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Legislators Seek to Solve Problem of Excessive Out-of-Network Medical Bills

Proposals include ‘baseball arbitration’ between insurers and hospitals, more information for consumers before treatment

medicine money

Different proposals -- including one for so-called “baseball arbitration” – aim to address insurance-payment issues that arise when patients are treated at out-of-network hospitals or even by out-of-network doctors at in-network hospitals.

“Baseball arbitration,” in which hospitals and insurers would submit offers to an arbitrator, has been proposed as one possible solution. For example, if an out-of-network hospital charged a patient $2,000 for a procedure and the patient’s insurer offered $1,000, the arbitrator could choose one price over the other.

It’s one of a variety of ideas that have emerged as legislators have discussed how to address the sticker shock from New Jersey’s high out-of-network medical bills.

Another proposal would require hospitals to disclose beforehand whether one of the doctors treating a patient is not in the patient’s insurance network, while another bill would prohibit hospitals from sending some unpaid patient bills to collection agencies.

Renee Steinhagen, executive director of the New Jersey Appleseed Public Interest Law Center, said an advantage of the winner-take-all baseball-style arbitration system – based on recent legislation in New York state -- is that the prospect of losing a case forces both sides to submit reasonable offers.

“If you’re going to consistently be on the losing end of the baseball arbitration, you’re going to start lowering your charge,” she said.

In standard arbitration, the arbitrator can choose a price in the middle of the two offers. In the baseball arbitration, there is no advantage to either party to make extremely high or low offers, since the arbitrator is unlikely to pick an extreme offer.

At a recent legislative hearing, Steinhagen said some of the needed changes could be regulatory.

For example, the state Department of Banking and Insurance regulators could check to see if insurers’ lists of in-network providers are out-of-date, Steinhagen said. This issue is particularly pressing for those who need mental-health providers.

Steinhagen also noted that consumers frequently don’t have the information they need to avoid high out-of-network charges.

She cited a case in which one client didn’t know the right questions to ask a hospital to avoid receiving a large bill for a colonoscopy. He asked whether the hospital accepted his insurance, which is different from asking whether the hospital was part of his insurance network.

Hospitals can be outside an insurance network and still accept the insurance, but at a higher cost to the patient.

Assemblyman Carmelo G. Garcia (D-Hudson), whose district is served by the for-profit CarePoint hospitals -- CarePoint Health’s Bayonne Medical Center has the highest Medicare charges of any hospital in the country said that consumers generally don’t bear the burden of out-of-network bills, which are frequently paid by insurers.

Insurers are required to pay emergency-room bills, but healthcare advocates have criticized CarePoint for working with doctors to schedule procedures with patients who come through the emergency room.

Garcia has proposed the bill, A-3872, that would bar hospitals from sending unpaid bills to collection agencies, as long as a healthcare provider referred the patient to the hospital. He said that since insurers have to pay the bills eventually, the measure would save consumers headaches and prevent potential harm to their credit scores.

Steinhagen said consumers need such protections when they are facing true emergencies, but actually benefit from having more information about potential hospital bills in non-emergency situations in which they can choose which hospital to have a procedure.

At a hearing that was held before Garcia introduced the bill, Steinhagen said consumers must be informed that they are hurt financially even when they don’t pay from their own pockets for out-of-network bills. That’s because they will see higher health insurance premiums when insurers pay out-of-network providers, and higher tax bills when government programs like Medicare and Medicaid pay these bills.

Garcia also is planning to introduce a second measure that would require hospitals to inform patients that they will receive notice before they receive any medical service if any of the providers are outside their insurance network.

New Jersey Hospital Association spokeswoman Kerry McKean Kelly said hospitals have had “strong concerns” with similar bills in the past and are not in the best position to inform patients about the insurance ramifications involved with which providers treat the patients.

“The insurance company is in a far better position than the hospital to know the current contract status of its physicians and to communicate that to the consumer,” she said in an emailed response to questions.

She said the hospital association is drafting a sample notice that hospitals would use to notify consumers that some doctors might not be in-network and urging them to contact their insurer ahead of time with questions.

The Assembly Financial Institutions and Insurance Committee has held two hearings on the out-of-network fees issue. Committee Chairman Craig J. Coughlin has said he’d like to pass legislation this year, but that it may not occur until 2015.

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