By: Ron E. Peck
As a member of the health benefits community, I – like many of you – have heard about the proposed “No Surprises Act.” Many representatives of our health insurance and benefits community have reached out to me asking whether this “new law” will make balance billing “illegal,” and thus enable plans to leave their networks behind and pay claims solely based upon a Reference Based Pricing (“RBP”) methodology.
Before we dive into what the No Surprises Act is (and isn’t), let’s first – as of the time this missive is being drafted – recognize that it is presently “a bipartisan, bicameral deal in principle.”1 The “Committee leaders” are on record as having said that they “… look forward to continuing to work together to finalize and attach this important new patient protection to the end-of-year funding package,” and that they are “… hopeful this legislation will be signed into law…” Despite Congress’ vote to pass the bill, which includes the No Surprises Act, unless and until it is signed into law by the President, it isn’t a law of the land (yet).
A wise person plans for anything and everything, however, so let’s proceed under the assumption that this “deal” will in fact become law. The question (then) is whether, as mentioned above, the No Surprises Act outlaws balance billing. The answer is no; not even close.
The name of the proposed law is literally the no “surprises” act, and the above mentioned Committee leaders specifically state that, “Patients should not be penalized with these outrageous bills simply because they were rushed to an out-of-network hospital or unknowingly treated by an out-of-network provider at an in-network facility.”
This proposal relates solely to “surprise” balance bills.
One trend, seen from both government and media, is to confuse the term “balance billing” with the more specific term, “surprise” balance billing. In a nutshell, every brown squirrel is a squirrel, but not every squirrel is a brown squirrel. Similarly, every surprise balance bill is a balance bill, but not every balance bill is a surprise balance bill.
A surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount a provider charged for out of network (“OON”) services, provided in response to an emergency, where the patient didn’t choose the provider (nor did they have the ability to choose). Alternatively, a surprise balance bill is an amount submitted to a patient for payment that represents the difference between what a health plan paid, and the amount an OON provider charged when the patient treated at an “in network” (“IN”) facility, but a specific healthcare professional at the facility – that provided services to the patient – is independently OON.
When a plan pays a usual and customary or “RBP” rate (often a percent of Medicare, or some other objective pricing metric) to a non-contracted provider, and the provider subsequently seeks payment from the patient of an amount that is in excess of the maximum allowable amount paid by the plan, this is balance billing. If the scenario doesn’t fit into the one of the two definitions explained above, then that balance bill is not a surprise balance bill, and – for the time being – the “No Surprises Act” is moot.
Further complicating the situation, most RBP plans do not utilize any network at all. This in turn nullifies one, if not both, of the scenarios that give rise to a “surprise” balance bill.
Specifically, when there is no network, a patient cannot find themselves in a situation where they visit an IN facility, only to have an OON provider provide services. This is because there are no IN facilities at all.
Further, depending upon how lawmakers interpret the interplay between the proposed rules and emergency services, it may be that an RBP plan will not benefit from protections afforded to patients in response to “emergency” situations either. Recall that the rule, and definition of surprise balance billing, envisions a scenario where a patient is whisked away to an OON provider in an emergency situation. The theory is that the patient “would have chosen” an IN provider had they had the chance. Yet, with an RBP plan that has no network at all, the patient could not have chosen an IN facility – emergency or not. In other words, with an RBP plan that has no network at all, the fact that the need was urgent (an emergency) has no impact on whether the patient is treated at an OON facility.
Benefit plans that do utilize networks should pay close attention because this proposal will impact them. Additionally, despite the above, even RBP plans and plans that don’t use a network should also pay attention – not because the proposal will impact them (it won’t), but because the way with which the rule addresses surprise balance bills may be a glimpse into the future, and a hint as to how lawmakers would seek to deal with all balance bills – not just surprise balance bills.
With this in mind, one item that should cause payers to tremble is the fact that, in direct opposition to the philosophy underpinning RBP, the “No Surprise Act” does not reference any objective payment standard. In other words, there is no universally agreed upon standard the parties can use in determining a fair payment.
The initial hope is that payers and providers will try to resolve payment disputes on their own. This initial “step” in the process, heralded as a novel step forward, does nothing more than document what most payers are already trying to do and have been trying to do for some time. When a patient is balance billed, a benefit plan rarely ignores their plight, and already seeks to resolve the matter with the provider – despite the plan not “technically” having an obligation to pay anything more.
Herein lies my concern – when the provider has a right to pursue payment from a patient (balance bill), and a payer has a right to cap what they will pay, both parties have something the other wants. The provider wants to be paid promptly, by the plan (whose pockets are far deeper than the patient’s). The provider recognizes that they aren’t guaranteed payment from the patient, and thus they are incentivized to work with the plan – applying the old adage that “a bird in the hand is worth two in the bush.” The plan, meanwhile, wants to protect their plan member from balance billing. Thus, even though they have paid all they are required to pay, the plan is compelled to pay more to protect the plan member. As a result, as mentioned above, both parties have something the other wants, and have a reason to negotiate in good faith.
In a new world, where the plan will be required to pay more – either a smaller amount proposed by the plan, a larger amount proposed by the provider, or some negotiated amount in between – the “threat” of the plan walking away without paying anything additional (a right the plan presently has) is stripped away, giving the provider more negotiation power and the plan less power than is presently the case. For this reason, the proposed rule hurts rather than helps negotiation efforts.
How could this be allowed to happen? As one reviews the proposed rule, one realizes that certain assumptions are in play. First, that benefit plans universally underpay claims when they are OON. Second, that benefit plans will never negotiate or pay anything additional when a participant is balance billed. As such, a law is required that will scrutinize what the plan paid and will force the plan to pay more.
For plans that already pay an objectively fair amount for OON claims, and already engage in good faith negotiations to protect patients from balance bills, these assumptions should be offensive, and the resultant rule should horrify.
Further worrisome is the so-called arbitration that ensues if a negotiation fails. The style of arbitration is “baseball arbitration;” a process where the arbiter is stripped of their power to steer the parties toward a middle ground and is instead forced to pick one of two amounts – one proposed by each party. As a result, benefit plans are cautioned against offering a too-small amount (including nothing additional), even if it seems fair to them, for fear of offending the arbiter and losing before they even begin. Of course, the counterpoint to that is that one does not negotiate against themselves. Many will not want to offer a too high amount, for fear that they will call their original payment (and logic behind the payment) into question, as well as embolden providers to increase their rates in response.
This, then, leads to another concern. If payers will be forced to pay “something” additional, why should providers avoid increasing their rates?
All involved in this proposal explicitly agree that this process is more favorable to providers. It’s why they supposedly added so-called “guardrails” to help ensure that the arbitration process is not abused.
First, payers and providers must engage in 30 days of negotiations, prior to requesting arbitration within 48 hours of the final day’s passage. This supposed guardrail only benefits providers. Presently, “pre-rule,” plans that have paid the maximum amount according to their controlling document seek only to negotiate to protect their plan member from balance billing. They, until now, gained nothing from paying more. Providers, on the other hand, are seeking financial gain. Prior to this rule, the threat that the plan could walk away, and the provider could be forced to pursue the patient – and likely get nothing additional – was an incentive to negotiate in good faith. Now, with the arbitration “light” shining at the end of the 30 day “tunnel,” providers will demand 100% of billed charges, refuse to negotiate, and simply await arbitration – knowing that they will either be rewarded with between a little more and a lot more payment from the plan. At best, they can assert a right to 100% of billed charges and win that amount in arbitration. At worst, they will get an amount the plan proposes (which is still more than the plan’s original payment – and thus more than the provider could potentially expect to get – should negotiations fail – pre-rule change). In other words, in a world where payers will be forced to pay more, and providers are not punished for charging excessive amounts, there is no downside to charging more, ignoring negotiations, and waiting for arbitration.
A rule that some say will prevent the overuse of the arbitration process is that the losing party will be responsible for paying the administrative costs of arbitration. Of course, those in our industry recognize that – for the reasons explained above – even if the provider loses (and is forced to pay the costs of arbitration) the additional payment from the plan of the lesser amount presented by the plan plus the already marked up rates initially paid by the plan, will outweigh the occasional loss and corresponding administrative costs.
Arbitrators, meanwhile, have the flexibility to consider a range of factors, but unfortunately – none of those factors are objective. They will be forced to limit their examination to only factors raised by the parties, and – significantly – not what the provider usually accepts from other payers. Additionally, the arbitrator is not supposed to review the billed charges (the chargemaster rate), but – assuming the provider is seeking payment of their charges in full via arbitration – that limitation is irrelevant.
Optional factors that an arbitrator could consider include, among others, the level of training or experience of the provider or facility, quality and outcomes measurements of the provider or facility, market share held by the out-of-network health care provider or facility, or by the plan in the geographic region, patient acuity and complexity of services provided, and teaching status, case mix, and scope of services of the facility. We question whether the payer will have an opportunity to challenge these metrics, or – as it appears to be presented – whether this is simply an open invitation for the provider to justify their demands.
Additional factors that the arbitrator may consider, and which are both beneficial to payers as well as uniquely worrisome, are any good faith efforts by the provider to join the plan’s network, past contracted rates, and the median in-network rate paid by the plan.
On the positive side, this will hopefully prevent the billed charges from being deemed the “starting point” or misrepresented as what is “usually paid” by benefit plans. Generally speaking, States that have implemented regulations limiting surprise balance bills that take such median rates into consideration generally see smaller amounts being paid than in States that do not take median rates into consideration.
On the flip side, knowing this information may be used against them in the future, will providers seek to contract for more with networks, to avoid creating a lower floor should they be forced to fight for OON payments at a later date? As for plans that do not even have a network, such as an RBP plan, how will these metrics apply to them?
This focus on networks, as well as in and out of network status, is a red herring. No payer should be forced to pay an abusive amount because they did or didn’t lock themselves into a contract at some earlier date, or with someone else. Each service provided by a provider should entitle that provider to fair compensation. If, four years prior, I agreed to pay $100,000 for an automobile that had a sticker price of $30,000, that mistake should not doom me to a lifetime of overpayments. If I paid $100,000 for a car worth $30,000, my wife shouldn’t be forced to do the same when she is purchasing a car. We should be allowed to pay a fair price for the service we are purchasing – in a vacuum and based solely on the value of that service, and that service alone.
“As we have stated many times before, the AMA strongly supports protecting patients from the financial impact of unanticipated medical bills that arise when patients reasonably believe that the care they received would be covered by their health insurer, but it was not because their insurer did not have an adequate network of contracted physicians to meet their needs,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in a letter to congressional leaders.2
This statement from the American Medical Association’s leadership exposes two worrisome philosophies. First, that it is reasonable and appropriate to expect benefit plans to agree, via contract, to pay a provider whatever that provider wants – regardless of how excessive or abusive those prices may be. Second, that benefit plans should be forced to create and expand networks until they have no bargaining power and thus cannot exercise any cost controls whatsoever. I would ask Mr. Madara what he believes constitutes an “adequate” network. 25% of providers? 50%? 100% of providers? As that network grows, in-network status loses its exclusivity, and steerage of plan participants is spread, thinning the number of patients visiting each provider and lessening the value of in-network status for the providers. This in turn justifies the providers demanding more payment, and lesser discounts.
This philosophy, shared by the AMA and providers alike, exposes a baseline assumption that has become prevalent in our nation, and serves as a foundation for a flawed system. No other type of insurance is “forced” to contract with providers. Whether it be homeowner’s insurance, auto insurance, or any other form of insurance – insurance pays the fair value of the loss, and the objectively reasonable cost of repair or replacement. Yet, here we see the American Medical Association’s leadership stating that benefit plans should be punished for not contracting with providers, before a service is even provided, and failing to agree to pay whatever the provider chooses to charge when the time comes. Imagine if your auto insurance carrier was forced to contract with every auto manufacturer, agreeing to pay whatever the car maker charges at the time an insured needs a new car, without knowing what those prices will look like at the time the contract is signed. Imagine how automobile manufacturers could and would abuse that one-sided deal, and what that would subsequently do to your premiums.
The bottom line? With this new rule, providers are not punished for failing to contract with payers. Payers are punished for not contracting with providers. This puts all of the negotiation power in the hands of the provider. They know they can leave the “networking table” without a deal and collect their lump of flesh later. The payer, however, now is desperate to get a contract signed – and will sign a deal, no matter how abusive – to avoid the punishments they will suffer when they dare to allow a provider to be OON.
Before this review can be concluded, it is important to recognize that this assessment has been mostly negative. Hopefully you will forgive the author his gloomy tone. Many people see that surprise balance billing is being identified as an issue – and that, in and of itself, is a good thing. Unfortunately, the approach presented by the No Surprises Act minimizes the importance of examining objective metrics, is over reliant upon networks, and ignores amounts providers accept as “payment in full” from other payers – including Medicare and Medicaid, as well as actual cost to charge ratios. Rather than drill down to the question of what constitutes “fair” compensation, the process will instead ask what constitutes the “most common” compensation. Looking at the current state of the healthcare industry, one would be justified in expressing concern over future dependence upon past “averages.”
Hopefully arbitration won’t take place in a vacuum, despite the analysis above. Furthermore, there are other reasons for optimism. Much of the proposal depends upon future rulemaking. There is an opportunity to further define how the rule will be applied through the regulatory process. Stakeholders are encouraged to analyze the rule, contemplate how it will impact them, and propose solutions to shift the end result to a more equitable conclusion. This is not the end, but rather a foot in the door.
Consider also the inclusion of air ambulance claims. For too long this subset of healthcare has been allowed to operate without limitation and gotten away with unfettered billing practices. By being included in this proposal, we are turning the corner and taking one step in the right direction.
Lastly, while the rule isn’t perfect, it does also require providers to exercise a new level of transparency – notifying patients when they may be treated by an out of network provider, and requiring the use of a waiver that is (hopefully) more robust than the traditional intake forms signed by patients today.
Thus, in closing, while the No Surprises Act is far from perfect, there exists an opportunity to adjust it through the regulatory process and it shines a light on some issues that have been hidden for too long.
By: Jon Jablon, Esq.
The CARES Act is brand new, obviously, but its treatment of the relationship between medical providers and health plans is anything but. As with just about all legislation to date on the topic of payor-provider relations, the legislature has not hesitated to essentially give all the power to the providers. The bill includes the following provisions:
SEC. 3202. PRICING OF DIAGNOSTIC TESTING.
(a) Reimbursement Rates.—A group health plan or a health insurance issuer providing coverage of items and services described in section 6001(a) of division F of the Families First Coronavirus Response Act (Public Law 116–127) with respect to an enrollee shall reimburse the provider of the diagnostic testing as follows:
(1) If the health plan or issuer has a negotiated rate with such provider in effect before the public health emergency declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), such negotiated rate shall apply throughout the period of such declaration.
(2) If the health plan or issuer does not have a negotiated rate with such provider, such plan or issuer shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website, or such plan or issuer may negotiate a rate with such provider for less than such cash price.
If there is a negotiated rate between the payor and provider, then the payor must pay that rate. If, however, there is no previously-negotiated rate, then the payor and provider can either elect to negotiate a rate (on a case-by-case basis, or globally – same as any other payment contract), or, if negotiation is not possible or not successful, the plan is required to simply pay the provider whatever price the provider has identified on its website. In other words, the plan must pay a negotiated rate, if there is one, but if not, the plan must pay whatever the provider demands.
Even in this time of near-universal employer financial hardship, the legislature has been very careful to not give a damn about the costs incurred by health plans – including self-funded employer-sponsored plans, many of which are struggling small businesses. It will never cease to amaze me.
Interestingly, the section of the bill immediately following the one quoted above reads:
(b) Requirement To Publicize Cash Price For Diagnostic Testing For COVID–19.—
(1) IN GENERAL.—During the emergency period declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), each provider of a diagnostic test for COVID–19 shall make public the cash price for such test on a public internet website of such provider.
(2) CIVIL MONETARY PENALTIES.—The Secretary of Health and Human Services may impose a civil monetary penalty on any provider of a diagnostic test for COVID–19 that is not in compliance with paragraph (1) and has not completed a corrective action plan to comply with the requirements of such paragraph, in an amount not to exceed $300 per day that the violation is ongoing.
So, the law requires payment of either a negotiated rate or the provider’s published rate – and the same law requires the provider to publish its rate. But what if it doesn’t, or what if the particular provider doesn’t maintain a website at all, as many smaller offices don’t? Health plans should be wary about what happens in the event the provider fails to “make public the cash price for such test on a public internet website.” It’s tempting to take the “you didn’t comply, so if you don’t negotiate a reasonable rate, we’ll report you” approach – but some consider that at least extortion-adjacent. Instead, a good practice may be to simply inform the provider – if it hasn’t posted a price – that there is no option but to negotiate, and make sure you’re armed with reasoning for what you should reasonably be paying.
One thing is clear, though: RBP plans will need to be careful here, since the legislature’s primary aim seems to be that patients do not get balance-billed for COVID-19 testing. The traditional RBP approach, then – where the Plan determines its pricing and then pays its minimum to the provider – is not going to be a viable option under the current state of the CARES Act. If there’s no pre-negotiated rate with the provider, the Plan must pay the provider’s published rate, or negotiate on the spot – but we strongly caution all health plans against creating a situation in which balance-billing is even a possibility.
By: Andrew Silverio, Esq.
In the final hours of 2019, a coalition of New Jersey medical providers filed a voluminous, 150-page complaint against CIGNA in federal court in New Jersey. The providers, in general, are challenging the validity of CIGNA’s reference-based pricing (“RBP”) program, which guides the payments of numerous self-funded plans in and around New Jersey. As would be expected with such a lengthy and thorough complaint, there are various causes of action being pursued – some allege criminal activities like “embezzlement, theft, and unlawful conversion,” and “a pattern of racketeering activity” under RICO. Others strike more directly at basic and common aspects of any RBP program, while others allege practices that, if the allegations are true, would certainly be reasonably classified as problematic.
In the coming weeks and months, we will be monitoring this case closely and providing in-depth analysis and commentary in our upcoming webinars and other releases, but for now, we wanted to highlight some key allegations being made. If the case progresses to any sort of substantive holdings, it could have significant effects on RBP as a whole, depending on which causes of action ended up “sticking.”
A key element of many of the complaint’s allegations is that CIGNA and its vendors, in repricing and processing non-contracted claims, fraudulently represent that the amounts paid are in fact agreed-to, contracted amounts which the providers have agreed to accept as payment in full. The providers state that there is in fact no agreement, which is almost certainly true, but also allege that the amounts actually paid are less than is required under the individual plans. For this second element, the complaint cites to no evidence. This issue would certainly be a matter of plan document language, which is not touched on in the complaint.
In support of these allegations that CIGNA fraudulently represents a nonexistent contractual agreement, the providers allege that the EOBs CIGNA sends to plan participants differ from those it sends to providers. Specifically, the patient EOB allegedly describes the portion of charges disallowed after repricing as a contracted discount, stating that the patient has saved money, while the provider EOB describes this same amount as an “amount not covered,” instructing providers not to balance bill the patient, but to contact CIGNA’s repricing company instead with any disputes. The providers give several examples of such claims paid at 1-3% of billed charges and describe a negotiation and dispute process which they allege is a “war of attrition,” aimed at creating delay, expense, and frustration rather than a good faith procedure truly aimed at resolution.
An allegation key to the RICO/racketeering causes of action stems from CIGNA’s billing practices, which the providers describe as a fraudulent scheme to convert plan assets. The complaint claims that CIGNA and its vendors retain a flat percentage of savings fee based on the initial repricing, and importantly, retain that full fee even when, after a negotiation/dispute process, the plans end up paying additional amounts, sometimes up to a full billed charge, negating any actual savings. For illustration, the complaint describes a situation in which a plan pays 1% of a billed charge, a 30% percentage of “savings” fee to CIGNA, then ends up paying the full billed charge after a provider dispute. The end result is the plan paying 130% of a billed charge, with the extra 30% going to CIGNA.
At the complaint stage, it’s important to remember that all the allegations described here are just that – allegations. Some take aim at practices which, if they are actually being engaged in, are objectively problematic, while others strike at core elements of RBP itself. We will be closely monitoring the case as it develops and providing commentary and analysis on an ongoing basis.
For those of you who have a player in the reference-based pricing game, you know that circumstances can arise when things don't go as planned. There are some providers, for instance, that are so dead-set on penalizing RBP plans and their members that they will accept nothing short of the full billed charge. As we all know, though, nobody gets paid full billed charges, and it's wildly unreasonable for anyone to expect that. But what is the end game, then, when a provider makes unreasonable demands and refuses to settle?
One option that's becoming increasingly popular is litigation – in other words, proactively suing a hospital, to help protect the patient. The suit needs to be filed by the patient, since the patient is the one to whom the balance “belongs” and therefore only the patient has standing to sue, but health plans and TPAs often provide assistance to patients with this endeavor, for obvious reasons.
Proactive litigation, or even just the threat, can serve a couple of important functions: it can compel a settlement when none was previously available; it can force the provider to publicize (and try to justify) its charge data; it can incentivize the provider to accept the Plan's payment or settle at a reasonable rate; or it can even lead to the formation of a direct contract that's acceptable to the Plan.
Now, please don't leave this blog post thinking that every claim should be proactively litigated. Litigating a small claim can actually lead to spending more on attorney's fees and costs than the full balance amount. We at The Phia Group have taken drastic steps to help with this dilemma, though; our patient Defender service is intended to give TPAs, employers, and plan members a sense of security with respect to their RBP plans, with the knowledge that the member has an attorney ready and waiting to go to bat when they need it. Most importantly, this attorney is pre-paid at no cost to the member, for a small, budgetable PEPM fee paid by plans or their TPAs.
Reference-based pricing is a tricky business, but there are programs that are designed to make it more manageable. Patient Defender is one of them. Have you found others? Tell us about them! We want to hear your stories.
As those of us involved in self-funding know, there are multiple considerations involved in most decisions. Even something as simple as negotiating a pre-payment bill can involve questions such as: (1) Will the stop-loss carrier reimburse the negotiation fees? (2) Will the agreement hold up if the provider or plan changes its mind? (3) Does the TPA incur liability if it enters into the agreement on behalf of the health plan? (4) How should the TPA treat patient responsibility pursuant to the agreement? ...etc.
And that's just pre-payment negotiations, which are generally considered to be very straightforward!
Reference-based pricing is far more complicated than simple, "traditional" pre-payment claim negotiations. Post-payment negotiations of any kind add a layer of complication, but add to that the human factor (i.e. the employee!), and situations tend to be delicate and can quickly become volatile.
All that aside, however, the purpose of this blog post is actually to talk about how stop-loss treats RBP. There are certainly different ways that different carriers view RBP in general - some view it as a boon, yet others as a bane. An issue that comes up across many different carriers, however they may view RBP, is reimbursement and calculation of "Usual and Customary" in the stop-loss policy.
Many carriers define U&C in the "traditional" way, which is often calculated simply as an amount the carrier deems reasonable as the result of an audit. That can be very dangerous to a plan using a PPO, since network rates are almost universally higher than stop-loss carriers' audits of claims - but for an RBP plan, even though payments are lower, something that cannot be ignored is the potential to settle large claims after the initial payment.
If the policy will cover this type of top-up settlement payment (and that's a big "if"), you'll still need to investigate how the policy will treat the allowable amount paid. Many medical providers will not settle claims for amounts less than the amount a stop-loss carrier's conservative auditor deems payable, which can result in denied claims!
As always, the best general advice we can give is that if a health plan incurs a large non-contracted claim that is paid subject to Medicare-based pricing, it may be worth it to discuss the potential outcomes with the carrier, since balance-billing can happen, and the plan may need the carrier's cooperation down the line! Without proactive communication, though, the chance of getting the claim covered by stop-loss diminishes significantly.
Employers, TPAs, and brokers primarily choose to utilize reference-based pricing programs to cut costs. Instilling systemic changes in the industry can also be a goal of those utilizing this methodology, but cost-containment is a much more tangible goal.
The reference-based pricing mentality can carry with it the opinion that medical providers are crooks – charging many times the fair market value of services with no meaningful system of checks or balances. While that may sometimes be accurate, it’s still important to remember the law that surrounds reference-based pricing and, more importantly, balance-billing, when deciding whether to “stick it to the man.”
Some employers refuse to negotiate balances with medical providers, even if the health plan offers very few or no options for contracted providers. Aside from the Department of Labor’s not-so-favorable stance on this matter (see https://www.phiagroup.com/Media/Posts/PostId/376/unraveling-faq-part-31), medical providers retain the right to send patients to collections, or even file lawsuits against them. Although there is an increasing amount of litigation in the industry regarding this exact topic, there is not yet any concrete guidance that removes a medical provider’s right to send patients to collections or sue a patient.
It’s sometimes tempting to walk away from the bargaining table in frustration, but remember the ramifications on the member if that’s the route taken. My advice is certainly not to bend to any given provider’s whim when it comes to payment – but keep an open mind, and consider the potential consequences associated with every option.
By: Ron E. Peck, Esq.
Why do employers offer health benefits to employees? Some might point to the Patient Protection and Affordable Care Act (“PPACA” or “ObamaCare”) and say the law forces them to do so. Yet, prior to the law’s passage in 2010, many (if not most) employers voluntarily offered health benefits to their employees. There are a number of reasons for this, but suffice it to say, it was meant to attract and retain the best talent.
Indeed, once upon a time, health benefits were just that – “benefits.” Now, it’s assumed health insurance is included in an employment package, and what was once a benefit is now an entitlement.
Why does this matter? It matters for many reasons, but as it relates to reference-based pricing, or “RBP,” it matters insofar as RBP ultimately – more often than not – puts the patient (“a/k/a” the employee or their family) in the crosshairs when disputes arise between providers of healthcare services, and the benefit plans that utilize an RBP pricing methodology.
Perhaps – long ago – when health benefits were welcomed as “icing on the cake,” the fact that an individual may be limited in who or whom they could utilize for care, or risk being balance billed the difference between what the plan pays and what the provider charges, would not have been so onerous. The employee might have thought, “Heck! It’s better than nothing; and I suppose I could avoid the bill by selecting a provider that works with my plan.”
Today, however, not only do we expect to receive health benefits, but we are outraged when our out of pocket expenses increase. This attitude, on the part of plan participants, is anathema to RBP.
At the same time, recall that RBP is a response to changing opinions as they relate to networks, and PPOs. Looking back in time, one of the values inherent in PPOs was a discount off of provider billed charges. It was assumed – “back in the day” – that the billed charges against which the discount applied were reasonable, and as such, getting discounts on top of reasonable charges had value. The fact that the provider, by agreeing to accept the network rate as payment in full, had the secondary impact of protecting patients from balance billing, was just icing on the cake.
Today, however, we recognize that billed charges are so exorbitant, that network discounts do next to nothing to counter the abuse, and thereby are worthless. As a result, the thing that once was a secondary benefit of network enrollment – balance billing protection for the patient – has become, more or less, the only valuable element of a network. Yes; if asked why they are still using a network, most plans would not state it’s for the discount, but rather, it’s to avoid balance billing and protect patients.
Thus, we must ask ourselves – how much will we pay to avoid balance billing and protect patients? If a provider charges $60,000, there is a discount of 30% ($18,000), $42,000 is thus expected as payment, and the reasonable fee is $5,000, is it worth $37,000 to protect the patient from balance billing? If not, what will you pay – instead – to protect patients, if anything?
This is ultimately the question every plan contemplating RBP must ask itself. How much more, beyond reasonable charges, am I willing to pay to protect my plan participants?
Piling onto this, politicians, lawmakers, regulators and courts seem more than happy to offset the rising cost of healthcare onto the benefit plans as well. From FAQs released by the DOL, indicating that a failure to offer “adequate access” (“a/k/a” a network) will result in balance billed amounts counting against maximum out of pockets – and thus make the remainder of the billed charges owed and payable by the plan, to court decisions overturning previous rulings that determined hospitals can’t force patients to agree to pay whatever the hospital charges and sought to calculate fair prices when no fee was agreed upon, those in power seem dead set on allowing providers to charge whatever they want, and protect patients from any undue out of pocket expenses – by forcing plans to either contract with providers, or pay the cost.
I have personally advocated for working directly with providers, identifying value, and finding ways to create win-win scenarios without increasing how much the plan pays; instead offering providers things of value – other than cash – that incentivizes them to accept plan maximums as payment in full. Yet, this effort is put into serious jeopardy whenever anyone “forces” a plan to enter into contracts or networks with providers. Politicians and providers seem to treat (or want to treat) “networks” like a silver bullet. The issue is, however, that networks are just a nice label for a “contract.” If any rule or law “requires” a payer to enter into a contract with a payee, and failure to do so results in penalties for the payer, it puts an unfair advantage in the hands of the payee. One key to successful negotiation – whether it be a provider network deal, buying real estate, or settling a law suit – if both sides don’t have something to gain, something to lose, and the freedom to leave the table, the “deal” won’t be fair.
As a result, the DOL FAQs, case law, and proposed laws that would “force” a payer (plan, carrier, etc.) to broaden their network, and force them to sign a deal with a provider, will result in one-sided deals, as providers know that the payer cannot “leave the table” without a deal.
These are all things one must consider when asking themselves whether to RBP or not to RBP.
This is a topic we’ve discussed numerous times in memos, phone calls, conferences, webinars, and any other time reference-based pricing is discussed – and it continues to be a relevant topic throughout the industry. A health plan utilizing some sort of RBP will get the most bang for its buck if the language in its SPD is strong – and of course if the language is weak, the plan’s payment methodology will be extremely difficult to enforce, and could even subject the Plan Administrator to liability.
Simply put: if your plan is using reference-based pricing – whether for all claims, only out-of-network claims, facility only, or any other subset of claims – your plan must have clear and accurate language.
Clear language describes what the plan will pay in a comprehensible manner. An example of clear verbiage is “This plan’s benefits equal 150% of the applicable Medicare rate, when such rate can be calculated by the Plan Administrator.”
An example of unclear verbiage is “All claims are paid at 150% of Medicare. Participating facility claims are subject to this rate only if the physician is nonparticipating. All facility claims are paid at the lesser of the reference based pricing amount or 70% of billed charges when inside the plan’s service area.” (Both examples are direct quotes from SPDs.)
Accuracy is just as important as clarity, if not more; an example of accurate verbiage is “When a given service is performed by an in-network provider, the Maximum Allowable Charge will be the PPO rate applicable to that provider. For all other claims, this plan pays the lesser of the following factors…”.
An example of inaccurate verbiage is “All in network claims are subject to code review and will be paid based on an amount deemed usual and reasonable and customary by this Plan, including but not limited to a multiple of the prevailing Medicare allowance.” (Again, both quotes are taken from real SPDs).
These are just a few examples of what we see on a daily basis; as medical providers begin to treat RBP differently than ever before, it is similarly more important than ever to make sure the plan’s language is optimal.
As a final note, the idea that language needs to be strong, clear, and accurate applies to all plans – not just those using RBP. It just so happens that RBP is a bit more novel than other traditional plan designs, so RBP language is sometimes less well-established in many SPDs. But together, as an industry, we can fix that!
Plan sponsors of self-funded health plans have a lot to think about. From deciding which services to cover to making tough claims determinations, there are lots of moving parts to consider and be mindful of. Plans that utilize reference-based pricing are in the same boat, of course, except they have added even more moving parts to their benefits programs.
As many plans that use reference-based pricing are aware, some claims need to be settled with providers to eradicate balance-billing. A claim initially paid at 150% of Medicare may need to be ultimately paid at 200%, for instance, pursuant to a signed negotiation between the health plan and the medical provider. Fast-forward two months later, to when the plan receives notice from its stop-loss carrier that the carrier is only considering 150% of Medicare to be payable on the claim, and the extra 50% of Medicare (which can be a significant amount!) is excluded.
When the plan asks why it isn’t receiving its full reimbursement, the carrier quotes its stop-loss policy and the plan document. The former provides that the carrier will only reimburse what is considered Usual and Customary – and the latter provides that Usual and Customary is defined as 150% of Medicare, by the Plan Document’s own wording. The carrier’s liability, therefore, is limited to 150% of Medicare. The plan’s has chosen to pay more than that. Even though it’s for a very good cause, the stop-loss insurer may deny that excess payment amount. In this example, there is a “gap” between the plan document and stop-loss policy such that the plan has paid a higher rate than what the carrier is obligated to pay.
For this reason, it is so incredibly important for plans that are using reference-based pricing to talk to their stop-loss carriers. Some carriers will say “we don’t care – your SPD says 150%, so we’ll reimburse 150%,” but other carriers will say “we understand that reference-based pricing saves us money, and we understand that it’s not always as simple as paying 150% and walking away – so we’ll work with you in terms of reimbursement.” Other carriers still will agree to place a cap on reimbursements higher than what’s written in the Plan Document; in other words, if the plan provides that it’ll pay 150% of Medicare, the carrier may agree to reimburse settlements up to 200% of Medicare, if applicable and if necessary.
There are lots of options for how a stop-loss carrier might react to reference-based pricing, and the only way to find out is to have a conversation. If you don’t ask, you’ll never know (until it’s too late, that is).
Moral of the story? If you’re going to adopt reference-based pricing – whether full network replacement, carve-outs, out-of-network only, or any other type – put stop-loss high up on the laundry list of considerations.
Reference-based pricing is one of the most mysterious self-funding structures out there. At its core, it’s a simple enough idea: the plan changes what it pays for non-contracted claims. At its most basic level, it’s a way to redefine the traditional notion of U&C; generally, RBP plans base payment on some percentage of the Medicare rate. Guess what, though? If your plan defines U&C based on a database such as FairHealth (for instance), that’s a form of RBP too!
RBP isn’t a structure with a well-defined set of rules. Different plans, TPAs, and vendors do things very differently. The common denominator is that pricing for claims isn’t based on billed charges or an arbitrary percentage off billed charges, but an objective metric based on the value of services. If the plan considers rates set by a popular database to be indicative of the value of services, then that’s the reference upon which prices are based (there’s the R, the B, and the P!).
While of course there are practical differences between popular databases and Medicare, the easiest example being differences in the actual amounts generated), the major conceptual difference is that providers are generally more likely to accept rates generated by popular databases as payment in full than to accept Medicare rates as payment in full from the same payors. Even though the majority of hospitals do accept Medicare, the prevailing opinion among hospitals is that Medicare rates are essentially thrust onto them in a contract that they sign out of necessity (since many hospitals would lose a large percentage of their business if they didn’t accept Medicare). While payors may consider Medicare rates or a percentage above them to be reasonable, the majority of hospitals tend to disagree – at least at first.
When a health plan accesses the FairHealth database (again, just for example) to obtain pricing, there is often no patient advocacy needed, since many providers access the same database or consider those rates to be generally accepted – but to contrast that to Medicare-based pricing, a plan paying Medicare rates is much more likely to need some sort of advocacy since Medicare rates are not nearly as widely-accepted by providers. Patient advocacy is one of the must-haves in “traditional” RBP, which typically uses Medicare rates.
The morals of this story: (1) you may already be using RBP without realizing it! And (2) make sure your RBP program has patient advocacy, if necessary. If your chosen RBP payment methodology doesn’t need patient advocacy, then your RBP experience will probably be a bit simpler – but if you do need it, don’t skimp on it.