Two Measures in State Legislature Seek to End Surprise Medical Bills
When Joshua Wachman, an 18-year old freshman at the University of Colorado, checked himself into Boulder Community Hospital after dislocating his shoulder, the receptionist checked his insurance card, approved his coverage and told him a doctor would see him shortly.
Roughly 30 minutes later, after an X-ray and a quick readjustment, Joshua walked out of the hospital thinking everything was fine; no one told him the hospital was out of his insurance carrier’s network of approved health care providers.
Two months later, his mom, Stephanie Wachman, received a bill for $5,455 to cover the costs of services — including $905 for the X-ray, $1,407 for popping his shoulder back into place and $2,188 for hospital’s facility fee. A week after that, the Wachmans received another bill for $2,468 for the out-of-network specialists who reviewed Joshua Wachman’s X-ray.
“It was completely taking advantage of this poor 18-year-old kid,” Stephanie Wachman said. “When they took his insurance card and told him he was fine, he didn’t know any better. I think they should be ashamed of themselves. He feels so bad about it. It’s not like this is a small amount that won’t affect our lives. We don’t have $7,000 just lying around.”
Joshua Wachman’s story is not uncommon. According to Altarum, a nonprofit research and consulting firm focused on the rising costs of health care, 34 percent of privately insured Colorado adults in the last year received a medical bill that included an unexpected expense.
While the Colorado Legislature for the past five years has attempted to address the issue by setting limits on how much out-of-network providers can charge, supporters believe this year’s bill has a good chance of passing under new Democratic leadership.
“I think this bill really does have a chance because the Senate is now Democratic,” Rep. Sonya Jacquez Lewis, D-Longmont, said. “I’ve even had colleagues from across the aisle that ... while they may not jump on immediately to all of our bills, they are looking at these health care bills very carefully because they heard about it from their constituents as well. Health care bills are one of the biggest priorities.”
Placing a limit on how much hospitals can charge, however, could have major unforeseen consequences — especially in rural parts of the state.
Currently, there is an out-of-network health care bill in each chamber of the Legislature. While both stipulate that health care providers must disclose whether a facility or a doctor is out of network and how that will affect the cost of services, the real sticking point is how to negotiate out-of-network prices.
House Bill 1174 calls for rates to be capped at the carrier’s median in-network rate for the same procedure in a similar facility, 200 percent of the Medicare rates for the same procedure in a similar facility, or 100 percent of the median in-network rate as determined by claims data from the Colorado All-Payer Health Claims Database, which the Legislature set up in 2010 to monitor health care costs throughout the state.
Senate Bill 134 lays out three similar options: the average in-network rate for the same procedure, 125 percent of the Medicare reimbursement rate for the same procedure, or 100 percent of the median in-network rate as determined by claims data from the Colorado All-Payer Health Claims Database.
Supporters of the bills say the limits will drive more providers to join network plans by reducing the financial incentive of operating out-of-network and thereby increase access to health care, as well as drive down costs.
“Under the current law there’s no negotiation between the facilities, providers and insurance company for out-of-network providers so they can charge whatever they like,” said Amanda Massey, executive director of the Colorado Association of Health Plans. “Our position is that a lot of these doctors that choose not to be in network are kind of gaming the system. Insurance companies must hold our members harmless, so that means insurance companies end up paying those massive bills, which drives up premiums for everybody.”
Though many providers support the spirit of the bills, they note that setting such strict limits on what they can charge gives insurance companies too much leverage in negotiating prices, opening the door manipulation of the market.
Dr. David Downs, of the Colorado Medical Society, said if the law only allows out-of-network providers to charge the average in-network price as determined by Colorado All-Payer Health Claims data, insurance companies will start to drop providers who previously negotiated higher reimbursement rates to bring the average price down, then force those same providers to renegotiate at a lower rate.
“Say the average rate is $75, so at the low end you’re paying $50 and at the high end you’re paying $100,” he said. “If you set the benchmark at $75, insurance carriers will drop all the doctors charging above $75 from the network so that the new average is $62.50 and force those doctors to renegotiate at the lower rate.”
Even though Downs admitted that sounds like some sort of conspiracy theory, he noted this type of behavior has already been seen in states that passed similar laws, such as California that passed similar laws.
While dropping the price of services seem like a win for patients at first glance, if prices drop too low, it could limit access to health care, especially in rural areas where care is more expensive.
Steve Sherick, the founder and CEO of Innova Emergency Medical, which specializes in providing doctors to rural medical centers said, “There have been bad players in the game and those who charge $2,200 for facility fees deserve to get raked over the coals for that, but if the insurance companies can basically drive down their payments because of the legal systems built around this bill, then they can essentially force us out of business and create a situation where you don’t have health care providers when they’re most needed, in places where they’re most needed. We have to be really careful about that balance.”
The key, Downs said, is setting rates high enough so insurance companies are not incentivized to drop doctors, but not so high that doctors can continue to charge whatever they want.
In reaction to these concerns, the House Health and Insurance Committee last week amended HB 1174 to allow out-of-network providers to charge 200 percent of Medicare reimbursement rates. With Medicare covering 69 cents for every dollar spent providing care, Downs said 200 percent could potentially be a good sweet spot, but warned against relying on Medicare rates set by the federal goverment.
The Health and Insurance Committee will debate the details during their hearing on Thursday, but, House Speaker KC Becker, D-Boulder, said this is one of the best bills of the session, and she believes it will pass as is.
“With this bill, almost everyone is supportive or neutral and even a lot of individual doctors came on board,” she said. “I think this bill is going to pass, I think it’s a huge benefit to the consumer, I think it’s going to drive down health care costs and lower premiums.”
John Spina: 303-473-1389, firstname.lastname@example.org or twitter.com/jsspina24