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Insurance Regulators Must Regulate Insurers, Not Physicians
Out of Network Billing and the NAIC Model Draft Bill
Background: The mission of the National Association of Insurance Commissioners is to assist state insurance regulators in regulating the conduct of insurance companies and their agents. In 2015, NAIC created a work group on creating a network adequacy model. On November 23rd, NAIC released its final draft of model regulation titled Health Benefit Plan Network Access and Adequacy Model Act (HBPNAA). The 17 section model act will be brought up in the 2016 legislative session and many forms of the legislation were considered in 2015.
Sections Concerning Members: Section 7 of the HBPNAA potentially concerning members.
Section 7: Requirements for Participating Facilities with non-participating (out of network), facility based providers
This section creates rules for out of network providers giving care at in-network facilities. There are two main requirements of this section of the rule, for emergency situations and non-emergency situations.
In emergency situations, under this rule, patients would only pay what they would pay for care from in-network providers. Patients would forward any balance bills to the insurer who can address the bill under a newly created mediation process. The patient would be guaranteed payment from the insurer to the provider for the full balance bill.
Staff Recommendation: Concerns.
In non-emergency situations, under this rule, patients who receive bills of more than $500 have the option to either pay the entire balance bill or opt into mediation. The patient would pay the traditional in-network portion then send the rest of the balance bill to the insurer requesting mediation. Provision F of Section 7 allows for a provider to receive payment outside of the mediation process determined by the state legislature as an “XX percentage of Medicare payment rates.” Health plans must establish, under this rule, a mediation process for payment of out-of-network providers at in-network facilities. The provider and health plan will split the cost of mediation evenly.
Staff Recommendation: Major Concerns.
Staff Recommendations and Insights:
The model legislation, at its core, is a prohibition on the ability of out-of-network physicians to bill for their services. To be clear: The model legislation mandates that there be regulation on physician billing. In most cases, if the patient who receives a balance bill does not agree to pay the physician for the services rendered in a non-emergency situation, the provider will not be paid for their services unless they go through a mediation process with the carrier or they opt to receive “XX percentage of Medicare payments.” The provider must pay for half of the mediation process. Both the cost and time for a mediation process creates an undue burden that some physicians may not participate in. Furthermore, section 7 creates an incentive system that rewards carriers with the poorest network by creating, what staff internally considers, “networks-in-law.” One of the last remaining bargaining points physicians have is not contracting in order to compel plans to set fair and reasonable terms for in-network services. Only allowing physicians to pay a percentage of Medicare on OON charges or requesting mediation is rate regulation by health plans.
Legislation is being brought in New Jersey, Florida and Nevada but almost every legislature will bring this issue up in the next 5 years as they modernize their network adequacy laws. The New York Times, Wall Street Journal and many local “newspapers of record” have written about this issue. Some, like the New York Times, have targeted members.
Finally, insurance commissioners exist to regulate insurance licensees (health plans). The NAIC, in section 7, is creating model legislation that regulates providers and the rates that they set. The NAIC should address balance billing issues by creating model legislation that further regulates insurance companies – the entities their members regulate.
Out-of-Network Providers, In-Network Hospitals
An update on state legislation
Health plans with high out-of-pocket expenses and narrow insurance networks continue to grow in the Affordable Care Act (ACA) market exchanges. As a result, balance billing for out-of-network providers at in-network hospitals has become a major issue for regulators, the media, and physicians.
Insurance regulators, seeking to fix the problem, have created model legislation that will be debated in nearly every state. Their proposal, supported by health plans, limits the ability of out-of-network physicians at in-network facilities to negotiate for their services. State insurance commissioners would regulate providers and their rates, and state legislators would set benchmark rates.
Patients don’t like surprises
Surprise bills arise when patients go to an in-network facility for healthcare services, but are unaware that some services may be delivered by an out-of-network provider. When patients receive a bill from the provider for the services that their insurance is not obligated to fully cover, they are surprised and frustrated—and they’ve communicated their feelings to legislators.
As a result, state legislatures across the country are attempting to remedy surprise charges and protect patients. Last November, the National Association of Insurance Commissioners (NAIC) released a draft model regulation, “Health Benefit Plan Network Access and Adequacy Model Act.” The 17-section model legislation will be introduced across the country.
Section 6 of the model act creates requirements for health plans, and in-network facilities and providers that create tiers of providers. It requires insurance companies to inform state regulators and the public of the criteria of these tiers. The rules also prohibit plans and facilities from discriminating among providers based on their patient populations. Finally, it governs the relationship between providers and health plans in creating, managing, and terminating in-network contracts.
Section 7 sets requirements for participating facilities with non-participating (out-of-network) facility-based providers. In effect, it creates billing rules for both emergency situations and non-emergency situations.
Under these rules, patients treated in emergency situations would pay the same amount for care by both in-network and out-of-network providers. If out-of-network provider bills patients, patients would forward the bill to the insurer. If the difference in the billed charge and the plan’s allowable amount is more than $500, the insurer and the provider would participate in a mediation process.
In non-emergency situations, patients unwilling to pay the full bill of more than $500 would pay the traditional in-network portion and forward the rest of the bill to the insurer. This section allows state legislatures to set payments as a percentage of Medicare payment rates. Providers who reject those payments must participate in a mediation process established by the health plan, and must split the cost of mediation evenly with the insurer.
A ban on billing
The model legislation, at its core, limits the ability of out-of-network physicians to bill for services provided at in-network facilities. In most cases, if patients who receive a balance bill do not agree to pay the physician for the services rendered in a non-emergency situation, providers will not be paid unless they go through a mediation process with the health plan or agree to the legislated percentage of Medicare payments.
Surprise bills as a result of narrow networks is a problem created by health plans. Statistics show a significant difference among health plans and their in-network providers at in-network facilities. For instance, some in-network facilities will have a nearly 100 percent rate of in-network providers for certain specialties, while other plans may have no in-network providers for those specialties. An article in the Journal of the American Medical Association (JAMA), titled Adequacy of Outpatient Specialty Care Access in Marketplace Plans Under the Affordable Care Act, showed that plans are being offered with no in-network physicians for a certain specialty within 100 miles of beneficiaries. According to the study, about 14% of plans were deemed specialist-deficient.
Health plans with properly managed networks make significant investments in contracting, negotiations, and other business functions required to attract and build a provider network. But some networks have few or no in-network providers in a certain specialty at an in-network hospital. This saves the health plan money, but does a great disservice to their beneficiaries (the physician’s patients).
Unfortunately, this section results in an incentive system that rewards carriers with the poorest networks and discourages health plans that have invested in their networks. By limiting out-of-network physician payments to a percentage of Medicare or mediation, the model legislation creates “network-in-laws” and reduces the need for health plans to contract with physicians.
The model legislation proposed by NAIC goes much further than the standard role of insurance commissioners. In most states, insurance commissioners are charged with regulating insurance licensees (health plans). The NAIC, in this model legislation, is attempting to regulate providers and the rates that they set.
A more proper role for NAIC would be to address balance billing issues by creating model legislation that further regulates insurance companies. If NAIC is truly concerned with out-of-network billing at in-network facilities, it should turn its attention to model legislation that focuses on the shortcomings in health plan policy benefits.
A link to the NAIC model legislation can be found in the online version of this article, available at www.aaosnow.org
Manthan Bhatt is the manager, state government affairs, in the AAOS office of government relations. He can be reached at email@example.com
ONLINE ONLY: http://www.naic.org/store/free/MDL-74.pdf