Surprise bills: Separating myths from facts

Both California and New York have enacted legislation to protect patients from surprise bills, while still compensating clinicians fairly. California’s law relies on a locally determined benchmark while New York’s law relies on arbitration to resolve payment disputes. See the results in our latest infographic. 

Surprise bills can have a crippling effect on consumer finances. They occur when patients receive care at a medical facility that is in their health insurance plan’s network, but some clinicians – such as those providing emergency room care or anesthesia – are not in that network. The patient does not know or cannot control whether some care was provided by a practitioner who is out of the network.

When patients have done all they can to stay within their medical network, they deserve protection from unanticipated or surprise medical bills. 

Currently, Congress is considering two different ways to resolve payment disputes involving surprise bills. We’ve fact-checked the arguments, separating the myths from the facts.

Myth: Setting a “benchmark” to pay surprise bills is like government rate-setting.

Fact: Benchmarking would use the negotiated, market rate between private insurers and clinicians. It does not rely on a government standard. The approach gives federal health officials the authority to develop a calculation methodology to promote transparency, but does not give the government the power to determine specific payment amounts. Insurers would still be responsible for using their data to calculate individual market rates within geographic areas, specialties and lines of business. 

Myth: A benchmark would reduce payments below what doctors and hospitals need to stay in business.

Fact: A median in-network reimbursement approach would not impact a clinician or medical facility’s ability to operate, since private health insurers already pay well above Medicare rates. The median reimbursement for anesthesiologists, for example, is currently 344 percent of what Medicare pays.

A payment benchmark could contain health care costs for consumers without limiting access to care or effecting the ability of health facilities and practitioners to be compensated fairly. 

Myth: A payment benchmark would deter health insurers from contracting with doctors and hospitals.

Fact: Creating a benchmark payment will not erode networks. Health plans develop different types of networks based on employer and consumer needs, and maintaining robust networks is central to insurers’ business. Furthermore, regardless of how surprise billing is addressed, most states already have extensive network adequacy laws which will require health plans to continue contracting with specialists. As evidence, a year after California’s surprise billing law, which includes benchmark payment, going into effect, multiple plans saw an increase in the number of contracted providers. Statewide, researchers found a 17 percent decrease in the share of services delivered out-of-network by specialties most associated with surprise billing.

Myth: Arbitration would not raise health care costs.

Fact: Arbitration requires an expensive and entirely new infrastructure. Experts point to potential costs including: $1,900 filing fee per case, $750 case management fee, and arbiter fees of $1,000 per hour. In many cases, these costs, coupled with additional legal fees, could quickly exceed the original bill. These costs could be passed on to consumers through higher premiums and taxpayers through tax credits that are tied to premiums under the Affordable Care Act. Also, arbitration does nothing to constrain costs. For example, provider charges are not tied to market forces, so clinicians could decide to raise their charges to raise their payments under arbitration. 

Myth: Arbitration will only be used to resolve a small number of cases.

Fact: In states that have implemented arbitration like New York and Texas, the number of arbitration cases has been increasing over time, sometimes with a growing backlog and wait times for resolution. From 2015 to 2018, the use of arbitration in New York increased by 770 percent, and in Texas, the state has a growing backlog of over 4,000 mediation requests that have built since it moved to dispute resolution.

Additional resources on surprise bills:

• Read our statement on the 2020 year-end, COVID-19 relief package, which addresses surprise billing.
• See more of our fact-checked arguments and download an at-a-glance myths vs facts.
• Read more on how a payment benchmark has positive impacts for network participation.