Polarized views on appropriatereimbursement levels for medical services “limit stakeholders atboth the federal and state level from making progress,” says oneexpert. (Photo: Shutterstock)

When Drew Calver had a heart attack last year, his health planpaid nearly $56,000 for the 44-year-old's four-day emergency hospital stay at St. David's MedicalCenter in Austin, Texas, a hospital that was not in his insurance network. But the hospitalcharged Calver another $109,000. That sum — a so-called balance bill — was the difference between whatthe hospital and his insurer thought his care was worth.

Though in-network hospitals must accept pre-contracted rates from health plans,out-of-network hospitals can try to bill as they like.

Related: Rhode Island latest state to take issue withbalance billing practices

Calver's bill eventually was reduced to $332 after Kaiser HealthNews and NPR published a story about it last month. Yet his experienceshines a light on an unintended consequence of a wide-rangingfederal law, which potentially blindsides millions ofconsumers.

The federal law — called ERISA, for the Employee RetirementIncome Security Act of 1974 — regulates company and union healthplans that are “self-funded,” like Calver's. That means they payclaims out of their own funds, even though they may be administeredby a major insurer such as Cigna or Aetna. And while statesincreasingly pass laws to protect patients from balance bills asmore hospitals and doctors go after patients to collect, ERISA lawdoes not prohibit balance billing.

Although Texas is one of nearly two dozen states that provideconsumers with some degree of protection against surprise balancebills, those state laws don't apply to self-funded plans.

It's a fairly common problem. About 60 percent of workers who get coverage through their jobhave self-insured plans, and 18 percent of people withcoverage through a large employer who were admitted to the hospitalin 2016 received at least one bill from an out-of-network provider,according to an analysis by the Kaiser Family Foundation. (Kaiser HealthNews is an editorially independent program of the foundation.)

Health researchers and advocates have identified a number ofpotential solutions that could tackle the problem at the federal orstate level. The courts are another option. Yet whether theseefforts are politically feasible when health care is in play as apartisan football is another matter.

Polarized views on appropriate reimbursement levels for medicalservices “limit stakeholders at both the federal and state levelfrom making progress,” said Kevin Lucia, a research professor atGeorgetown's Center on Health Insurance Reforms, who has analyzed state laws that restrict balance billing.

A look at options that experts say might address theproblem:

Change federal law

The simplest way to stop surprise bills would be throughrestrictions imposed by federal legislation that would apply toboth state-regulated policies sold by insurers andemployer-sponsored self-funded health plans, which are federallyregulated.

There's a precedent for this. The Affordable Care Act addedprovisions that apply to both types of plans. That law requiresplans that cover dependents to allow children to stay on theirparents' plans until they turn 26, for example, and coverpreventive benefits without charging patients anythingout-of-pocket.

New legislation could plug a big loophole in the ACA. The healthlaw offered some consumer protections for out-of-network emergencycare, one of the biggest trouble spots for balance billing. Notonly do people sometimes wind up at out-of-network hospitals whenthey have an emergency, but even if they visit an in-networkhospital, the emergency physicians, specialists and other providerssuch as pathologists and labs may not be in their health plan'snetwork.

The ACA limited a patient's cost sharing for emergency servicesto what they would face if they were at an in-network facility. Italso established standards for how much health plans have to paythe hospital or doctors for that care.

But the law didn't prohibit out-of-network emergency doctors,hospitals and other providers, such as ambulance services, frombalance billing consumers for the amounts their health plan didn'tpay.

Federal legislation could close that loophole by prohibitingbalance billing for emergency services, as well as hospitaladmissions related to that emergency care.

Analysts at the University of Southern California-BrookingsSchaeffer Initiative for Health Policy, who have suggested such aremedy, say the federal law could apply to any doctors andhospitals that participate in the Medicare program, as most do, toensure that the effect would be widespread.

They also propose prohibiting balance billing in non-emergencysituations when someone visits an in-network facility but receivescare from out-of-network doctors or is referred for outpatient labor diagnostic imaging that is outside of the person's health plannetwork.

Still, the deep political scars left by the health law battleswould seem to preclude any bipartisan efforts in Washington tochange it.

“I'd love to see any kind of federal action,” said Loren Adler,associate director at the USC center, who co-authored the proposal.“It's just hard to be super optimistic about anything happening inthe near future.”

Revise federal regulations

The federal executive branch could also weigh in on fixing theproblem for self-insured coverage. The Department of Labor could, for example, issue a ruling thatclarifies that states can regulate provider payment, or requireself-funded plans to participate in state dispute-resolutionprograms.

But experts say relying on regulatory changes to fix surprisebills may also be a nonstarter in this political climate.

“I don't foresee the administration taking a hard look at thelimits of its powers under the ACA,” said Sara Rosenbaum, professorof health law and policy at George Washington University.

Look to the states

More than 20 states have laws protecting consumers to somedegree from surprise bills from out-of-network emergency providersor in-network hospitals if they're covered by a state-regulatedinsurance policy, according to an analysis by Georgetown researchers published by theCommonwealth Fund.

State laws vary. Texas,for example, requires that consumers in HMO plans be held harmlessfrom balance billing in out-of-network emergency and in-networksituations, but consumers in PPO plans can be balance-billed.

New York's law is more comprehensive, covering both types ofplans and settings. New York protects consumers from liability for out-of-networkemergency and other surprise bills, requires plans to disclose howthey determine a reasonable provider payment and has a bindingindependent dispute-resolution process.

These laws typically don't apply to self-funded plans, however.But that could change. A New Jersey law thatwent into effect last month allows self-funded plans to opt in tothe state's balance billing dispute-resolution process. If afederally regulated plan decides to participate in the stateprogram, doctors, hospitals and labs would be prohibited frombalance-billing those consumers, and any disputes will be handledthrough a binding arbitration process.

For self-funded employers, especially those who choose to paytheir employees' surprise bills, “this provides for a more formalstructure and some relief,” said Wardell Sanders, president of theNew Jersey Association of Health Plans.

There are other possibilities for addressing surprise bills atthe state level, policy experts say. While states can't regulateself-funded health plans, they do regulate doctors and hospitalsand other providers.

States could simply cap the amount that providers can charge forout-of-network care, for example, or prohibit practitioners likeradiologists and pathologists, who don't deal directly withpatients, from billing them for services, said Adler.

“As long as providers can charge whatever they please, theproblem won't go away,” said Adler.

Will the courts weigh in?

These billing disputes rarely end up in court, mainly becauseattorneys are hesitant to take them since there are no guaranteedattorney's fees.

A recent Colorado case was a rare success for a patient. A juryin June sided with Lisa French, a clerk at a trucking company, whowas stunned by a $229,000 balance bill for spinal fusion surgery.Saying the charges were unreasonable, the jury knocked down hershare of that bill to just $766.74.

The hospital was paid nearly $75,000 by her health coverage, anamount her insurer felt built in a fair profit margin, but thehospital claimed fell short.

That raises the question at the heart of many disputes overbalance billing: What is a fair price?

Hospitals argue they should get whatever amount they set ascharges on their master list of prices. Attorneys for patients,however, argue that a fair price should be closer to thosediscounted rates hospitals accept in their contracts withinsurers.

Hospitals generally refuse to disclose those discounted rates,leaving patients fighting surprise bills little information aboutwhat other people pay.

Several recent court cases — including state Supreme Courtrulings in Georgia and Texas — required hospitals to provide thosediscounted rates, although the rulings did not say those discountedprices are ultimately what patients would owe.

Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.