In response to individuals receiving large, unexpected medical bills for out-of-network care, Congress has recently been considering legislation to address surprise billing. As the term is currently being discussed, surprise billing typically refers to situations where consumers are unknowingly, and potentially unavoidably, treated by providers outside of the consumers’ health insurance plan networks and, as a result, unexpectedly receive larger bills than they would have received if the providers had been in the plan networks. In the 116th Congress, federal proposals have sought to address surprise billing in the context of two types of situations: (1) where an individual receives emergency services from an out-of-network provider and (2) where an individual receives services from an out-of-network provider that is working at an in-network facility.

Although no federal requirements directly address surprise billing, at least half of the states have implemented policies to address surprise billing in some capacity. However, the state laws are limited in application, as certain types of plans, such as self-funded plans offered by employers, are exempt from state insurance regulation. State policies to address surprise billing vary in terms of the types of consumer financial protections provided (e.g., consumer balance billing limitations) and the related requirements on insurers and providers to establish such protections. Among states that offer similar types of consumer protections, policies may vary in their application and may differ according to the types of situations addressed (e.g., emergency services, out-of-network care at an in-network facility), the types of plans addressed (e.g., HMO, PPO), and the methods used to determine insurer payments to providers for such services (e.g., benchmark, arbitration).

Similar to many state laws, recent federal legislative proposals related to surprise billing typically seek to address the financial relationships between insurers, providers, and consumers. They do so by establishing new requirements on insurers, providers, or both to create a degree of consumer protection related to reducing patient financial responsibilities with respect to some types of out-of-network care.

In addition to including language that limits consumer cost sharing in surprise billing situations, the federal proposals typically include language that specifies the methods by which insurers determine payment to providers for the services being addressed in the bill (since solely reducing consumer financial liability in such situations would reduce the total amount providers receive for their services). When combined with balance billing prohibitions, this type of requirement effectively results in what the insurer and provider recognize as the total payment for out-of-network care.

To date, federal proposals are largely aligned in how they would address consumer protections in surprise billing situations. However, the proposals differ in how they would address total payment for specified services furnished by out-of-network providers.

Federal proposals generally have focused on at least one of two methods to determine insurers’ financial responsibility: (1) selecting a benchmark provider payment rate that serves as the basis for determining specific amounts that insurers must pay providers, net of consumer cost sharing or (2) establishing an alternative dispute resolution process, such as arbitration, with provider payment determined by a neutral third party.

Surprise Billing

As the term is currently being discussed, surprise billing typically refers to situations where a consumer is unknowingly, and potentially unavoidably, treated by a provider outside of the consumer’s health insurance plan network and, as a result, unexpectedly receives a larger bill than he or she would have received if the provider had been in the plan network.

Most recently, in federal policy discussions, surprise billing has commonly been discussed in the context of two situations: (1) where an individual receives emergency services from an out-of-network provider and (2) where a consumer receives nonemergency services from an out-of-network provider who is working in an in-network facility. However, surprise billing may occur in other situations (e.g., ground ambulance and air ambulance services) where consumers are unknowingly and unavoidably treated by an out-of-network provider.

As these situations imply, surprise billing is rooted in most private insurers’ use of provider networks. Therefore, this report begins with a discussion of the relationship between provider network status and private health insurance billing before discussing existing federal and state requirements around surprise billing.

Private Health Insurance Billing Overview

The charges and payments for health care items or services under private health insurance are often the result of the contractual relationships between consumers, insurers, and providers for a given health plan.

Health care providers establish dollar amounts for the services they furnish; such amounts are referred to as chargesand reflect what providers think they should be paid. However, the actual amounts that a provider is paid for furnishing services vary and may not be equal to the provider-established charges. The amounts a provider receives for furnished services, and how the payment is divided between the insurer and the consumer, can vary due to a number of factors, including (but not limited to) whether a given provider has negotiated a payment amount with a given insurer, whether an insurer pays for services provided by out-of-network providers, enrollee cost-sharing requirements, whether a provider can bill the consumer for an additional amount above the amounts paid by the consumer (in the form of cost sharing), and the insurer.

In-Network Coverage

Under private insurance, the amount paid for a covered item or service is often contingent upon whether a consumer’s insurer has contracted with the provider. Insurers typically negotiate and establish separate contracts with hospitals, physicians, physician organizations (such as group practices and physician management firms), and other types of providers. For each provider where such a contract exists with a particular insurer, that provider is then generally considered to be a part of that insurer’s provider network (i.e., that provider is considered in network).

Out-Of-Network Coverage

In instances where a contract between an insurer and provider does not exist, the provider is considered out of network. The total costs for services furnished by an out-of-network provider, and who pays for such services, depend on a number of factors; one key factor is whether the plan covers out-of-network services in the first place.

Generally, point of service plans and preferred provider organization (PPO) plans cover out-of-network services, whereas exclusive provider organization plans and health maintenance organization (HMO) plans generally only cover services by providers within the plan’s network (except in an emergency).

Existing Requirements Addressing Surprise Billing         

Currently, no federal private health insurance requirements address surprise billing; however, federal requirements do address related issues.

Policy Considerations

Federal surprise billing proposals, like state laws, typically seek to address the current financial relationships between insurers, providers, and consumers for certain services. In doing so, the proposals generally would establish new requirements on insurers, providers, or both in specified billing situations to create a degree of consumer protection.

As an example, requirements on insurers may address how the insurer pays for specified services or what consumer cost-sharing requirements would be under specified plans. Requirements on providers may address the extent to which providers may balance bill consumers. Requirements on both entities may establish the terms under which insurers and providers participate in alternative dispute resolution processes (e.g., arbitration) to determine the amount providers are paid by insurers and consumers for surprise bills.

Surprise billing can be addressed in a variety of ways, and the following sections discuss questions policymakers may want to consider when evaluating these different approaches. The following policy discussions are examples of the types of questions policymakers may want to consider when evaluating surprise billing proposals and should not be treated as an exhaustive list.

Furthermore, due to the development, introduction, and modification of numerous federal proposals on this topic during the 116th Congress, the policy discussions in this section of the report generally do not include specific references to any current or historical federal proposals. The report references state surprise billing laws to provide examples and context, but such references should not be considered comprehensive references of all applicable state laws.

What Plan Types Could Be Addressed?

Federal private health insurance requirements generally vary based on the segment of the private health insurance market in which the plan is sold (individual, small group, large group, and self-insured).

How Could a Proposal Address Consumer Protections?

In surprise billing situations, the consumer is typically the one being surprised. Correspondingly, proposals seeking to address surprise billing situations generally include provisions that would establish consumer protections.

Most federal surprise billing proposals from the 116th Congress generally address consumer financial liabilities in these situations. Generally, they do so by tying consumer cost sharing (in some capacity) to what cost sharing would be had specified services been provided in network and by limiting the extent to which consumers can be balance billed for specified services.

In addition, some federal proposals incorporate various requirements designed to inform consumers so they can make more informed choices about seeing in-network or out-of-network providers. In current federal proposals, this has most commonly taken the form of consumer notification requirements, which are designed to inform the consumer, prior to receiving out-of-network services, that he or she might be seen by an out-of-network provider (among other pieces of information). Some federal proposals link such notification requirements with consumer financial protections, so that the consumer financial protections would not apply in instances where notification requirements were satisfied (e.g., a consumer may be balanced billed only if the provider satisfied consumer notification requirements).

The aforementioned financial protections and notification requirements typically are established by creating requirements on insurers, providers, or both. They may take a variety of forms, as discussed in the subsequent sections.

What Kind of Information Could Be Provided to the Consumer Prior to the Receipt of Services?

Because surprise billing may occur when a consumer is unknowingly treated by a provider outside of the consumer’s health insurance plan’s network, surprise billing proposals may include a variety of requirements that would seek to provide consumers with more information about the providers in their network and/or the care they are to receive in order to make an informed decision about their medical care providers. Such requirements alone would not eliminate surprise billing but could reduce the prevalence of unexpected out-of-network use, which in turn would decrease the prevalence of surprise billing.

What Types of Requirements Could Be Placed on Insurers, Providers, or Both?

In considering surprise billing proposals, there has been debate around how to shield consumers from receiving unexpected and likely large bills from out-of-network providers that the consumer did not have the opportunity to choose while balancing the impact of establishing a method for ensuring payment for those services. Proposals to address surprise billing situations have generally sought to address the lack of a contractual relationship between insurers and out-of-network providers by establishing standards for determining the total provider payment and the insurer payment net of specified consumer cost sharing. Other methods have sought to create network requirements that would reduce the probability that a consumer would be treated by an out-of-network provider at an in-network facility.