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Surprise medical bills could soon be curbed by federal laws

Efforts are advancing to curb surprise medical bills.

The Energy and Commerce Committee in the U.S. House of Representatives advanced several health care initiatives Wednesday, the most significant of which could curb surprise medical bills.

But the regulations threaten to increase health insurance premiums.

Surprise medical billing is when a provider, often out-of-network, bills the balance of their claim to the patient rather than accept what the insurance company pays them.

The legislation passed Wednesday would allow any bills greater than $1,250 to go to arbitration.

Currently, rules exist nationwide to address this problem in emergency situations. Even though expensive bills are still possible for a number of factors, including mode of transportation, but for non-emergent situations a gap in regulations remains.

If they are out of network, they don’t have an agreed upon rate or contract with the insurer, so they can typically bill the patient directly to make up the difference.

Increasingly, this has been the source of extraordinary bills. Another source is medication that is not covered or not a high-tier medication (i.e. it will cost less).

Several states have created regulation that protects patients from the high medical care bills—but their authority only goes so far.

State bills cover the largest insured population—state employees—and commercially insured plans. But they do not regulate self-insured plans, often the plans used by large employers or companies who group purchase health care through a trade association. Those fall under federal law and make up more than 60 percent of health insurance plans in the country.

State by state

The regulations in each state typically differ in how they resolve the difference in what the provider claims and what they are reimbursed by the insurer.

In New York and Connecticut, for example, the states chose to pursue independent reviews, but are using cost information provided by a database, from FAIR Health, as the benchmark.

In New Jersey, meanwhile, the state chose to use baseball style arbitration—where both the health provider and the insurer provide their offer to a third-party arbitrator, and only one of the two final offers is chosen.

Despite the efforts at the state level, many patients still see high surprise bills because no federal regulations exist.

Cost pressures

While regulating the industry is sought to be a political and policy win, both sides have their concerns.

The relationships between providers and insurers is already contentious—both are often on opposite sides of the table with insurers trying to negotiate down rates while providers are trying to negotiate increases in rates.

Both sides have said in state hearings around the country that the regulations will interfere in this delicate dance.

Neither disagree that there should be a provision stating that patients should be held harmless, but both want the government to stay away from the rest of the process.

The American Hospital Association voiced a similar concern Wednesday after the passing of the House committee bill.

“The AHA believes that once the patient is protected from surprise bills, providers and insurers then should be permitted to negotiate payment rates for services provided,” said executive Vice President Thomas Nickels in a statement.

“We strongly oppose approaches that would impose arbitrary rates on providers. It is the insurers' responsibility to maintain comprehensive provider networks, and a default payment rate would remove incentives for plans to contract with providers or to offer fair terms."

Similarly, the insurance lobbying group, America’s Health Insurance Plans, voiced concern.

“We strongly oppose the inclusion of arbitration because it does not solve the problem of surprise medical bills,” said AHIP president and CEO Matt Eyles.

“It increases the financial burden on everyone with coverage, increasing patient premiums and driving up the cost of health care. The arbitration proposal allows private-equity firms and certain providers to price gouge patients and then shifts the final decision to a ‘third party.’ This process introduces new bureaucracy and red tape into the system, with costs to hardworking taxpayers exceeding $1 billion.”

The Congressional Budget Office estimated that enacting the surprise medical billing law would reduce the deficit by almost $25 billion from 2019-2029.

“(The bill would) increase revenues by $23.8 billion and reduce direct spending by $1.1 billion, for a total reduction in the deficit of about $24.9 billion over that period,” according to the CBO.

Regulating the health care industry in order to curb the high cost of care is an ongoing hot topic in Washington, D.C., and more bills to effect change in the industry are expected this month.

Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem

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