Employers Can Help with ‘Surprise’ Out-of-Network Medical Bills

Employer groups want to protect patients without undermining networks

Stephen Miller, CEBS By Stephen Miller, CEBS May 13, 2019
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updated May 21, 2019

When they're having a heart attack, people aren't likely to ask the ambulance driver if they're being driven to an emergency room that their health insurance reimburses at in-network rates. When having surgery at an in-network hospital, patients often assume that the surgeon—and the anesthesiologist—must also be in-network. But they may later learn otherwise when they receive an exorbitant bill for these services.

On May 9, President Donald Trump asked lawmakers to prohibit doctors and hospitals from excessively billing patients for the balance not covered by their insurance for emergency treatment at an out-of-network facility or by an out-of-network doctor at an in-network facility. 

"This must end," Trump said. "We're going to hold insurance companies and hospitals accountable."

Patients "often receive surprise bills at highly inflated prices after receiving care from an out-of-network provider they reasonably assumed was in their network," according to a White House fact sheet posted the same day. "Patients should not receive surprise bills from out-of-network providers they did not choose."

But employers can also take steps now to protect employees who receive surprise medical bills.

What Congress Might Do

Legislative proposals on surprise billing include:

In addition, a bipartisan group of lawmakers—including Sens. Cassidy and Hassan—is attempting to put together legislation that could win support across party lines.

"Employers will want to carefully monitor future congressional action in the area of surprise medical billing," as the legislation could affect the design and cost of employer plans, wrote Lori Jones, chair of law firm Thompson Coburn's employee benefits practice, in an analysis of these measures.

[SHRM members-only toolkit: Managing Health Care Costs]

What Employers Want

Groups representing U.S. employers welcomed the White House announcement, saying they are concerned about the burden that surprise medical bills create for their employees.

"We applaud the president for drawing attention to the hard work already under way by lawmakers in the U.S. Senate Health, Education, Labor and Pensions Committee and elsewhere," the American Benefits Council, the ERISA Industry Committee and the National Retail Federation said a joint statement. "Employer health plan sponsors share their commitment to ensuring that the more than 181 million Americans who receive health coverage through work are protected from 'surprise' medical bills that cannot reasonably be avoided."

Neil Trautwein, vice president of health care policy for the National Retail Federation, called surprise medical bills "a symptom of high health care costs and out-of-control medical provider fees," and he urged that out-of-network rates be banned when patients have no control over the emergency facility at which they receive treatment or the out-of-network doctors they may encounter—without being notified—at an in-network facility.

"To avoid what can frequently be costly and time-consuming litigation, negotiation, or arbitration, an alternative solution must provide some certainty and flexibility as to how these surprise bills for out-of-network claims are resolved," wrote Katie Mahoney, vice president of health policy at the U.S. Chamber of Commerce. "An appropriate solution should reflect the geographic differences in the cost of services, consider the rates established by the private market for these services, and increase predictability for employer plan sponsors," she added.

The U.S. Chamber's recommended solution is to create a benchmark that allows insurers to reimburse facility-based emergency room physicians, radiologists, anesthesiologists and pathologists for out-of-network services based on the median in-network reimbursement for that same service.

Keeping Network Tiers

Health plans cover a larger share of the cost when employees and covered dependents use in-network doctors and hospitals. Health plans put doctors and hospitals in their networks when they have high-quality ratings and reasonable costs for their services, which the insurer usually has negotiated with these providers.

In an April 2 letter to Congress, more than 30 employer groups said that the goal of any federal surprise-billing legislation should be to protect patients who lack a choice of providers, but the groups added that proposed legislation should not discourage plans from incentivizing employees to choose in-network providers when they can do so. The groups advocated legislation that:

  • Requires disclosure of out-of-network professional costs at the time of scheduling to help ensure that patients can make an informed decision and schedule procedures when an in-network professional is available (a provision included in both the Cassidy and Hassan bills).
  • Establishes a federal cap at 125 percent of the Medicare rate for costs associated with having received emergency care at an out-of-network facility, and requires all providers at an in-network facility to accept in-network rates (a provision included in the Hassan bill).

Employer groups also expressed concern over requiring binding arbitration to resolve surprise billing disputes. Without reasonable limits on reimbursement rates, they wrote to Congress, "out-of-network providers in surprise balance billing situations will have an incentive to bill even higher rates in order to achieve maximum payment through any binding arbitration mechanism."

When patients go to an in-network hospital, "they deserve the peace of mind of knowing that every provider they see will accept in-network payment rates," said James Gelfand, senior vice president for health policy at the ERISA Industry Committee.

  • Update: On May 16, a bipartisan group of senators, including Cassidy and Hassan, introduced the STOP Surprise Medical Bills Act. For any service where the surprise bill ban applies, providers would automatically be paid the median in-network rate. Providers seeking larger payments would have 30 days to initiate an independent dispute process that includes binding arbitration between the plan and provider.

    A measure under consideration in the House, the No Surprises Act, would also establish a minimum payment standard for surprise bills set at the median contracted in-network rate for the service in the geographic area the service was delivered. The House bill, however, does not include a binding arbitration provision. The National Law Review published a side-by-side comparison of the Senate and House bills.

What Employers Can Do Now

"Employers need to mine their claims data to determine how widespread an issue surprise billing is for their employees—because it's going to affect those employees' financial well-being, stress levels and productivity," said Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm. "Employers can't afford the lost productivity related to employees fighting these bills."

She suggested that employers work with their insurer—or, if self-insured, with their third-party administrator—to educate employees about what to do if they receive an unexpected out-of-network bill. Employers can also help by "having their insurer's provider-relations department have a conversation with the provider in question [to help negotiate these bills] or agreeing to cover such expenses on the employee's behalf," Buckey suggested.

She pointed out that 25 states have some sort of protections in place to curtail surprise billing. However, most large employers are self-insured and regulated by federal law, so "this needs to be addressed at a federal level." Employers should reach out to their representatives in state and federal government, she advised.


What Large Employers Are Doing

Many employers already have taken steps to protect employees and their families from surprise bills, and to assist and advocate on behalf of their employees to reduce or eliminate these bills when they happen, according to the National Business Group on Health (NBGH), which represents large, self-insured employers.

For instance, employer plans often have provisions in their contracts with in-network hospitals that ban "balance billing" of employees for amounts beyond what the plan normally reimburses. "In these cases, employees and their families should not be receiving extra bills from out-of-network physicians if the hospital is in their network," said Steve Wojcik, vice president for public policy at NBGH.

The NBGH's Quick Survey Findings: Surprise Billing for Out-of-Network Medical Claims Data (January 2019) found that:

  • 91 percent of large employers provide assistance to help employees negotiate away or reduce surprise bills, whether it's through the company's HR staff, their health plan administrator or a health navigator/advocate that the employer contracts with to help.
  • 75 percent of large employers have protections in place to stop balance billing in emergency situations at in-network hospitals, and 38 percent have balance billing protections for nonemergency services at in-network hospitals.
  • Emergency room physicians (98 percent), anesthesiologists (88 percent), surgeons (67 percent), pathologists (58 percent) and radiologists (58 percent) are the most frequent sources of surprise bills.

When large employers have a health plan policy for paying out-of-network bills from in-network hospitals, they reported that:

  • For emergency situations, the most common rate is the average in-network rate for the same services.
  • For nonemergency services, the method to determine the rate is fairly split between a percentage of Medicare reimbursement, the usual, customary and reasonable (UCR) rates, or some other pricing system.

"Putting these protections in contracts with in-network facilities gives employees peace of mind," Wojcik said. "It also saves time and money that would have been spent trying to reduce or eliminate the extra bills."

Related SHRM Articles:

Small and Midsize Employers Can Contract with Health Providers, SHRM Online, May 2019

Employers Cut Health Plan Costs with Reference-Based Pricing, SHRM Online, May 2019

HHS Secretary Azar Wants Employers to Help Control Health Care Costs, SHRM Online, April 2019

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