Health Plan Payment and Reimbursement

Providers push arbitration approaches used in some state surprise-bill laws

June 13, 2019 6:57 pm

What should Congress learn from states’ experiences with laws attempting to curtail surprise healthcare bills?

As healthcare industry advocates and legislators clashed over draft federal legislation to end such billing disputes, both sides highlighted state experiences they viewed as bolstering their preferred approach.

The major differentiator among state laws and competing federal proposals remains the method used to determine provider payment.

The House Energy and Commerce Committee’s Health panel clashed with provider advocates Wednesday over its bipartisan draft bill, the No Surprises Act, which would establish a minimum payment standard based on the median contracted in-network rate for the service in the geographic area in which the service was delivered. The measure also would allow states to determine their own payment standards for the health plans they regulate.

About half the states have enacted measures that address surprise healthcare bills to varying degrees.

Competing views of New York’s arbitration-based approach

The state measure that garnered the most discussion was a 2015 New York law that providers support. Provisions include:

  • Allowing providers or insurers to submit for arbitration the remaining balances on surprise bills
  • Requiring arbiters to consider factors that include a sample of recent payments from other insurers for that service
  • Requiring arbiters to look for gross disparities in the health plan’s previous payments for such services
  • Requiring arbiters to use review of the charge by physicians of the same specialty
  • Directing arbiters to use a Major League Baseball-style arbitration process, which limits consideration to proposed payments and allows any that is considered extreme to be dropped

Tom Nickels, a lobbyist for the American Hospital Association (AHA), testified that the New York approach has produced a 34% reduction in out-of-network billing charges, with no noticeable impact on premiums.

That view ran counter to the opinions of critics of the New York approach, such as America’s Health Insurance Plans (AHIP). Jeanette Thornton, a senior vice president for AHIP, warned that an arbitration-type approach would “increase healthcare costs for everyone.”

James Gelfand, senior vice president for the ERISA Industry Committee, also blasted the New York law for imposing steep costs on each claim sent to arbitration. That criticism is unwarranted, said Sherif Zaafran, MD, chair of Physicians for Fair Coverage, who asserted that such disputes cost $300 and are concluded within two weeks.

Although many committee members have supported the No Surprises Act, some members expressed a preference for an arbitration-style approach and some openly opposed the rate-setting approach of the draft legislation.

Rep. Larry Bucshon (R-Ind.) blasted the bill, saying it would lead to a “race to the bottom” in provider payments, encourage narrower networks, cut patient access to care and produce physician shortages. Instead, he urged either a New York-type approach or a hybrid benchmark-negotiation approach.

Senate bill has similarities to the New York model

The New York approach to payment determinations is closer to the model used in the Lower Health Care Costs Act of 2019, a bipartisan discussion draft released in May by the leaders of the Senate Health, Education, Labor and Pensions Committee. Senate staff said in recent interviews that they expect to resolve the differences in payment mechanisms as part of negotiations once each chamber of Congress passes its own surprise-bill legislation.

The outlook is good for passage in the House of the No Surprises Act, said Rep. Greg Walden (R-Ore.), not only because more than 60 healthcare industry groups submitted comments on the proposed bill but also because it “lines up pretty well” with the Trump administration’s preferred approach.

“We’re going to resolve this once and for all,” Walden said.

Similar arbitration-based approaches have been implemented in recent years in Texas, Florida and Illinois.

Insurers support rate-setting approach used in California’s model

The House bill is closer to the surprise-bill law enacted in California, which also bases payments on set rates. AHIP backed a California-type approach, where provider concerns that it would disincentivize health plan contracting have failed to materialize, said Thornton. She said that since the law went into effect in January, 5% more physicians have joined health plan networks.

Gelfand said the benchmark-payment approach would lower costs by incentivizing reluctant providers to join networks, to avoid facing lower payments.

Although no witnesses could cite data on experiences under a similar approach used by Oregon, Zaafran said physician practices in the two states have told him health plans have jeopardized network negotiations with their willingness to default to the states’ mandated rates for out-of-network providers.

Rep. G. K. Butterfield (D-N.C.) worried that the House bill’s approach would negatively impact the ability of rural hospitals to survive if payments are based on regionally determined rates.

Hospitals have complained to Rep. Doris Matsui (D-Calif.) that the California approach will disincentivize them from forming value-based payment arrangements with commercial health plans.

“Especially innovation would be really hindered by a one-size-fits-all approach,” Nickels said.

When Matsui asked whether the incentive for insurers to create networks could be preserved under a regional-rate benchmark approach, Vidor Friedman, MD, president of the American College of Emergency Physicians, said it is “virtually impossible to find the perfect rate.”


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