Three reasons not to celebrate the end of surprise medical bills

Jan. 20, 2021 / By Steve Delaronde

After narrowly missing an opportunity at the end of 2019 to end the outrage surrounding surprise medical bills, the United States Congress finally agreed to ban most of them. The legislation was part of a $900 billion stimulus package passed in the final days of 2020 that primarily addresses the economic devastation caused by the COVID-19 pandemic. 

So, are surprise medical bills really a thing of the past? The answer is “mostly yes,” but at least three issues remain:

1. Wait until 2022

The ban on surprise billing does not go into effect until 2022. Ending the practice of sending surprise bills to patients that receive emergency medical treatment by out-of-network emergency physicians, laboratories and air ambulances is widely supported across the United States. Eighty-one percent of U.S. adults polled in October 2020 supported legislation from Congress that would end surprise billing.

While many states had already enacted some type of balance billing protection for enrollees, these protections did not apply to the two-thirds of American workers enrolled in self-funded plans. The legislation passed by Congress in December 2020 effectively shields every commercially-insured person in the United States from surprise bills resulting from certain out-of-network treatment. Unfortunately, patients will not receive these protections until January 1, 2022.

2. Land ambulances not included

The good news is that air ambulance companies will no longer be able to charge patients exorbitant out-of-network rates. A June 2020 study found that over three-quarters of air ambulance transports of commercially-insured patients were out-of-network. While nearly half of these out-of-network charges were paid in full by the insurer, the potential for balance (surprise) billing existed for 40 percent of these cases with an average of $20,000 per case. States had previously been powerless to address these fees, since federal law had barred them from regulating air transit fees. 

The bad news is that land ambulances are exempt from the recent legislation. According to an April 2020 study, 71 percent of ambulance rides have the potential to generate a surprise bill with an average cost of $450 for commercially-insured patients. However, there are two developments that will hopefully address surprise billing among ambulances. First, Medicare is currently reviewing its payment rates, which means detailed information will become available that will shed light on the quagmire of costs and prices of ambulance transport. Second, the new legislation has established a commission to study the problem of ground ambulance prices, so we should see some changes in the future.

3. Health care costs will continue to increase

The use of arbitration to resolve out-of-network payment disputes between payers and providers rather than benchmarking will not be as effective in controlling health care prices. The new legislation requires an Independent Dispute Resolution (IDR) entity to “consider” the median in-network rate when resolving a dispute brought by a payer or provider. However, by not setting the median in-network rate as a benchmark, prices will continue to increase resulting in the cost burden shifting from the individual to all commercially-insured persons in the form of higher insurance premiums. It also requires the creation of an expensive arbitration bureaucracy that has not been effective at reducing overall health care costs in those states where it presently exists.

One method that would effectively address rising health care prices is to set a benchmark that is indexed to the regional in-network rate or a percent of the Medicare rate. While this would benefit those who directly pay for health care services, including insurers, it would disadvantage physician staffing firms and the private equity firms that back them. The incentive for the provider to remain out-of-network and obtain higher fees will persist.

The health care challenges created by the COVID-19 pandemic in 2020 will continue in 2021. We may also continue to see surprise medical bills in 2021, both COVID and non-COVID related, such as the $52,000 bill received by a Pennsylvania woman for air ambulance transport. The good news is that 2021 is well-positioned to end better than it began.

Steve Delaronde is manager of products for Population and Payment Solutions at 3M Health Information Systems.

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