Surprise Medical Billing Comes to An End, Insurers Oppose Arbitration Mechanism

After years of failed attempts, Congress has finally come to an agreement on a measure to end the practice of surprise medical billing. 

Surprise billing, also known as balance billing, is the practice of charging patients for out-of-network procedures that insurers refuse to pay for in whole or in part. Often, patients incur these balance bills without their knowledge. The new legislation would ban providers from sending such a bill to patients, and would instead require providers to negotiate reimbursement with the patient’s insurer or submit the dispute to a binding arbitration process. 

Providers will have 30 days from the day of the procedure to negotiate a compromise reimbursement amount with payers. If the parties can’t agree, they must submit their preferred reimbursement amounts to an HHS-approved arbitrator, who will pick one of the two amounts. 

Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, praised the legislation as “closer to the ideal, consumer-friendly solution” than previous attempts to address the issue. 

“It’s very likely that this bill reduces premiums,” says Adler, who has contributed to research that found surprise billing increases health care costs.

Insurance stakeholders are displeased that surprise bills will be resolved through arbitration. Instead of arbitration, America’s Health Insurance Plans had lobbied for out-of-network reimbursement to be tied to a benchmark rate. 

Adler thinks that insurers’ objections to arbitration are overblown, and he argues carriers will gain leverage in balance billing negotiations because of the legislation.

“It seems pretty easy for an insurer or a [plan sponsor] company to call a provider’s bluff,” Adler says, citing rules in the bill that he thinks will prevent providers from abusing the arbitration system. 

Dan Mendelson, founder of Avalere Health, is more skeptical about the bill’s potential to reduce costs and slow premium inflation, since it will require new administrative costs.

“There is no question that whenever you force more cost into the system, it’s going to be reflected in consumer cost,” Mendelson explains. “So there will be a premium effect. Will people actually be able to differentiate it from the typical rise in costs? No….I do expect that it will have an effect, just from an economics standpoint.”

By Peter Johnson