Out-of-network ED costs fuel balance-billing disputes

In an emergency situation, patients typically don't have the luxury to choose who treats them. Which means, they could see a physician who does not contract with their health insurance plan.

When the bill for such out-of-network emergency costs comes due, however, how much insurers are obligated to cover has long been a point of contention between physicians and the companies -- and one that could leave patients responsible for outstanding expenses not borne by health plans.

The practice -- so-called balance billing -- has been the subject of a number of legal and legislative battles over the years, most recently in Washington state. There, state physicians are asking the Washington Supreme Court to compel state Insurance Commissioner Mike Kreidler to properly enforce a statute they say was meant to eliminate the need for balance billing in the first place.

The Washington State Medical Assn. and the Washington chapter of the American College of Emergency Physicians filed the petition on Dec. 9, 2010. Under Washington's constitution, the high court can, in certain circumstances, force public officials to perform duties required of their position. The case hinges on a 1997 law mandating that insurers pay for emergency medical services provided to their members, regardless of whether the physician providing the care was in or out of the health plan's network.

Historically, that meant that insurers were obligated to pay the full amount billed by noncontracted doctors, minus typical co-payments and nominal cost-sharing of up to $50 by the patient. Instead, the Office of the Insurance Commissioner, under Kreidler, has permitted health plans to pay only a portion of the noncontracted emergency doctors' rates, equivalent to the discounted rates that in-network doctors agreed to accept to participate in a health plan.

Kreidler said in a statement that he believes his office is appropriately enforcing the statute, which does not specify that insurers must cover billed charges in full. "Our interpretation of the law is that carriers can pay contracted and noncontracted providers the allowed amount. They don't have to pay noncontracted providers the billed amount."

That stance has prompted some out-of-network emergency physicians to bill patients for the difference.

Doctors agree that patients should not be the ones responsible for outstanding emergency bills when they have insurance coverage. That's why the law was enacted, said WSMA President Dean Martz, MD.

"The patient's exposure, in our point of view, was increased due to a lack of enforcement" by the OIC, he said. As a result, "insurance companies shifted their obligations in the system to the patient. And now the patients are taking the risk for their medical coverage."

The OIC's interpretation imposes a de facto predetermined payment rate, giving noncontracted emergency doctors little or no freedom to negotiate, Dr. Martz said. Doctors are concerned that such a move unfairly could boost insurers' leverage in future payment negotiations with other physicians.

"Regardless of what part of the continuum of care we are talking about, if we get a fee set in one part of the continuum of care, that becomes the point of negotiation insurers use for the rest of care," Dr. Martz said. The legal battle is "more about losing our overall ability to negotiate than about the ability to get paid."

Policy shift

The issue came to light in 2010, when several bills were introduced in the Washington state Legislature to ban balance billing and set specific payment levels for out-of-network emergency services. That perked the ears of doctors, who believed the current law already mitigated such concerns.

Physicians then discovered that the law was not being applied as it had been by former Insurance Commissioner Deborah Senn, and that Kreidler's position represented a shift in OIC policy.

Under Senn, insurers were required to pay the full billed charges. Doctors also point to several investigations by Senn and ensuing settlements by insurers for alleged violations of the statute as evidence that the companies were aware of the law's intended application. The health plans admitted no wrongdoing.

But insurers say noncontracted doctors gained an unfair advantage under the prior interpretation of the law -- one they say threatened access to care.

With health plans responsible for 100% of out-of-network emergency bills, many in-network doctors, whose fees were typically lower, dropped off the insurance rolls, said Joseph Gifford, MD, senior medical director of Regence BlueShield in Washington.

"It was a clear unintended consequence that drove up health care costs, and it was not the point of the law," he said. "The point of the law wasn't to give billed charges to all emergency doctors. It was to protect consumers from restricted networks." Nor was the statute directly aimed at preventing balance billing, he added.

Regence is following Kreidler's guidance to make reasonable payments, Dr. Gifford said. "It is a more reasonable interpretation. ... Any cost increases go right back to premiums, so it's our obligation to help members get good health care and keep premiums from getting out of control in order to provide affordable access to health care," he said.

States seek balance

States continue to grapple with balance billing, with at least eight states restricting noncontracted physicians' ability to bill patients, according to American Medical Association data. The Association is not involved in the Washington case.

Though stakeholders generally agree that, when it comes to emergency situations, patients should not be the ones stuck with the bill, disputes about how to address the issue typically boil down to what constitutes a reasonable payment for such services, said Jack Hoadley, PhD, a research professor at Georgetown University's Health Policy Institute.

"That's where the bind comes in," he said. The two main mechanisms states have tried, Hoadley said, typically involve limiting what physicians can charge, as Maryland has done, or holding patients harmless and requiring insurers to pay first and negotiate later, as in Colorado.

The California Supreme Court in 2009 resolved a battle similar to that in Washington in clarifying that state laws did, in fact, ban balance billing by out-of-network emergency doctors.

The California Medical Assn. and the Litigation Center of the American Medical Association and the State Medical Societies filed a friend-of-the-court brief in the case, Prospect v. Northridge. Though justices agreed with doctors that plans do not have "unfettered discretion to determine unilaterally the amount it will reimburse a noncontracting provider," they declined to address the payment issue.

Meanwhile, Washington doctors are asking the state Supreme Court to resolve the discrepancy about its law by the end of January, before the 2011 legislative session gets too far under way. Some lawmakers are expected, once again, to propose measures to ban balance billing and set physician fees in the emergency context.

At this article's deadline, the high court had not decided whether to take the case, which could get sent to a trial court first. No hearing dates were scheduled.