits aren’t the real reason they’re upset. Most providers still haven’t learned how to live within Medicare rates. They depend on cross-subsidization by their privately insured customers to pay the bills.
Insurers may benefit from benchmark rates in the short run. But the Congressional Budget Office analysis of one compromise bill, which included benchmark pricing but sent disputes over $750 to arbitration, projected the government would save $17 billion over the next decade. How? Through lower premiums on the exchanges, which will reduce the subsidies given lower-income purchasers. And through higher tax collections, since reducing employer premiums will generate higher income taxes from higher employer profits and higher wages.
At least six states have put limits on balance billing. California’s 2016 law set benchmark rates at the private insurer median or 125% of Medicare rates. It allows providers to challenge the benchmark through an independent dispute resolution process.
The head of the California Medical Association said the law “emboldened insurers to avoid entering into contracts with doctors.” Yet the consumer group Health Access California reports “all but a handful of physicians” are accepting benchmark rates in the state.
Moreover, the state’s regulators say networks are getting wider, not narrower, in response to the law. That suggests the prospect of benchmark pricing has incentivized both providers and payers to compromise in their never-ending battles over networks and rates.
Politicians from both political parties are eager to reach some kind of compromise. Surprise billing and outrageous drug prices are the two main healthcare issues voters are worried about this election season. Incumbents are desperate to have something to show on at least one of those issues.
The kerfuffle over surprise bills has revealed the dysfunction at the heart of America’s fragmented reimbursement system. Instead of ratcheting down costs to live within public-sector payments, hospitals have increased prices on the privately insured. Instead of negotiating fair rates, insurers have narrowed their networks. Instead of fighting to end fee-for-service medicine, employers have shifted their workers into high-deductible health plans.
Stopping surprise bills won’t end those larger problems. But a common pricing system for all payers might. A ban on balance billing that uses benchmark pricing for out-of-network services is a small step in that direction.