People want to get rid of “surprise medical bills”. After an out of network (non-contracted) doctor performs an emergency or unscheduled medical service, he or she submits a bill. If the insurer pays the bill, it is just one of many paid medical bills. If the insurer chooses not to pay or negotiate the bill with the doctor, it is a “surprise” medical bill. The patient rightly expected their private insurer to pay for the bill, and they did not. In 2010, the Patient Protection and Affordable Care Act specifically protected patients against just this type of insurance behavior. Insurers were required to pay these bills. So what happened?
Federal Regulators bowed under pressure of the insurance companies, and gave them a big loophole. They allowed the insurers to pay based on how the patient’s individual insurance plan determined “usual and customary rates” (UCR) for out of network services. At the time, most insurers and providers considered UCR to be the 80th percentile of regional charges. The American Medical Association (AMA) strongly warned the federal agencies that leaving the payment methodology entirely up to insurers was a recipe for disaster and would just lead to many unpaid (“surprise”) bills for patients.
This is exactly what happened. Insurance companies pounced and started to encourage people to buy insurance plans with out of network benefits such as “120% of Medicare”, instead of “80% of UCR”. Essentially, they conned people. People thought they were buying more, when actually the benefits with Medicare formulation were much worse. Medicare fees for physicians have dramatically fallen over time, so they represent only a fraction of usual fees. (For example, the current Medicare fees for most major surgery and 3 months follow up, is in the hundreds of dollars, a fraction of the cost of providing such a service.) Now, with the new insurance structure, if someone saw an out of network doctor, they might only have 20% of the fee covered instead of 80%. This was like buying an airbag that would deploy only 20% of the time.
But it got worse. People were double duped by the insurers. Nobody realized that by purchasing an insurance product that covered only a fraction of out of network elective services, their insurance now only had to pay for a fraction of their out of network care even for emergencies. Surprise again! This is the real reason for the dramatic rise in surprise medical bills since the Patient Protection Act was passed.
And then there were many other adverse consequences. Insurers then lowered their in-network rates and developed “skinny” networks with fewer providers. There was no concern for not having enough doctors to cover emergencies, because they no longer had to pay for these bills either way, thanks to the faulty regulation. Insurer profits soared, private physicians went out of business at a record pace fueling hospital consolidation and increased costs, and surprise bills dramatically increased. Total healthcare costs as well as health insurance premiums continued to increase at a rapid pace.
Congress is now looking at passing a new surprise medical bill law. But most proposals are very problematic and have the insurance companies’ fingerprints all over them. These proposals would generally just outlaw physician fees and allow the insurer to pay a rate of its choosing (their in- network rates). Price controls such as these would be a disaster for doctors and hospitals and would dramatically worsen the healthcare in this country. The cure would be worse than the disease! Furthermore, the public doesn’t want “socialized medicine”, they don’t want to harm their doctors and hospitals, and 80% of people favor having their insurers pay these surprise bills.
This is one provision of the Patient Protection and Affordable Care Act that should not be overturned. The administration should just take the advice offered in 2010 by the AMA and change the loophole in the federal regulation so insurers pay most of these bills. This quick solution would eliminate the burden of surprise medical bills for our patients.
