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State Legislators Tackle Persistent Problem of Unexpected Medical Bills

Lawmakers draw ire of doctors’ groups who call regulations addressing ‘out of network’ costs unnecessary and even insulting

schwimmer coughlin
Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, endorses legislation sponsored by Assemblyman Craig J. Coughlin (D-Middlesex)that aims to protect consumers from unexpectedly high bills from out-of-network providers.

A far-ranging proposal to alter how medical providers bill for services is being championed as a way to protect consumers from unwittingly being charged high fees for services.

But doctors’ groups are lining up in opposition, saying it would give power to insurers in their negotiations with doctors over prices.

The bill calls for notifying patients whenever a member of a medical team will be billing for their services “out of network” – or outside of previously negotiated fees with an insurance carrier.

The onus for the notification of whether they are members of an insurer’s network would be on both hospitals and doctors at least 30 days before a non-emergency or elective procedure. The medical provider would also have to give a cost estimate.

The legislation would also require insurers to update their provider lists at least every 20 days.

In addition, the bill would limit reimbursements to providers to no more than two and a half times the median price paid by in-network commercial insurers -- networks are the rosters of hospitals and doctors that have contracted with insurers to provide care at a negotiated rate).

The bill would also mandate binding arbitration when providers and insurers can’t resolve billing disputes; and bar providers from waiving out-of-pocket costs as a way of attracting patients, unless the payments would be a hardship to the patient.

The issue has become so contentious because, while only a small share of all New Jersey healthcare bills statewide are out-of-network, providers see the ability to go out-of-network as a crucial tool in negotiating payments with insurers.

Insurers, employers and consumer advocates support many of the changes included in the bill, while doctors would like to see a much more modest proposal. Most hospitals didn’t stake out an immediate position, although a Hudson County for-profit chain is against the measure.

The bill builds on groundwork laid by lawmakers who say they’ve tried for years to reconcile the competing demands of insurers and providers,

Bill sponsors said the interests of consumers were their focus in shaping the measure. The bill is certain to face some of the same opposition that blocked previous efforts.

“There is an inordinate amount of money that gets spent on out-of-network costs and the people of the state of New Jersey stand to benefit greatly if we can rein in some of those costs,” Assemblyman Craig J. Coughlin (D-Middlesex) said. “And we think that this bill does that.”

Coughlin took on the issue as his top priority when he became Assembly Financial Institutions and Insurance Committee Chairman last year.

The bill -- A-4444, called the Out-of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act -- was sponsored by Coughlin, Assemblymen Gary S. Schaer (D-Bergen and Passaic) and Troy Singleton (D-Burlington), as well as Sen. Joseph F. Vitale (D-Middlesex).

The first outside endorsement for the bill came from Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, a nonprofit that seeks to promote healthcare quality, safety, accountability and cost-containment.

Surprise billing for out-of-network costs is “something that’s been going on for a long time and, really, it’s the citizens of New Jersey that have been caught in the crossfire between these competing interests,” Schwimmer said.

She challenged the many lobbyists for various healthcare interests who attended the announcement of the legislation in the Statehouse yesterday to work together on the bill to benefit patients.

In the last two legislative sessions, Schaer has unsuccessfully sponsored a bill that was intended to increase out-of-network price transparency. He noted that the bill was receiving criticism before it was even introduced.

“The one thing that we can say to many or most people in the room is that they hate the bill, even if they haven’t seen it,” Schaer said, adding that the current situation is “simply unacceptable.”

“We believe that at the end of the day, everyone will be in a fair position – a balanced position, if you will – and the group that will benefit the most is the group that we’re all here for the most, and that is the consumers,” he said.

The bill would introduce a potentially important new concept to New Jersey healthcare – the healthcare price index.

The index would be maintained by an organization chosen by the state government and would gather data on hospital claims paid by commercial insurers and annually publish the median prices paid for in-network healthcare services. Out-of-network reimbursements would then be limited to a rate between 75 percent and 250 percent of the median.

But doctors don’t want to apply these price limits on their out-of-network billing. Larry Downs, CEO of the Medical Society of New Jersey, the state’s largest doctors’ group, said the bill would takes away doctors’ ability to negotiate with insurers for “fair contracts and adequate payment, when they are already at a disadvantage in such negotiations.” He said it wouldn’t be fair to base out-of-network payments on a percentage of in-network reimbursements.

Downs said there’s a better way to induce doctors to join networks.

“The solution to this problem is simple and proven to work – pay physicians fairly and provide fair contract terms, and they will join networks,” he said.

Downs also criticized a provision of the bill that sets rules for binding arbitration, which the sponsors described as “baseball” arbitration. That’s because, like the system used by Major League Baseball, arbitrators would choose either an insurer’s or a provider’s proposed price, rather than forging a compromise between the proposals. Supporters of this provision say it will encourage both sides to moderate their proposals or settle early before reaching the arbitration process.

But Downs said it’s unnecessary.

“This is an insult,” he said. “We are talking about complex, life-saving medical procedures, not baseball.”

Singleton said Illinois has had success with a similar arbitration system, and that both parties in that state have increasingly preferred to settle before heading into the arbitration process, rather than risk losing in arbitration.

The bill provision that would require doctors to inform patients about their estimated costs and network status drew concern from Claudine M. Leone, director of policy and advocacy for the New Jersey Academy of Family Physicians.

“It is concerning that this legislation puts additional responsibilities on in-network physicians – requiring them to educate and counsel patients on the intricacies of their individual health plan benefits, co-pays, deductibles and other coinsurance obligations,” she said. “Physicians are here to provide guidance on medical and health care treatment decisions. Consumer benefits communications should fall squarely on the health plan.”

The insurers appear eager to work with the sponsors on the bill.

Top industry lobbyist Wardell Sanders said they’ve identified “some initial concerns,” but that it’s necessary for the state to address “predatory pricing” by a minority of providers.

He cited news report about unexpectedly large bills that patients faced.

Another group supporting the effort is the New Jersey Business & Industry Association, representing employers who would like to see their healthcare costs reduced.

“We are very pleased that the legislators have moved forward with a bill that is as comprehensive as this, because we feel that the cost of healthcare in New Jersey is very high and one of the big cost drivers is out-of-network charges,” said Melanie Willoughby, senior vice president of the NJBIA.

New Jersey for Health Care, a coalition of nonprofit and community groups dedicated to increasing healthcare access, also applauded the bill.

“The proposed bill appears to be a giant leap forward for consumers,” coalition spokeswoman India Hayes Larrier said in a statement. “We applaud the sponsors for keeping consumers front and center as they seek to tackle this contentious and costly issue and look forward to working with them as this bill makes its way” through the Legislature.

And Evelyn Liebman, associate director for state advocacy for AARP New Jersey, added that while her organization was still reviewing the bill, it was encouraged that the legislators took on a difficult issue “and put consumers front and center.”

But Mark Manigan, a healthcare lawyer with Roseland-based firm Brach Eichler, said the bill raised major concerns for providers, starting with its scope.

“The concerns that my clients have arise from those portions of the bill that have nothing to do with the so-called ‘surprise bill’ situation. There’s room for reform. There was an emergent consensus to deal with that fairly narrow issue,” he said.

Manigan said the out-of-network issue only affects a small slice of patients: those whose insurers don’t provide out-of-network coverage, who receive treatment in a hospital that’s out of network, or who are treated by an out-of-network doctor at an in-network hospital.

“This bill goes way beyond that and touches every healthcare provider-patient relationship,” Manigan said.

Since the bill includes provisions to contain costs in these situations, it’s unnecessary and burdensome to providers to also require them to inform patients about their insurance status and potential bills. In addition, Manigan said, the state should let the market determine how much providers charge patients, rather than preventing (as the bill would) providers from waiving out-of-pocket costs.

“Let the market deal with this … as it already has,” Manigan said. “Why further reduce the leverage of healthcare providers in that space?”

Manigan raised the possibility that requiring providers to notify patients of costs at least 30 days in advance would delay many procedures that are scheduled in less than 30 days.

“That’s a harsh intrusion into common practice,” he said.

Legislators cited cases where patients only become aware that a provider is outside their network shortly before a surgery. For example, anesthesiologists may not be scheduled until just days before a procedure.

In addition, insurers, employers, legislators and consumers have raised concerns that even when state law protects consumers from out-of-network bills by requiring insurers to cover those costs, , higher bills have the effect of raising everyone’s insurance premiums.

Vitale also raised this issue related to providers that waive out-of-pocket costs to attract patients. This can lead to insurers paying higher amounts than they otherwise would and passing along the costs to everyone else through higher premiums, he said.

Hudson County-based for-profit hospital chain CarePoint Health issued a statement describing the bill as “a massive gift to large insurance companies, and a shot across the bow against the Medicaid population and undocumented population.”

CarePoint has been singled out for going out of network in order to increase its revenues – the hospital has said this is necessary to offset the cost of serving a disproportionately low-income and uninsured population. Earlier this week, CarePoint CEO Dennis Kelly called for the state to set all hospital reimbursement rates, which he said would be fair to all patients and hospitals.

Perhaps the largest voice in New Jersey health policy – the New Jersey Hospital Association – didn’t take an immediate position on the bill. Association President and CEO Betsy Ryan said hospital officials understand consumers’ frustration over the out-of-network issue.

“It’s a very complex issue, and we agree with the bill’s sponsors that addressing it requires a shared responsibility from hospitals, physicians, insurers and regulators,” Ryan said in a statement. She added two priorities: making sure patients have access to the providers they want, and ensuring fair negotiations between providers and insurers.

Coughlin said the legislators plan to meet with stakeholders on May 22 in what he said would probably be “a marathon day” to discuss the bill.

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