Surprise Medical Billing

Bipartisan efforts to end surprise medical billing have recently picked up significant additional steam. There are two main developments. First, on February 12 the House Ways and Means Committee passed H.R. 5826 on a bipartisan basis. This new IDR-only bill addresses some of the major criticisms made of H.R. 3502, the previous IDR-only bill.

Second, the “New Compromise Bill” version of a combined payment standard and IDR approach that was announced in December and was reviewed in the original brief has now been introduced a formal bill. On February 11, 2020, the House Education and Labor Committee passed H.R. 5800 on a bipartisan vote. That means that H.R. 5800 now has support in the lead Senate committee and in two (Energy and Commerce and Education and Labor) of the three House committees with jurisdiction.

Leaders are now discussing which bill to advance with the May 22 healthcare funding package or whether to develop a new bill that is a compromise between H.R. 5800 and H.R. 5826. The most likely compromise would be to reduce H.R. 5800’s limit on the size of cases that can be appealed to IDR. In H.R. 5800, only cases worth more than $750 can be appealed. That limit could be reduced to something like $250 or $500.

The details of the update are provided in three sections below. First, we have updated Table 1 summarizing the different bills, highlighting what is new. Second, there is a new section providing the details on H.R. 5826. Third, there is an updated section on H.R. 5800 (what had been called the “New Compromise Bill” in the original brief). Most of this section is the same as the original brief. The information that is new in this section has been highlighted in yellow.

IDR: H.R. 5826 – The Consumer Protections Against Surprise Medical Bills Act

Summary of What it Does

Details of What It Does

House Bill 5826 (H.R. 5826) eliminates surprise medical bills for emergency and ancillary services.  It does not eliminate surprise bills for air or ground ambulances, though it has a provision to study eliminating surprise bills for air ambulances.  It does eliminate surprise bills for post-emergency inpatient stabilization (see Table 1).

Like H.R. 3502, H.R. 5826 takes an Independent Dispute Resolution (IDR) approach rather than mandating a payment standard.  H.R. 5826 allows insurers and providers to negotiate the out-of-network payment appropriate to each case. In cases in which the insurer and provider are unable to agree, either can submit their case to an IDR “final offer arbitration” process, like in H.R. 3502.  

H.R. 5826 differs from H.R. 3502 primarily in the benchmarks it establishes for the arbitrator to consider when determining which of the final offers is most appropriate.  The biggest difference is that H.R. 5826 does not give the arbitrator the 80th percentile of billed charges as a benchmark. Instead, the arbitrator is directed to consider two benchmarks.  First, the arbitrator considers the insurer’s own median in-network rate for similar items or services in the same geographic area. Specifically, the benchmark is the insurer’s 2019 median in-network rate indexed to inflation.  Second, the arbitrator can consider other information the parties provide related to the final offer they submit to the arbitrator, except that the arbitrator cannot consider a provider’s billed charges.

Representative Richard Neal (D-MA), the chairman of the House Ways and Means Committee, and Representative Keven Brady (R-TX), the committee’s ranking Republican, sponsored H.R. 5826.  It is co-sponsored by 16 Democrats and 20 Republicans. On February 12, 2020, the House Ways and Means Committee passed the bill overwhelmingly on a voice vote.

Arguments For and Against

Because it is also an IDR-only approach, many of the same arguments are made for and against H.R. 5826 as H.R. 3502.
In response to H.R. 5826 the White House cautioned against an IDR-only approach, saying that President Trump “is concerned that a push to overuse arbitration will raise healthcare costs.”

H.R. 5826, however, does address one of the chief criticisms H.R. 3502. Opponents of H.R. 3502 argued that by including the 80th percentile of billed charges as a benchmark for the arbitrator would lock disproportionately high payments to emergency and ancillary providers into federal law. Most agree that H.R. 5826’s elimination of that benchmark means that it wouldn’t maintain, or even increase, already high prices as much as H.R. 3502.

By benchmarking to the insurer’s 2019 median in-network rate indexed to inflation, H.R. 5826 raises two arguments that cut in the opposite direction of each other in terms of prices. First, the 2019 benchmark means that insurance companies can’t manipulate the data to calculate the median. Many agree that data less prone to manipulation is an advantage over S. 1895’s benchmark of the insurer’s own median in-network rate for the prior year. Providers argue that this keeps insurance companies from unfairly reducing the payments they receive for their services.

Second, since healthcare costs tend to rise more rapidly than inflation, some argue that the indexed 2019 median should help hold down costs over . Insurer’s tend to like that consequence more than providers.

The Evidence

A CBO cost estimate confirms that H.R. 5826 would reduce prices, in contrast to their findings that H.R. 3502 would increase them. CBO estimated that H.R. 5826 would reduce payments to those who can surprise bill enough to reduce overall insurance premiums by between 0.5 and 1 percent. That is less than the 1 percent reduction in premiums that CBO estimated S. 1895’s payment-standard only approach would produce.

Combined: H.R. 5800 – The Ban Surprise Billing Act

Summary of What it Does

Details of What It Does

H.R. 5800 eliminates surprise bills for emergency and ancillary services. It also eliminates surprise bills for post-emergency inpatient stabilization and air ambulance services. It does not eliminate surprise bills for ground ambulance services. It does, however, mandate a study to investigate how to protect patients from surprise bills for ground ambulance services (see Table 1). This source of surprise bills is complicated because many ground ambulance providers are public entities like cities or counties.

Like H.R. 2328, H.R. 5800 combines a payment standard approach with IDR. It establishes the insurer’s own median in-network rate as the payment standard for out-of-network providers. Specifically, H.R. 5800 also establishes the insurer’s own current median in-network rate in 2019 for a given service or item in that geographic area, indexed to inflation.

An insurer or provider who is dissatisfied with this payment standard rate for a particular emergency or ancillary care case can appeal that case to IDR as long as the contested charge is more than $750, in contrast to the higher minimum of $1,250 under H.R. 2328. In cases specifically involving air ambulance services, the contested charge must be more than $25,000.
Like the IDR provisions in other bills, H.R. 5800 uses “final offer” arbitration. The arbitrator’s decision is binding. The losing party pays for the arbitration.

H.R. 5800 establishes three benchmarks for the arbitrator to consider when determining which of the final offers is more appropriate. First, the arbitrator can consider the median in-network rates of all other insurance plans in that geographic area for that service or item. Second, the arbitrator can consider distinguishing factors such as the severity of the case and the education and experience of the provider. Third, the arbitrator can consider the market share of the insurer and the provider. This third provision allows the arbitrator to take into account circumstances where the insurer or provider may have disproportionate bargaining power because they have a large share of the market in a particular geographic area.

The outline of H.R. 5800 was announced by Senator Alexander (R-TN) and Representatives Pallone (D-NJ) and Walden (R-OR) on December 8, 2019. That announcement was the result of negotiations among the three leaders to build on the insights gained from the various efforts to find a commonsense, bipartisan solution to surprise billing. Senator Alexander is the chairman of of the Senate HELP Committee and a co-sponsor of S. 1895’s payment-standard-only approach. Representative Pallone is the chairman, and Representative Walden is the Ranking Member of the House Energy and Commerce Committee. Together, they co-sponsored.R. 2328’s combined approach.

President Trump released a statement supporting Alexander, Pallone, and Walden’s December 8th announcement, praising their efforts to address the concerns of both Republicans and Democrats and the Senate and the House.

On February 7, 2020, Representative Robert “Bobby” Scott (D-VA), chairman of the House Education and Labor Committee, and Representative Virginia Foxx (R-NC), ranking member of the committee, introduced as H.R. 5800 what Alexander, Pallone, and Walden had outlined on December 8. On February 11, 2020, the House Education and Labor Committee passed H.R. 5800 on a 32 – 13 bipartisan vote.

Arguments For and Against

H.R. 5800’s combined approach is very similar to H.R. 2328. Consequently, most of the arguments for and against it are the same.

H.R. 5800’s main distinguishing feature is the limit it establishes that only cases over $750 can be appealed to IDR. Insurers still prefer no IDR, for the reasons described above. If there is to be IDR, insurers would prefer the $1,250 limit. Most providers remain opposed to any approach with a payment standard, for the reasons described above, even if there is an IDR appeal. If there is an IDR, providers would prefer that even cases for even very small amounts could be appealed .

Most Republicans and Democrats and insurers and providers support H.R. 5800’s unique provision to study how to address surprise bills for ground ambulance services. None of the prior bills prohibited ground ambulance surprise bills because they present unique complexities. Many who provide these services are public entities like counties and cities. Still, most believe a way to address these surprise bills should be explored.

Most also agree with the provision that arbitrators can consider insurer’s and provider’s market share. In many geographic areas, a few insurer’s and/or a few hospital systems can own most of the market share. The lack of competition can give them increased, and potentially unfair, bargaining leverage.

The Evidence

The evidence cited for H.R. 2328’s combined approach is also relevant for H.R. 5800. A CBO estimate finds that HR 5800 would provide similar cost savings as H.R. 2328 and result in roughly a 1 percent reduction in insurance premiums overall.

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