Doctors fight balance-billing ban on out-of-network costs
■ California physicians and hospitals are fighting the state insurance regulators' new rules in court. Two other cases also address balance billing.
By Amy Lynn Sorrel — Posted Nov. 17, 2008
California physicians are waging a campaign to block balance-billing regulations they say ignore health insurers' habitual underpayments for out-of-network care.
The Dept. of Managed Health Care rules, in effect Oct. 15, prohibit physicians and hospitals from billing patients for outstanding out-of-network emergency care costs not covered by health plans. The move comes amid several legal challenges over balance billing and confusion about California laws that generally ban the practice for in-network services, but are vague on noncontracted care.
The latest broil has state physicians and hospitals challenging insurance regulators' authority to promulgate the new rules.
"The [DMHC's] job is to protect enrollees from HMOs. But instead of doing that by regulating HMOs, [the department] is trying to regulate physicians," said Francisco J. Silva, general counsel to the California Medical Assn. The organization -- along with the state chapter of the American College of Emergency Physicians, the California Hospital Assn. and several other specialty medical groups -- filed a lawsuit on Sept. 26 asking a Sacramento County trial court to invalidate the DMHC's rules.
Physicians and hospitals argue that state law requires insurance regulators to ensure that HMOs maintain adequate networks and pay fair and reasonable rates -- obligations they say insurers have failed to follow and the DMHC has loosely enforced. Instead, the balance-billing regulations shift the burden onto doctors to recoup payments for which insurers are responsible, while creating a disincentive for health plans to contract properly, Silva said.
"This is essentially shifting millions of dollars away from the health care delivery system and allowing HMOs to hold onto it, which in the meantime can have a devastating effect" on access to care, Silva said. The CMA continues to advocate for alternatives that would require insurers to pay a bill before resolving disputes over the amount, whether through arbitration or court. New Jersey and Colorado have similar measures.
But the DMHC maintains it is upholding its duty to protect patients by keeping them out of payment disputes between doctors and insurers.
"Until the two sides can come up with a compromise, patients should not be picking up the tab," DMHC Director Cindy Ehnes said at an Oct. 14 news conference announcing the rules, which followed a 2006 order by Gov. Arnold Schwarzenegger. "No longer will [patients] face the possibility ... of paying a second time for emergency care, which they already purchased with their [insurance] policy."
The department continues to take action against insurers and has recovered nearly $6 million in delayed or inadequate payments to doctors and hospitals since 2005, Ehnes said.
Courts test balance billing
The DMHC also remains confident the regulations will withstand a legal test. "We believe our legal authority to protect consumers from balance billing is clear, and we think our moral authority is even more clear," Ehnes said.
The agency recently reinforced that stance when in June it sued a hospital system, Prime Healthcare, for allegedly illegally billing more than 3,500 HMO enrollees for out-of-network emergency care. The hospital denies any wrongdoing. A trial court hearing was scheduled for Oct. 27. A decision was pending at press time.
The DMHC contends that state law proscribes balance billing because federal law obligates physicians and hospitals to provide emergency services and insurers to pay for them, creating an implied contract. But doctors argue that interpretation would give health plans license to unilaterally set rates for noncontracted care that physicians must provide, while making contracted situations essentially meaningless, according to a friend-of-the-court brief the CMA filed on Oct. 1.
The issue also is at the heart of a separate case pending before the state Supreme Court, where the CMA and the Litigation Center of the American Medical Association and State Medical Societies weighed in with a friend-of-the-court brief. Organized medicine maintains that, absent a written contract, balance billing for emergency services remains legal under California law. Oral arguments in Prospect v. Northridge were set to begin Nov. 5.
Meanwhile, the DMHC said it is pursuing other efforts to address what Ehnes called the "root causes" of balance billing. The agency launched a program to step up investigation, enforcement and penalties related to unfair billing practices by health plans.
The department also instituted an independent dispute resolution process to address disagreements over reasonable and customary rates for health care services.
Health plans say they strive to offer affordable coverage for patients while fairly compensating doctors. But Christopher Ohman, president and CEO of the California Assn. of Health Plans, said, "It is just plain unfair to put the consumer in the middle of a billing dispute between providers and insurers." The CAHP supported the balance-billing ban.
State law prohibits insurers from engaging in unfair payment patterns, he added, and nothing in the department's regulations inhibits the agency's "clear authority to take action against plans that do not comply with the law."