Policy & Regulation News

Physicians Hail New York’s Surprise Billing Law as a Success

A report shows New York’s surprise billing law saved consumers over $400 million through an arbitration process, resulting in state and physician support.

Surprise billing

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By Jacqueline LaPointe

- A surprise billing law implemented in New York four years ago is being considered a success according to the state’s Department of Financial Services.

In a report released earlier this month, the state department found that the law, which implemented an independent dispute resolution process for out-of-network emergency and surprise medical bills, saved consumers over $400 million from 2015 to 2018.

The number of independent dispute resolutions requested also increased during the period, growing from just 149 requests when the law first went into effect to 1,148 requests three years later.

“Surprise medical bills have been a huge burden that can stress consumers' finances, literally causing some people to go broke. Our review shows that the law is making a major difference in helping New Yorkers receive the healthcare they deserve without the unnecessary shock and onerous cost of surprise bills and the stress of having to enter disputes themselves,” Department of Financial Services superintendent Linda A. Lacewell said in a press release.

Surprising billing has become a major problem for Americans. A study published in JAMA Internal Medicine last month found that out-of-network billing has become more common compared to nearly a decade ago and the bills are potentially more costly.

READ MORE: Exploring the Fundamentals of Medical Billing and Coding

A survey conducted by Kaiser Family Foundation in 2018 found similar results. Forty percent of insured adults between 18 and 65 years old having received a surprise medical bill within the last 12 months, the survey showed. Additionally, 67 percent of the individuals said they were concerned about surprise medical bills, surpassing high premiums, high deductibles, and rising drug costs as top concerns that year.

Implementing a national independent dispute resolution process may be the key to addressing the problem of surprise billing, New York’s leaders suggested in the report.

The law increasingly took patients out of the surprise medical bill negotiation process, state leaders explained. They also pointed to research published in the National Bureau of Economic Research that found the law reduced out-of-network billing by about one-third and lowered in-network emergency physician payments by nine percent.

Physicians are using the report as support for their surprise billing solution: an arbitration process in which payers and providers name what they believe is a fair price for an out-of-network emergency service and a third-party arbitrator determines the more reasonable offer.

“Patients lose if they are held harmless from ‘surprise’ bills only to discover they can’t access essential medical services in an emergency. Congress can deliver a win for patients, physicians and insurers by including a proven, successful dispute resolution process like New York’s in legislation to end surprise medical bills,” Robert W. Seligson, president of the Physicians Advocacy Institute, said in an emailed statement following the report’s release.

READ MORE: AHA: Fixed Reimbursement Rates Not a Surprise Medical Bill Solution

However, the approach to surprise billing could cost the federal government billings, according to a Congressional Budget Office (CBO) cost estimate obtained by The Hill.

The news source recently reported that the government agency estimated that a bill from Representatives Raul Ruiz (D-CA) and Phil Roe (R-TN) that would implement a national arbitration process for surprise billing would increase costs by driving up provider payments.

In contrast, legislation supporting another strategy would save the government, CBO reported this summer. The Lower Health Care Costs Act introduced by Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) would save nearly $7.6 billion over the next decade by setting benchmark reimbursement rates for out-of-network care, the agency found.

Physicians and hospitals have staunchly opposed setting benchmark rates. But research shows that a western state using this approach to address surprise billing has also realized success.

In California, state law requires fully insured health plans to pay out-of-network physicians practicing at in-network hospitals the higher of the payer’s local average contracted rate or 125 percent of the Medicare reimbursement rate for that service.

READ MORE: 1 in 7 In-Network Admissions End with Surprise Medical Bill

Following implementation of the law, Californians saw a shift toward in-network care, researchers reported in a recent USC-Brookings Schaeffer Initiative for Health Policy blog post. Analyzing FAIR Health commercial insurance claims data, they found that in-network care increased from 79 percent before the law to nearly 83 percent afterwards. At the same time, they observed a 17 percent decline in the share of services delivered out-of-network.

Patients may be receiving fewer surprise medical bills because of the benchmark rates in California but physicians may be paying the price.

A case study published in the American Journal of Managed Care earlier this year found that California’s law resulted in payers lowering rates for some providers and in some cases, canceling their contracts. The study also found that the law may have motivated increased consolidation among physician practice groups.

Payers and providers are split on which approach is better for addressing surprise billing and federal policymakers must weigh the pros and cons of each before finalizing a national policy.