First, the state of Texas made its move. Then, federal lawmakers followed suit. And come 2022 – one way or another – a major transformation will be complete.
For now, the war over how to avoid so-called “surprise” medical bills in Texas – and resolve how much physicians should be paid for out-of-network care – is over. In its place: Payment skirmishes between physicians and insurers go to an independent dispute resolution (IDR) process, often loosely referred to as arbitration.
Aside from a few exceptions, balance billing for out-of-network services that the state and federal legislation cover will disappear, achieving the aim of medicine, lawmakers, and health plans to take patients out of the middle of out-of-network “surprise bill” payment fights.
Congress in December 2020 passed surprise-billing legislation as part of a wide-ranging coronavirus relief bill, tying a bow on federal lawmakers’ primary health care focus just prior to COVID-19. Texas already had set up its own system for state-regulated plans in 2019 with Senate Bill 1264, which took effect last year.
When the federal legislation takes effect in 2022, just about all physicians and health plans in Texas fighting over out-of-network payments will have an IDR setup available to them. For doctors fighting to get paid, it will be a different world. But just how different won’t be known until sometime later this year.
Many of the particulars of implementing the law will be ironed out through the federal rulemaking process, which could span much of 2021. And although it appears to Texas Medical Association staff that the federal law won’t override state laws like SB 1264, it’s not completely known yet how the two will interact. Meanwhile, TMA remains vigilant of any possible legislative efforts this session to erode the state law.
Just as it had on SB 1264, medicine, including TMA, played a role in keeping the federal process fairer for physicians than what insurers and some congressional lawmakers wanted.
“Is it perfect? No. Is it better than what we had here in Texas? No. But it’s a lot better than what it could have been,” said Houston anesthesiologist Sherif Zaafran, MD, a past member of TMA's Council on Legislation. “[With] all those kinds of considerations, it was probably a win compared to what it could have been.”
State and federal schemes
The measure Congress passed and the one the Texas Legislature signed off on have some things in common. They also have key differences, namely the factors used in the IDR process to determine fair payment; how separate claims can be bundled together in one dispute; and each side’s responsibility for paying for the IDR. (See “Surprise Billing: State vs. Federal,” page 32.)
Like Texas, the federal law applies to a wide swath of physicians (and other practitioners) who are out-of-network at an in-network facility. Texas law applies to state-regulated plans; the federal law covers self-funded ERISA plans and other fully insured plans in the individual and group markets. Both laws cover out-of-network emergency care. They also have similar timetables for a health plan to make an initial payment.
Both systems allow a period for physicians and a health plan to resolve their dispute before IDR begins. And if they go to IDR, the person presiding over the dispute must ultimately pick one of two payment figures: either the one the physician provides, or the one the health plan offers. Any other payment amount would come from an agreement between the two parties. And with some exceptions, both setups generally prohibit balance billing for the out-of-network services they cover.
On the other hand, some of the differences in the federal scheme are stark – and not all of them are beneficial to physicians.
The first big piece to know about the federal setup is bad news, TMA lobbyist Clayton Stewart says: As an out-of-network physician, your billed charges – a consideration in the state’s dispute resolution process – won’t be among the factors considered to determine proper payment. That’s a key difference from SB 1264, the Texas bill, which included 10 factors that the IDR arbitrator must consider in determining payment. (See “Swinging for Fairness,” August 2019 Texas Medicine, pages 30-31, www.texmed.org/swingingforfairness.)
Among those 10 factors are the physician’s usual billed charge for similar services or supplies when providing them out of network, and the 80th percentile of all billed charges for that service or supply provided by a same or similar specialty physician in the same geographic area, as reported in a database selected by the Texas Department of Insurance (TDI). Nor are usual and customary charges considered in federal IDR.
Like Texas, the system Congress passed allows physicians to bundle multiple claims related to the same service in a single dispute, but doctors must wait 90 days to initiate a second IDR process for another batch of claims with the same insurer.
Determining payment
However, other parts of the federal law represented victories for medicine.
For one, TMA and others successfully lobbied to keep Medicare and Medicaid payment rates out of the payment determination – rates the Centers for Medicare & Medicaid Services (CMS) sets “below the cost of doing business for most physician practices,” Houston-area emergency physician Swapan Dubey, MD, said. Including them could have driven down payment awards in arbitration.
“Unlinking the two is definitely a step in the right direction, and may even lead to more reasonable operations from CMS [regarding] payment, which will make our overall health care system more equitable and easier to navigate,” Dr. Dubey said. “In other words, CMS certainly shouldn’t be an example of an ideal health care system.”
Dr. Zaafran also praised Congress’ inclusion of case complexity and patient acuity as payment factors. But while Texas puts a $5,000 cap on the amount that can be disputed in one claim bundle, the federal legislation has no cap. That’s key, Dr. Zaafran says, because it prevents physicians from having to contest too many claims separately.
Also, while Texas makes the two sides split the cost of dispute resolution, Congress is making the losing side pay. In its first biennial report on SB 1264, covering the first 10 months of the state system, the Texas Department of Insurance found the median arbitrator fee was $1,000. (See “Texas Billing Arbitration by the Numbers (So Far),” page 30.)
For emergency physicians – whose claims made up the vast majority of arbitration requests covered in the TDI report – Dr. Dubey says that figure is “cost prohibitive” in pursuing fair payment through arbitration.
Adds Dr. Zaafran, on IDR disputes in general: “I’m fairly confident that physicians are going to win the vast majority of those claims. And I think in those instances, the insurance carrier deserves to pay for the cost of the arbitration.”
The New York IDR system served as a partial basis for the Texas system adopted in SB 1264. A September 2019 New York state report (tma.tips/nyoonlaw) noted that in the first few years of that state’s law, practitioners prevailed in 48% of surprise-billing cases; insurers won 13% of the time; and 39% involved split decisions.
During the debate over surprise-billing measures at both the state and federal levels, health plans have been committed to stopping arbitration-based IDR or limiting its use. America’s Health Insurance Plans (AHIP) responded to a request for comment by referring Texas Medicine to statements released by AHIP President and CEO Matt Eyles during December 2020, both before official passage of the omnibus legislation.
“While we appreciate Congress’ work to protect patients from surprise medical bills, we remain deeply concerned that hardworking American families and businesses will face increased costs and higher premiums as private-equity firms exploit arbitration processes,” Mr. Eyles said in a Dec. 21 release. “We have already seen this play out in Texas and New York, which have both experienced first-hand the harms of arbitration on consumers.”
The unknowns
At press time, the federal rulemaking process hadn’t yet begun. Which is why TMA legislative and lobby staff say there’s still plenty to iron out before knowing how well the federal system will address out-of-network billing.
When finally adopted, the rules will fill in important particulars not specified or prohibited by Congress. As just one example, the lack of a dollar-amount cap on bundling payment claims doesn’t mean a cap won’t be introduced as part of rulemaking – and TMA staff expect insurers to push for one. Overall, Dr. Zaafran says Texas came up with “the gold standard” in SB 1264, and he hopes the federal system still can get closer to that.
“That’s something that we’re going to see how much we can fight for that in the rulemaking process – to make sure that what we have that works really well in Texas can at least hopefully apply somewhat to the federal component,” he said.
Tex Med. 2021;117(4):30-33
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