There’s Still Time to Reform the Senate’s Surprise Billing Legislation

As Congress and the Trump administration continue to deliberate over legislation that would curb the practice of “surprise billing,” a fierce debate has broken out over how to resolve payment disputes between doctors and health insurance companies when a patient is treated outside their network.

The current showdown is between a benchmark proposal, included in the Senate’s Lower Health Care Costs Act (S. 1895) and the House’s No Surprises Act (H.R. 3630), and an arbitration proposal featured in S. 1531 and H.R. 3502. Benchmarking would set a fixed payment rate for out-of-network doctors who provide care to a patient in an emergency situation. Arbitration would involve doctors and insurers submitting bids for how much a doctor should be reimbursed for their services to a third party, with the third party deciding on an amount from there.

Unfortunately, neither proposal is ideal for leaving health care markets free. Benchmarking, in particular, introduces government rate-setting to private contracts between doctors, hospitals, and insurance companies. This proposal, if enacted into law, will put undue pressure on doctors and impact the delivery of care at hospitals and emergency rooms.

Sen. Lamar Alexander (R-TN), the sponsor of S. 1895, defended the benchmarking policy recently in an op-ed for The Tennessean. While NTU has applauded Sen. Alexander’s support for free markets in the past, the Senator’s defense of benchmarking in The Tennessean deserves greater comment:

  • Sen. Alexander calls the benchmark “the negotiated free-market rate within their local area.” However, a benchmark would undercut (or render moot) one of the key aspects of current free-market negotiations between doctors and insurers: the very existence of networks. S. 1895 would, in effect, automatically put certain physicians in the same insurance networks as the hospitals they work at. This would undercut doctors in negotiations with insurers, and significantly reduce the incentives for insurance companies to include doctors in their networks. This could lead to narrower networks without producing significant cost savings for patients.

  • The Senator contends the bill “does not provide any new ability for insurance companies to cancel previously negotiated contracts and force doctors and hospitals into new contracts.” While S. 1895 does not explicitly provide for contract cancelation or renegotiation, urgent warnings about the unintended consequences of benchmarking are already surfacing. Take California, which recently instituted benchmarking. According to an August 2019 piece in The American Journal of Managed Care, recent contract negotiations in California between health insurers (on the one hand) and doctors and hospitals (on the other) have been characterized by insurers having “an incentive to lower or cancel contracts with rates higher than their average as a means of suppressing [out-of-network] prices.” This is a not-unjustified (and predictable) response from insurers.

  • Alexander claims benchmarking will empower “local markets, not government bureaucrats.” Unfortunately, the bill as currently written leaves federal bureaucrats at the Department of Health and Human Services (HHS) in charge of creating the methodology health insurers must follow to determine the “median in-network rate.” It’s often said that the devil is in the details, and indeed the devil of government rate-setting may be in the details of a methodology determined by an HHS led by President Trump or a new Democratic president in 2021.

Fortunately, Sen. Alexander is not single-minded when it comes to the benchmark proposal. He notes in his op-ed that he is “reviewing” legislation that features arbitration instead, and wants to ensure it:

“…does not add new costs to the health care system and that it does not lead to higher insurance premiums and out-of-pocket costs for patients, all while adding additional paperwork and frustration to an insurance process that’s already difficult enough to understand.”

We agree with Sen. Alexander that surprise billing solutions should not add new costs to the health care system, make the insurance process more complex, or lead to higher premiums and out-of-pocket costs for patients. That’s why we have outlined a few alternatives to the status-quo benchmarking proposal:

  • The “FTC Solution,” as introduced by the Goodman Institute for Public Policy Research’s John Goodman. This would have the Federal Trade Commission (FTC) tackle surprise bills through its existing authority to pursue either false and misleading advertising or “unfair or deceptive acts or practices in or affecting commerce.” While NTU has warned that there should be prudent guardrails on the FTC’s authority to regulate surprise bills, this approach has the benefit of relying on existing federal authority rather than new powers created by Congress.

  • Ban balance billing and let states or markets determine dispute resolution. In the absence of federal and state legislation (or regulation) mandating a particular kind of resolution process, payment disputes would be settled by major players in the private sector: health insurers, providers or provider groups, and hospitals or facilities. NTU consistently advocates for market-based solutions to the country’s major challenges, and we believe generally that financial disputes in the private sector should be left to private actors to solve. That said, this proposal is not without its risks to patients and taxpayers.

  • Address network complexity. As West Virginia University professor Simon F. Haeder, University of Wisconsin-Madison professor David L. Weimer, and UC Irvine professor Dana B. Mukamel noted in a recent Health Affairs analysis, two of the root causes of surprise billing are inaccurate provider directories and inadequate networks. Measures that encourage insurers to keep accurate and up-to-date provider databases, and make it easier for consumers to access and understand their networks, would help avoid surprise billing situations in the first place and are less disruptive than benchmarking.

There are admirable goals in Sen. Alexander’s comprehensive legislation to address health care costs, and we appreciate his willingness to consider alternatives to the benchmarking proposal currently in S. 1895. We believe that the options outlined above would strike the right balance between protecting patients and maintaining a free and competitive market for health care, and we stand ready to work with lawmakers on replacing the benchmark with a market-oriented solution.