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Proposals Emerge for Easing Pain of ‘Sticker Shock’ from Out-Of-Network Costs

Greater price transparency and arbitration identified as possible solutions to hefty and unexpected healthcare bills, but details remain unclear

Dr. Nancy Staats
Dr. Nancy Staats of the New Jersey State Society of Anesthesiologists

The “sticker shock” some patients experience when they are told they have to pay for an out-of-network doctor is prompting the Legislature to find ways to avoid such unpleasant surprises.

The problem arises, for example, because some specialists like anesthesiologists are only assigned shortly before procedures, often leaving patients with no way to know if the specialists are part of the patient’s ’ insurance network.

Doctors and hospitals are now uniting behind a legislative proposal to require insurers to disclose to patients how much the insurers will reimburse providers, as well as how much the patients could have to pay out of pocket, before patients receive services.

Insurers and employers who pay for insurance also want changes in the system , but their motivation is lowering healthcare costs.

Both those who provide healthcare services and those who pay for them, such as insurers, argue that current laws give too much leverage to the other side in contract negotiations, and can point to specific cases of apparent abuses.

Both sides also are producing concrete proposals after three rounds of legislative testimony by stakeholders. But they are far apart on how to resolve their differences, and it’s unclear what legislative proposals will emerge.

“The focus needs to be on consumers and how consumers are impacted,” said Assemblyman Craig J. Coughlin (D-Middlesex), chairman of the Assembly Financial Institutions and Insurance Committee. He’s convened three hearings to hear testimony from stakeholders on out-of-network costs. The last of those hearings was held yesterday.

Dr. Nancy Staats of the New Jersey State Society of Anesthesiologists said the onus should be on insurers, not doctors, to inform patients about their potential exposure to out-of-network costs. She added that many anesthesiologists don’t know exactly which health plan networks they are in, noting that even with specific insurers their services might actually be covered in the networks for some plans but not for others.

Staats said most doctors prefer to work in-network as much as possible, adding that at the ambulatory surgery center that her practice services, patients can learn if the anesthesiologist is in their network, since all of the anesthesiologists are in the same networks.

But legislators said this isn’t the case at all facilities, since a single hospital may be served by multiple anesthesiology practices. Since anesthesiologists generally aren’t assigned for specific surgeries until 24 hours before a surgery, there is always a risk of the patient having an out-of-network anesthesiologist.

“It seems to me … that this situation cries out for some sort of legislation,” Coughlin said. He added that he had an experience in which he had a procedure at a hospital that was in his insurance network, with a doctor that was in network, but he wasn’t able to learn before the procedure whether his radiologist was in his insurer’s network.

Consumers protected, but still foot bill

The state does have some protections for consumers. For example, in cases where the hospital where a patient chooses to have a procedure is part of the patient’s insurance network, insurers must reimburse specialists who treat patients like Coughlin during the course of their treatment – frequently for whatever amount the specialist charges. In addition, insurers must cover emergency care at out-of-network hospitals.

But both insurers and groups that represent employers --say this system has come at significant costs to patients. While they may not have to pay the costs directly for these costs, they indirectly pay through higher insurance premiums, as well as higher taxes to cover government insurance programs like Medicare and Medicaid.

“These kinds of out-of-network providers’ surprise bills that are really high impact the cost of buying that coverage,” said Christine Stearns, vice president of health and legal affairs for the New Jersey Business and Industry Association.

For their part, doctor groups said insurers should be required to inform patients exactly how much they will reimburse out-of-network providers, as well as how this compares to other payments that providers receive for the same procedure.

Dr. Steven M. Reich of the New Jersey Spine Society and the New Jersey Orthopaedic Society expressed frustration that insurers won’t tell providers or patients before a procedure how much they will reimburse the doctor for the service. In some cases, insurers have later tried to pay as little as 5 percent of what a patient was originally told they would pay.

Reich said it would be fair if insurers based on their reimbursements to out-of-network providers on an index of what fees other doctors are paid for the same service. Instead, insurers are increasingly basing their out-of-network payments on a fixed percentage above the Medicaid reimbursement rate, which Reich said is too low.

But Wardell Sanders, president of the New Jersey Association of Health Plans, noted that Medicare reimbursements are based on a calculation of the value of the services, while basing reimbursement on fees would be inflated by the astronomical sums charged by some providers and lead to higher costs to insurers and consumers -- in some cases, as much are 10 times more than the Medicare rate.

“That’s why they’re fine with their fee schedule,” Sanders said.

He added that state regulations already require insurers to base out-of-network reimbursements on fees in the individual and small-group markets, leading most insurers to stop offering out-of-network benefits in these markets. This leads to providers billing patients for the cost and also results in disputes between the providers and the patients’ insurers, he said.

These regulations don’t apply to large employers who fund their employee health costs, which are increasingly seeking to reimburse providers an amount tied to the Medicare rates.

Belinda Doyle Puglisi, director of payer services for Children’s Specialized Hospital, said hospitals must be able to use the ability to go outside of an insurer’s network as a way to gain leverage.

“If you can’t go out of network, then you can’t get their attention,” she said. “That is unfortunate, but that is true.”

Timothy Martin, a lobbyist for the medical society, added that four insurers control 70 percent of the market, leaving providers with little leverage.

The issue extends beyond hospitals to ambulatory surgery centers, according to Mark Manigan, a lawyer who represents such facilities . He said that the state offers no protection for doctors who perform outpatient procedures, with insurers frequently tying their reimbursements to the Medicare rates. He also said that he would like to see the state require that out-of-network benefits reimburse doctors based on an index of all prices paid for the same procedure.

Sanders said the Legislature should give more weight to the position of those who pay for out-of-network specialists at in-network hospitals, as well as for out-of-network emergency care.

“The status quo is harming consumers today,” he said, adding that some hospitals and doctors are engaged in “price gouging.”

Coughlin said he doesn’t care how the money is divided between doctors, hospitals or insurers, as long as patients come out ahead.

“How do we drive down the cost of healthcare?” he said.

But Lawrence Downs, CEO of the Medical Society of New Jersey, the state’s largest doctors’ group, responded that each dollar paid to medical practices results in needed healthcare, as well as job creation and tax payments.

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