Federal Out-of-Network Balance Billing Legislation: Context and Implications for Radiology Practices

Introduction

Costs of care are an important part of ongoing conversations about health care delivery in the United States. Other than COVID-19, access to care and costs were the primary health concerns of registered voters in the 2020 election (1). Unexpected health care costs are a particular concern. An example of such unexpected costs is unanticipated out-of-network (OON) care. This gap in insurance coverage, often referred to as surprise medical billing or simply surprise billing, is a concern because there are often increased out-of-pocket costs associated with care by a physician or facility not in a patient’s health plan network. The term surprise billing itself is a misnomer because it is really a surprise gap in insurance coverage. A majority of Americans support legislation to end this practice (2).

Even for those patients with private health insurance, out-of-pocket financial responsibilities for health care services, including medical imaging, may be substantial (3,4). This is because of various factors including the emergence of high-deductible health plans, coinsurance, and other forms of patient cost sharing. The implications of financial toxicity and the potential to reduce compliance with physician recommendations and limit access to care are meaningful (5).

Published research and reviews to date have tended to focus on the patient side of this issue (6). Whereas patient perspectives are critically important, considerations of physicians and their practices must align to ensure sustainable success. In this work, we review the issue of surprise billing and recent federal legislation by providing historical context and an analysis of the implications for radiology practices.

Historical Context

Surprise billing occurs when an individual with private health insurance (vs a public insurer such as Medicare) is administered unanticipated care from a physician who is not in their health plan’s network (7). Because the insurer and physician have no agreement regarding payment, the amount the insurer pays the physician is generally at the discretion of the insurer. Additionally, the price the physician bills is often a higher and undiscounted rate. Balance billing—when the patient is held responsible for the balance, or difference, between the amount the clinician charges and the amount the insurer pays—is termed surprise billing when the patient did not expect to be undergoing OON care. It may lead to patients owing far more money out of pocket than they would have with in-network coverage. The classic example is a patient who is administered emergency services from an OON physician, even at an in-network hospital.

Numerous states have enacted laws about surprise billing (8). In 2020, for example, Georgia, Maine, Michigan, Ohio, and Virginia passed bills. However, health plans that are self-funded (typically by employers) fall under the jurisdiction of the federal government by the Employee Retirement Income Security Act of 1974, or ERISA. Because a large fraction of the private health insurance marketplace, approximately 135 million people in 2017, falls within this category of ERISA plans and because those plans are generally exempt from state law, many saw a need for federal action (9).

In the 116th Congress, multiple committees put forth bills regarding surprise billing (10). Although differing in approach, all proposals ended the practice of surprise billing and took patients out of the middle of payment disputes between insurers and physicians. Patients would be held harmless, meaning they were only responsible for their normal in-network cost-sharing payment. Additionally, because the federal government subsidizes much of the private insurance marketplace by tax preferences for employment-based coverage and supports the plans established under the Affordable Care Act, activities that reduce premiums result in federal savings. All of the bills that passed out of a Congressional committee were projected to result in federal savings, ranging from $18 billion to $25 billion over 10 years.

Because these Congressional proposals would end surprise billing and save money, much of the legislative debate focused on how the amount insurance companies would be required to reimburse physicians for their services would be determined. Insurers advocated for an approach termed benchmarking, which would fix rates at a set level. However, physicians supported independent dispute resolution (IDR), which is a process that is based on negotiation and third-party arbitration.

In December 2019, leaders of the Senate Health, Education, Labor, and Pensions (HELP) committee and the House Energy and Commerce committee announced a joint, bipartisan, bicameral proposal on the basis of bills their committees had previously passed (11). The bill established an OON payment standard of the median in-network rate, with an option for arbitration. The threshold to reach arbitration was set at $750, an amount that excluded the overwhelming majority of radiology claims (the bills that physicians send to payers on the basis of procedure and diagnosis codes). The bill banned bundling of claims for arbitration. Such bundling would have allowed radiologists to combine multiple identical claims to reach the $750 threshold. There was robust opposition from physicians and other stakeholders, with the House Ways and Means committee chair and ranking member also opposing the bill (12). Because of the opposition, the proposal was not included in the 2019 end-of-year legislative package.

Unlike the Senate, where only one committee was active, there were multiple bills passed by House committees. In early 2020, the Ways and Means and Education and Labor committees passed bills. The Education and Labor and Energy and Commerce bills were rooted in benchmarking. The bill from the Ways and Means committee was on the basis of arbitration. As a result of these different approaches, many believed that the surprise billing debate would continue past the 116th Congressional session (13).

In early December 2020, House Speaker Nancy Pelosi (Democrat, California) negotiated a deal between the House committees, and on December 11, 2020, an announcement was made confirming a compromise (14). On December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021, which included appropriations for 2021, coronavirus relief, and other items including the No Surprises Act (NSA) regarding surprise billing. The bill was signed into law on December 27, 2020.

The NSA

The NSA (Fig 1) was intended to end surprise billing (15). It applies to emergency care at OON facilities, certain services (such as radiology) provided by OON physicians at in-network facilities, and OON care provided at in-network facilities without the patient’s prior informed consent (16–18). It prohibits OON facilities and physicians from sending patients balance bills for more than the in-network cost-sharing amount, except in circumstances when informed consent was obtained for scheduled procedures. As with the prior bills on the issue, the NSA holds patients financially harmless. Patients are responsible only for their in-network cost-sharing amounts. The law includes other provisions that favor patients, such as requiring health plans apply the cost-sharing amount to the patient’s in-network deductible and to the patient’s out-of-pocket maximum.

Figure 1:

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An insurer payment or a notice of denial are required within 30 days of the physician sending a bill. The amount of the initial payment is decided by the insurer. It may be on the basis of state law (if there is one) or a mutually agreed upon amount. The insurer could also choose to base payment on the qualifying payment amount, which is defined in the arbitration criteria as the median in-network rate for a given service in a particular geography, as of January 31, 2019, adjusted for inflation by using the Consumer Price Index for All Urban Consumers.

If the physician or the health plan is dissatisfied with the payment, then they have 30 days to attempt to negotiate a compromise before requesting formal arbitration through IDR. After the mandated 30-day period, 4 days are allowed to request IDR. There is no threshold dollar amount to enter IDR and clinicians may batch similar claims over a 30-day period, assuming they are from the same physician, for the same or similar condition, and billing the same health plan. The IDR uses so-called baseball-style arbitration rules, where the insurer and physician each submit a best and final offer and the arbiter selects one of the two offers. With few exceptions, the result of IDR is binding and cannot be challenged in court. If there is a determination by the arbiter, then the party who was not selected is responsible for the arbiter’s fee (ie, loser pays). There will also be a shared fee to cover governmental administrative costs. If an agreement is reached before an IDR determination, then the two parties split the IDR costs. The arbitration will be adjudicated by third-party entities that are subject to conflict-of-interest disclosures. It is estimated that the NSA will save the federal government approximately $17 billion over 10 years (19).

As noted in Figure 1, there are several factors that arbiters will use in their decision-making process. Among others, these factors include physician experience, the qualifying payment amount (the median in-network rate for that service in that region), case complexity, evidence of good-faith efforts to contract, and previously contracted rates. These criteria are meant to promote in-network contracting and support high-value care. Notably, adjudicators are prohibited from considering the physician’s billed charges and public payer rates, such as Medicare and Medicaid. Rulemaking should clarify if items not specified in the NSA may also be submitted for consideration.

There is ambiguity regarding how the new federal law interacts with existing state laws (20). States without an existing law will use the NSA to regulate the health plans they oversee and the federally regulated plans; however, more than half of the states have some form of surprise billing legislation. The NSA respects existing specified state law, referring to states that have a law providing for “a method for determining the total amount payable.” The ultimate decisions on these issues will first be addressed in rulemaking, but may ultimately be decided in the federal courts.

There are several other notable facets of the NSA, as follows:

• A 90-day “cooling off” period: Following an IDR deter­mination, the party that initiated the IDR may not take the same party to IDR for the same service for 90 days.

• Clinician directories: The Act requires health plans update and monitor their clinician directories.

• All payer claims database: The Act provides funds for grants for states to establish an all payer claims database or improve their existing one.

• Reporting: The Act provides for several reports to Congress, including on how the IDR process is functioning, the effect on rates and health care costs, and access to care. It also will establish public reporting of arbitration determinations.

• Rulemaking and other efforts: The Act grants power to a rule-making system that will operationalize the process with a go-live date of January 1, 2022. The statute requires that three federal departments—the Departments of Treasury, Labor, and Health and Human Services—coordinate in the rulemaking. Such rulemaking will detail how the Act actually functions, including the mechanics of the arbitration process.

• The Act includes an IDR process for uninsured individuals.

Implications for Radiology Practices

Surprise billing legislation involves two distinct issues. The first, ending the problem of surprise billing, is patient centric, patient protective, and noncontroversial. There is little disagreement that privately insured patients who are administered unexpected OON care should be removed from insurer-physician reimbursement disputes.

The second issue concerns contracted rates between insurance companies and physicians. The nonpartisan Congressional Budget Office explained this by stating that “policies to address [surprise billing] can have important consequences for the health care system because they affect negotiations between insurers and providers” (21). By establishing set reimbursement levels or otherwise disrupting good-faith negotiations between insurers and physicians, surprise billing legislation is a tool that can be used to manipulate rates for in-network services. Whereas this is directly relevant to radiologists and other physicians, the issue is also important to patients because a reduction in revenue could negatively impact patients’ access to care (22).

There are two general approaches to determining the OON reimbursement standard: benchmarking and arbitration. With benchmarking, a price for a service is pegged to a predetermined level. This could be a percentage of Medicare’s reimbursement or the median of the in-network rates for a particular service in a certain area.

The benchmarking approach to reimbursement, favored by insurers, is viewed by some as disruptive to good-faith negotiations. By effectively capping in-network rates at the benchmark rate, it could empower insurers to push physicians to accept an artificially reduced in-network rate. In the current system, radiologists and other physicians negotiate in good faith with insurance companies to determine reimbursement rates. Contracting to be in network with an insurer is advantageous for physicians, even for those who do not depend on in-network status for patient volume, because the revenue cycle process is more transparent, faster, less costly, and more reliable. Additionally, many facilities have strong preferences, if not mandates, that physicians on their medical staff be in network with the health plans they contract with. However, if OON reimbursement is capped at the median of the in-network rates, the new 100th percentile of OON rates is the previous 50th percentile of in-network rates. As shown in Figure 2, which is a simplified view of this general principle, physicians opting for OON status would encounter the noted challenges of providing OON coverage, with the maximum benefit of reimbursement at the 50th percentile of previous in-network rates.

Figure 2:

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Arbitration aims to preserve good-faith negotiations. States that use arbitration have had positive results. New York, which in 2015 became the first state to implement comprehensive surprise billing legislation with accessible IDR, reported savings of more than $400 million for consumers in less than 4 years. It accomplished this while reducing OON billing (23). The New York State Department of Financial Services notes that radiology accounted for less than 1% of all disputes (23). In 2019, Texas passed a law that addressed unexpected OON coverage with an IDR model (24). Interestingly, most disputes are resolved before formal arbitration. Whether through an informal teleconference settlement or formal arbitration decision, on average providers received more than four times the initial insurer payment. Consumer complaints about surprise bills decreased by 96% and physician complaints decreased by 70%.

There is an incorrect narrative that the financial importance to most medical practices of surprise billing legislation comes from balance billing patients. For example, a New England Journal of Medicine commentary about Congress’s December 2019 failure to pass the HELP/Energy and Commerce bill stated that “only certain specialties and investor-backed physician-staffing firms that rely on OON billing as a revenue strategy would see their profits fall” (25). To the contrary, the Congressional Budget Office analysis of the Energy and Commerce bill, which was similar to the joint HELP/Energy and Commerce proposal, noted that the bill would significantly reduce in-network rates. The report states that although there would be variability, it anticipates that the law would result in an “average rate to drop by 15%–20% at the national level” (21). To be clear, medical practices that are 100% in network, are 100% physician-owned, never practiced surprise billing, and acted in good faith could be negatively impacted.

It is worth noting that there is currently no evidence that radiology practices use surprise billing as a revenue-generating strategy. In reality, there was support within the house of medicine for appropriate legislation to clarify the rules for OON reimbursement and end the practice of surprise billing (26).

There is a belief that some insurance companies, anticipating that the median in-network rate would be used in legislation as a payment standard, engaged in activities to preemptively reduce in-network rates. A national survey from the American Society of Anesthesiologists found that 42% of respondents had their contracts recently terminated and 43% of respondents reported significant reimbursement reductions, both midcontract and at renewal (27). A large insurer made news for canceling numerous contracts around the country, both for private and academic groups (28–30). There is a historical basis for suspicion of insurer activities. Ingenix (which was owned by a large insurance company) developed and sold a database used to determine OON reimbursement. It purported to be market based; however, the New York Attorney General’s investigation found that the database manipulated rates downward (31).

Looking Forward

The NSA is going to take effect in 2022, which means there is limited time for the government to establish the system by rulemaking. Although the general format is determined by statute, rulemaking will determine how much of the process functions.

There are several concerns about the current law, which may be worked out as the process is operationalized. In the absence of state law, the initial payment is determined by the insurer, who could choose to underpay and prolong the process before making an offer close to the qualifying payment amount before IDR. Such tactics could be used to incentivize medical practices to contract at reduced rates to avoid the delays and hassles with OON reimbursement. This underscores the importance of the arbitration criteria. If arbitration is primarily on the basis of the qualifying payment amount (the median in-network amount), then the effect would be establishment of a benchmark-like system and disruption of good-faith negotiations. Some have recommended that rulemakers adopt this benchmark-like approach, even stating that arbiters should begin with the presumption that the qualifying payment amount is the appropriate amount, and that the system should favor arbiters who have a track record of basing their determinations on the qualifying payment amount (32). A counter argument is that Congress previously considered and ultimately rejected a benchmark-type approach.

It was important to the physician community that previously contracted rate and good-faith efforts to be in-network be included as arbitration criteria because these criteria disincentivize insurers from canceling contracts and refusing to negotiate in good faith. Furthermore, the criteria seem to imply that quality improvement investments will be considered. If not, especially if there is a benchmark payment standard, some groups may find it challenging to justify the expense of quality improvement investment.

Another concern is the timeline. As shown in Figure 3, the time from care episode to payment after IDR could be months, which could adversely impact the cash flow of medical practices. The timing itself is a concern because the radiologist has only 4 days from the end of the 30-day negotiation period to formally request IDR. Perhaps more significantly, there is a 90-day period after an IDR determination where the radiologist (or other physician) is forbidden from requesting IDR for the same issue. This means that if an insurer underpays a radiologist, and the radiologist requests IDR and wins a determination, the insurer may underpay again for the same service and the radiologist must wait 90 days to request another IDR process. It is also important to note that IDR occurs not at the practice level but at the individual physician level. So, if the same insurer underpays different radiologists in the same practice at the same location for the same examination, even on the same day, the practice cannot bundle their claims for IDR.

Figure 3:

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The NSA provides for several reports to be developed for Congress. One issue that will be evaluated is the effect of the law on physician practice consolidation. Some believe that the law could accelerate physician group consolidation because larger organizations, with the benefits of scale, may be better equipped to deal with its challenges. The alternative for many practices may be to accept a suboptimal rate to be in network, avoiding the costs and challenges of going OON with a major insurer who is experienced in IDR.

Conclusion

Surprise medical billing, better described as a surprise gap in health insurance coverage, is a complex issue with substantial implications for patients and physicians, including radiologists. The debate regarding legislation to end surprise billing was primarily about its effect on in-network reimbursement rates. Like previous proposals, the recently passed No Surprises Act (NSA) takes patients out of the middle and holds them financially harmless when they receive unanticipated out-of-network (OON) care. Because of its effect on reimbursement rate negotiations between insurance companies and physicians, the NSA could have a meaningful impact on hospital-based specialties, including radiology. Radiology practices, even those that are fully in-network or that never practiced OON balance billing, may be impacted by the legislation. Although it is on the basis of arbitration, which is the model preferred by physician organizations, a major issue will be how the law is implemented through rulemaking. Future studies will be necessary to gauge its impacts on physicians and patients.