Law Feature - September 2009
By Crystal Conde
Physicians have long questioned the way health plans reimburse them for out-of-network claims, oftentimes leaving patients to foot an unexpected bill they assumed insurance would cover. When patients receive a bill for the balance, it doesn't just hurt their pocketbooks, it can strain their relationships with their physicians.
According to Austin emergency medicine physician Dennis Watts, MD, patients' aggravation with balance billing often stems from what they think is an overcharge by the physician. However, he says, the truth is just the opposite.
"In fact, the balance bill was the result of an insurance company underpayment," he said. "In some cases of balance billing, patients got angry, but the anger ended up being directed at the physician."
To take some of the heat off physicians, Dr. Watts testified in May on House Bill 2256 by Rep. Kelly Hancock (R-North Richland Hills). The Texas Medical Association, the Texas Society of Anesthesiologists (TSA), other specialty societies, and other health care stakeholders labored over crafting the legislation. The bill went through several incarnations - originally prohibiting exclusive contracts in the market - until, ultimately, it emerged with a two-thirds vote in both chambers of the legislature as a law around which facility-based physicians could rally. Gov. Rick Perry signed the bill in July.
HB 2256 provides for a fair balance-billing resolution process that holds health plans, hospitals, facility-based physicians, and patients accountable, while examining the adequacy of insurance company networks in local markets. The State Office of Administrative Hearings (SOAH), the Texas Medical Board (TMB), and the Texas Department of Insurance (TDI) will adopt rules to enforce the legislation.
As those agencies work out the details, physicians will want to ensure they're knowledgeable about the new fee dispute process and network adequacy requirements under the law.
TMA's Ambassador Program can provide county medical societies, hospitals, medical management groups, medical schools, or other health care organizations with an informative presentation on this new process, facilitated by TMA staff and leadership. To schedule a speaker for a meeting or event, call Karen Matthews at (800) 880-1300, ext. 1448, or (512) 370-1448, or e-mail Karen Matthews .
Not All About Money
When HB 2256 originally debuted, TSA President Jeffrey Jekot, MD, opposed it because he feared Texas physicians could end up in the same situation as their California colleagues.
In January, the California Supreme Court ruled in Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, et al. , that emergency medicine physicians and other physicians who provide care in an emergency setting who don't have an HMO contract may not balance bill HMO beneficiaries.
Dr. Jekot says the California case motivated Texas physicians to develop a fair process for resolving balance-billing disputes here. He credits the work of TMA, TSA, and other pivotal stakeholders, as well as the legislature, with coming to a fair resolution.
During the legislative session, organized medicine wasn't focused on how facility-based physicians could collect payment on balance bills, Dr. Jekot says. Research compiled in the 2008 TMA Survey of Texas Physicians shows that compared with other specialties, facility-based physicians contract equally as often with most large health plans, with the exception of Blue Cross and Blue Shield of Texas (BCBSTX) and UniCare, as do non-facility-based physicians. (See " Physician-Reported Contractual Relationships .")
"We weren't as concerned with collecting payment on those few out-of-network claims. The real issue is if the insurance companies can set your reimbursement rate when you're out of network, it destroys your ability to negotiate managed care contracts. That was the true crux of the bill," Dr. Jekot said.
Dr. Watts laments the arbitrary way insurers determine a physician's usual, customary, and reasonable (UCR) charges when calculating payment for out-of-network services.
In its January 2009 Report of the Health Network Adequacy Advisory Committee to the 80th Legislature, TDI identified four scenarios PPOs use to determine basic reimbursement for out-of-network physicians. Compared to set contracted payments for in-network physicians, a health plan's payment for care from a physician outside the network varies widely, and greatly affects a patient's out-of-pocket cost. (See " Reimbursement Rates Compared .")
Mediation for All
HB 2256 establishes a mediation process for settling fee disputes arising when the balance on a patient's bill is questioned.
According to the statute, the purpose of mediation is to determine:
- Whether the amount charged by the facility-based physician is excessive;
- Whether the amount paid by the insurer represents the UCR charge for the medical service or is unreasonably low; and
- The amount the patient is responsible for paying the facility-based physician after copayments, deductibles, and coinsurance.
Under the law, when patients receive balance bills, they may request mediation of an out-of-network balance greater than $1,000 after copayments, deductibles, coinsurance, and any amounts offered to be paid by the health plan. The only situation warranting mediation occurs when a patient goes to an in-network hospital for a procedure, only to be billed by an out-of-network, facility-based physician later.
The law pertains to radiologists, anesthesiologists, pathologists, emergency medicine physicians, and neonatologists. It also requires the PPO or Texas governmental employee plan that insures the patient to participate in mediation with the physician. The law applies to PPOs immediately but won't affect the Employees Retirement System of Texas until Sept. 1, 2010.
In an effort to settle the bill before mediation, the patient, the health plan, and the physician must participate in an informal settlement teleconference within 30 days of the mediation request. Dr. Watts hopes this step will reduce the number of mediations.
One of the most important mediation stipulations in HB 2256, according to Dr. Jekot, requires health plans to share the cost of mediation evenly with physicians.
"Had the insurance company not shared that responsibility, it would have had the resources to harass doctors into compliance," he said.
Clayton Devin, JD, outside general counsel for TSA, says mediators' fees vary, ranging, for example, from $400 to $750 per party for a half-day of mediation in the Dallas-Fort Worth area. Mediators' fees in other parts of the state will differ based upon a law firm's fee schedule. HB 2256 specifies that mediation shouldn't last more than four hours, or a half-day, but it does allow the parties to continue the mediation if more time is necessary.
Another important condition in the law is that the patient must start the mediation process by making a request to TDI.
"The insurance carrier can't bring the case to mediation. It has to be the patient who initiates the process," Dr. Jekot said. "That's critical because we didn't want the insurance carriers to pick out one medical group and barrage it with a slew of mediation demands so it would succumb to contracting pressures."
Should mediation fail, the mediator will report the outcome to TDI, TMB, and the SOAH chief administrative law judge. The chief administrative law judge will then refer the matter to a special judge who will conduct a trial. The patient, health plan, and physician must each pay the proportionate share of the special judge's fees. The legislation doesn't contain any information about how much the special judge could charge.
Not participating in mediation and not providing information the mediator deems necessary to reach an agreement constitute bad faith mediation. The mediator will report such conduct to TDI or TMB, and the appropriate agency can impose an administrative penalty on the offending physician or health plan.
Dr. Jekot says, overall, he's pleased that HB 2256 holds health plans and physicians accountable.
"If there are physicians taking advantage of out-of-network patients in how they bill, the process under HB 2256 will put a check on it. I don't know that physicians are doing that, but the process provides a safeguard against that kind of behavior. It also provides a safeguard against insurance carriers setting UCR charges at an arbitrary, exceedingly low level," he said.
Transparency in Billing, Contracting
William W. Hinchey, MD, TMA past president and a pathologist, says one of the benefits of HB 2256 is that it compels physicians, insurance companies, hospitals, and other health care facilities to be more open in giving patients information. The legislation contains disclosure provisions to notify patients that they may receive a balance bill for services provided by a facility-based physician.
Except in the case of an emergency, the bill says facility-based physicians should disclose to a patient, before providing care, that the physician doesn't have a contract with the patient's health plan and give the patient projected amounts for which he or she may be responsible for paying.
Upon doing so, if the facility-based physician obtains the patient's signature, the physician is not required to mediate a billed charge if the amount billed is less than or equal to the maximum amount the physician projected in the disclosure. Physicians who fail to make such a disclosure will not be subject to discipline by TMB or any penalties under the statute.
Disclosure isn't only the responsibility of the physician. Hospitals and other health care facilities must notify patients in writing when they are admitted or initially receive care that the facility is a participating provider under the patient's health plan, but that the facility-based physician caring for the patient may not be a participating provider in the health plan.
The written disclosure also tells patients that they may receive a balance bill and that they can request a listing of facility-based physicians granted medical staff privileges at the facility or hospital.
Dr. Watts says HB 2256's disclosure provisions lend greater transparency to the arbitrary way in which health plans determine UCR charges.
"The patients are ignorant of this. They have no clue what they're getting when they buy their coverage," he said.
In addition to informing patients of the potential for balance billing, HB 2256 addresses the adequacy of insurance networks in local markets across Texas.
Under the law, TDI Commissioner Mike Geeslin must adopt network adequacy standards that:
- Are adapted to local markets in which an insurer offering a preferred provider benefit plan operates;
- Ensure availability of and accessibility to a full range of contracted physicians and health care providers to provide health care services to insureds; and
- On good cause shown, may allow departure from local market network adequacy standards if the commissioner posts on the department's Web site the name of the preferred provider plan, the insurer offering the plan, and the affected local market.
Dr. Hinchey hopes TDI's examination of health plan network adequacy will bring to light gaps in network coverage in local communities. In turn, he says identifying areas lacking in-network physicians in particular specialties may cause those specialists to examine more closely why they're not participating in certain plans.
For instance, Dr. Hinchey says, some pathologists won't join health plan networks because the plans won't pay for clinical pathology services.
"In that instance, the only way to get paid is to be out of network and bill the patients. If that barrier is removed, more pathologists will be inclined to participate," he said.
Mr. Devin says he also hopes HB 2256 will pressure health plans to add more physicians to their networks and will encourage physicians to contract with plans.
All in all, Dr. Jekot says, the successful passage of HB 2256 is a win-win for physicians.
"I think we accomplished keeping the insurance companies from gaining unreasonable leverage in the contracting process, and we provided for a mechanism for patients who feel they've been caught in the middle of insurance companies and physicians. The act will also highlight any network inadequacies in certain communities. Insurance companies will have to ensure availability and accessibility to a full range of contracted specialists," he said.
Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by e-mail at Crystal Conde .
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