Anyone who has had a serious illness or injury is familiar with the dizzying array of medical bills that seem impossible to decipher, replete with codes and charges that are supposed to explain financial liabilities, deductibles, in-network charges, out-of-network fees, and the like. How is a layman expected to figure out what’s really owed, what costs could have been avoided by using in-network care, and whether or not there have been overcharges.
A bill aimed at addressing this problem will be up for discussion today in the legislature. Called the, it requires patients to be made aware of potential financial liabilities, before they decide to seek out-of-network care.
Currently, patients can be unaware that a subspecialist or other healthcare provider -- such as an anesthesiologist -- is out-of-network, even though the hospital in which the procedure occurs is in network. When that happens, the patient gets socked with extra out-of-network costs or the insurance company negotiates a payment to the doctor.
The bill will require health plans to explain to their members, in writing, their methodology for calculating the portion of the bill they will cover for out-of-network care. And the bill requires health plans to post on a website a "clear and understandable" explanation of the plan’s out-of-network benefits.
What's not clear is whether the bill (A2751), which is sponsored by Assemblyman Gary S. Schaer (D-Passaic/Bergen), chair of the Assembly financial institutions and insurance committee, has any chance of passage. Despite months of meetings among stakeholders, it failed to come before the legislature for a vote in the last session -- in the face of stiff opposition from physicians and hospitals.
The biggest issue that the bill tries to address is the confusion about out-of-network and in-network care-- and who pays the bill.
Health plans negotiate the rates they pay in-network providers, and contend that when their members go out of network, the result is higher medical bills that drive up the cost of health insurance for everyone. But physicians, hospitals, ambulatory surgery centers and other healthcare providers argue they have a right to refuse to join a network if they don’t like the health plan’s rates.
This is where it begins to get complicated. Health plans typically require their members pay a larger share of an out-of-network bill than if they go in network. But doctors, specialists, and other providers often waive the patient's part of the bill -- the amount he or she would pay for going out of network. Thus, the patient has no financial incentive to remain in network. (This is particularly a problem for office visits, rather than treatment at an in-network hospital.)
Schaer's bill addresses this situation directly. It would require doctors to make a "good faith" effort to collect the patient's share of the bill. The legislation would allow providers to waive the patient’s share in the event of financial hardship, as long as they don’t routinely waive the patient’s contribution.
This should help explain why the legislation is not popular with physicians.
But what happens when a patient chooses an in-network facility, like a hospital, but while there receives treatment from an out-of-network physician, such as an anesthesiologist?
The bill is equally direct in this situation. It would prohibit the out-of-network anesthesiologist from billing the patient any more than he or she would have to pay if the anesthesiologist were in-network. Thus, instead of charging a fee that the anesthesiologist sets, the doctor would only receive would he or she would have gotten as part of the health plan network.
Randy Minniear, senior vice president, government relations and policy spokesman for the New Jersey Hospital Association, said he is concerned that if these out-of-network providers can’t bill the patient, they will instead bill the hospital.
“If they have no ability to collect out-of-network costs from the patient," he said, "and if they can’t go back to the insurance company, they are going to come back to us, and we can’t afford to be reimbursing our physician practitioners in our hospitals.”
Minniear said it is not clear from the bill’s language if out-of-network providers can seek payment from the insurer. “If they can negotiate with the insurance company, that is a different story. While we support the perceived intent of the bill to protect patients from unwittingly being billed out-of-network charges, we are concerned that the wording of the bill may create unintended consequences that would put the facilities at untenable financial risk.”
Mark Manigan, a partner at the law firm Brach Eichler, who represents healthcare providers, also objects to this provision in the bill. Currently, he said, the out-of-network physician bills the patient, who then forwards the bill to the health plan, which then pays the bill based on the out-of-network benefits it has agreed to provide under the member’s health plan. He said the provider can’t bill the insurance company directly: “They have no contractual relationship with the insurance company, so how else are they going to get paid then by billing the patient?”
The provision is also opposed by the Medical Society of New Jersey. Lawrence Downs, chief executive, said the bill appears to require out-of-network physicians working at in-network facilities to accept in-network rates.
“If you are an out-of-network doctor, you have already attempted to reach an agreement with an insurer, failed to come to terms," explains Downs, "but would have to accept those terms anyway. It would remove any leverage at all in the market for physicians to negotiate fairly with insurers about payments to keep their practices afloat.”
Manigan said the healthcare market is changing, and insurers are restricting what they will pay for out-of-network care, with the result that patients are getting hit with larger bills when they go out-of-network.
Jeff Shanton, chair of the advocacy and legislative affairs committee of the New Jersey Association of Ambulatory Surgery Centers (NJAASC), said the group “supports disclosure, transparency and fairness in the healthcare system. We have worked extensively with Assemblyman Schaer on this bill.”
This week health insurer Aetna announced a national initiative to encourage its members to use in-network facilities when they schedule same-day surgical procedures -- and the pushback from the NJAASC illustrates how complex the out-of-network issue can get.
According to Aetna, half of its members who are referred by their doctors to a surgery center did not know the referral would take them out of the Aetna network. On average, the medical bill was $5,000 lower when the members stayed in network, according to the company. It said that since August 2010, on nearly 38,000 occasions an in-network doctor referred an Aetna member to an out-of-network surgery center.
To illustrate the price differential, Aetna spokeswoman Susan Millerick used an example in which the patient pays 10 percent of the bill for in-network care and 30 percent for an out-of-network facility.
If the member went in-network for care and the bill was $2,000, the member would pay 10 percent, or $200. If the patient went out-of-network, and the bill was $6,000, Aetna would apply a formula that allows a payment of $5,000 for the procedure. Aetna would then pay 70 percent, or $3,500, and the member would pay 30 percent or $1,500.
In addition, an out-of-network provider can “balance bill” the member for the difference between its billed amount and what Aetna allows, or $1,000.
In this example, according to Aetna, the member pays $2,500 out of pocket when using an out-of-network facility and $200 by staying in network.
Larry Trenk, president of the NJAASC, contended that patients should be free to use in-network physicians who perform surgical procedures at out-of-network facilities.
“Aetna charges higher premiums for policies that have out-of-network benefits. If a patient that has such a policy is convinced by Aetna to go to an in-network provider, Aetna would stand to benefit.”
Trenk said that Aetna “has made it very difficult for ASCs in New Jersey to join with them, and provide in-network care. Aetna has stopped negotiating with new and existing facilities that want to participate in their network. This only serves to increase the number of out-of-network claims.”
Millerick said Aetna has 119 ASCs in its New Jersey network and is currently in negotiations with at least 12. “But even good-faith efforts to contract with these facilities are not always successful, because we can’t contract at any price. Aetna has a dual responsibility to its employer customers. The first is to provide them with access to comprehensive health benefits coverage that is both accessible and affordable. The second is to help contain rising health care costs which threaten their ability to continue providing coverage for their workers.”