Balance-billing: When is it legal?

From time to time, you may have fielded a question from a client who has paid his co-pay yet received a notice that further payment is due.

There is a chance he has been "balance billed," or asked to pay the difference between what the insurer has paid the provider for medical service and what the provider is charging for services rendered.

Depending on state law and the specific circumstances, billing the patient may be illegal.

For the most part, in-network providers consider the contracted insurance rate to be payment in full and do not balance-bill patients. Medicare balance billing is generally prohibited, and many states have tightly regulated private insurance in-network balance.

Recent media stories about this mostly concern out-of-network balance billing. Physicians or hospitals that balance-bill patients have decided not to accept or are not contractually obligated to accept the insurance carrier's payments for services. Thus, the carrier pays a portion of the bill and the patient assumes the rest, or the balance, of the bill.

In cases where the patient actively selects an out-of-network provider, balance billing may be perfectly fair. But what about cases where the patient did not have a choice, or thought that an in-network provider was being selected?

For example, a life-threatening emergency does not always give a patient the ability to choose in-network medical facilities. Emergency medical technicians may take a patient to the nearest hospital, which may or may not be in-network, where the patient will be treated by an on-call physician, who may or may not be an in-network physician. Or maybe the patient is able to select an in-network hospital, but the emergency treating physician, the anesthesiologist or any of the many doctors that treat the patient, whom the patient often has no choice in selecting, may not be part of the insurance plan network.

Is it reasonable to expect a patient who has selected an in-network hospital to verify that each treating provider is part of the insurance plan's preferred network, particularly in a serious medical care situation during which the patient may or may not be physically capable of making such an inquiry?

Providers are free to contract with insurance companies and should not be obligated to accept any arbitrary payment for services. Likewise, insurers should not be obligated to pay any price for any service. The public policy question is: How can consumers be protected from high medical bills when in these very common situations? One could be paying his or her co-pay or several thousand dollars out of pocket for the same medical procedure.

To address these situations, many states have enacted balance-bill consumer protections. These protections vary widely among public programs like Medicare, as well as within private insurance.

Participating Medicare and in-network providers are generally forbidden from balance-bill patients. They have agreed to accept the Medicare or private insurance fees as payment in full.

On the other hand, when a patient leaves his preferred network, balance billing is generally much more common, and legal. State balance-bill laws differ greatly.

In Delaware, all individual and group health insurance policies must provide medically necessary covered services. However, if services are not available through the network providers within a reasonable period of time, the insurer shall allow a non-network physician or provider and pay an agreed-upon rate.

Connecticut state law explicitly forbids in-network balance billing. State law declares any "request [for] payment from an enrollee, other than a co-payment or deductible, for medical services covered under a managed care plan" is an unfair trade practice.

Maryland has one of the some of the more complicated and stringent balance-bill regulations. Out-of-network providers can balance-bill patients, but are limited to the Health Services Cost Review Commission-approved hospital rate. Please note that Maryland has a unique hospital rate-setting board.

Physicians working in a "trauma center" can charge out-of-network patients either the Medicare rate plus 40 percent or the average geographic HMO rate paid in Jan. 1, 2001. Finally, any other health care provider can balance-bill a patient at the greater of average local HMO rate plus 25 percent or the average non-contracted rate as of Jan. 1, 2000.

Providers have legitimate payment concerns; they have to maintain a viable business model to practice medicine. Some of the poorest payers are government programs, like Medicare and Medicaid. The American Medical Association has been advocating the right to balance-bill Medicare patients. President Dr. Ronald M. Davis defends the practice: "(It) provides physicians with a means to bridge the gap between such inadequate Medicare payment levels and the actual increases in practice costs."

Not surprisingly, low Medicare and Medicaid reimbursements and medical provider trade associations' battles to fight a 10 percent payment reduction are leading many physicians to close their practices to new Medicare and Medicaid patients, which is frustrating many NAHU members, clients and their families.

At the recent National Association of Insurance Commissioners meeting, regulators expressed great interest in the subject. Most are wrestling with the need to protect consumers without setting rates.

NAHU is interested in your feedback on this topic. We know that a number of state chapters have worked on solutions to this problem with their departments of insurance and that more states may be considering addressing this issue soon.


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