ALEC Statement of Principles on Surprise Medical Billing
ALEC Statement of Principles on Surprise Medical Billing
Whereas, it is the mission of the American Legislative Exchange Council (ALEC) to advance the principles of free markets, limited government, and federalism; and
Whereas, the American healthcare system depends on free-market forces in order to provide a robust, consumer-driven marketplace of services; and
Whereas, health insurance products delivered by a mixture of for-profit and not for profit corporations are the primary method by which healthcare is delivered in the US; and
Whereas, these products depend on a network of negotiated fee for service arrangements between insurers and health care providers; and
Whereas, the lack of a negotiated agreement for services results in a provider being out of network; and
Whereas, payment disputes often arise in out of network situations and patients are ultimately billed the difference between what the provider charged and what the insurer offers to pay, known as balanced billing; and
Whereas, this practice is particularly alarming when no opportunity to shop for an in-network provider occurs, as in an emergency, or when care is sought from a facility or provider that is in-network, but involves another provider who is out of network that the patient had no opportunity to choose, known as surprise medical billing; and
Whereas, the economic consequences of surprise medical billing are borne by the patient, despite the cause of the unexpected bill resulting from a failure of the insurer and provider to agree on a fair market value for services that have already been provided.
Therefore, be it resolved that ALEC supports the following principles in formulating effective government policy regarding surprise medical billing:
1. Effective solutions to surprise medical billing remove the patient from the medical billing dispute, and instead require negotiations between the provider and the insurer.
Although it may seem easy or even appropriate to burden the consumer with these additional and unexpected bills, it often exacerbates the underlying problem instead of relieving it. The cause of surprise medical bills is the inability of the insurer and the provider to agree on a fair market value for services that have already been provided. Hence, the patient is poorly equipped to be able to resolve such disputes, especially since the patient’s primary ability to exercise thoughtful consumer behavior is removed in these instances due to the inability to shop for in-network services in advance of receiving care. As such, ALEC believes that such a solution limiting a patient’s financial responsibility to the applicable in-network copay and deductible is warranted in surprise medical billing situations.
2.Effective solutions preserve free market forces by relying on an independent dispute resolution process, and avoid rate setting.
Although it is conceptually easier to explain a solution that involves rate setting or benchmarking, ALEC strongly discourages the use of such an approach to determining fair market value for services in such situations. Even though such a solution may immediately lower costs by fixing prices in advance of services being rendered, it does so at the expense of all free-market forces in these situations. Thus it is antithetical to ALEC’s core principles. Rate setting also has the added disadvantage of using single payment standard to determine fair market value, which may easily be manipulated by one party or the other, leading to further distortions of fair market value. Instead, of benchmarking or rate setting, ALEC supports the uses of an independent dispute resolution (IDR) process to resolve surprise medical billing disputes. IDR uses a non-conflicted third party, charged with examining specific factors that may affect the value of these services in a mediation or arbitration setting, in order to determine the fair market value for services in dispute on a case-by-case basis. As part of these factors, independent, non-conflicted databases of charges or contracted rates which are reflections of market forces, may be included, however, government rates such as Medicare, Medicaid, and others which are artificially determined, are not. Having decided what the FMV is, the arbiter or mediator must then choose which offer, insurer or provider, more closely approximates the FMV. This approach allows both parties to negotiate on a specific service in good faith, and preserves free market forces. It is fluid, which is important as markets may change over time, a key free-market characteristic. It also creates the psychological effect of causing both parties to moderate their offers, which stabilizes markets over time, resulting in lower costs through competition.
3. Federal solutions to this issue should show deference to existing state solutions that have been adopted by the states.
ALEC strongly believes in the concept of better governance through federalism, and nowhere is that more important than the regulation of insurance products, including health insurance products. Insurance markets vary significantly across state lines, and hence, it is unreasonable and counterproductive to assume a uniform approach to dealing with insurance market issues would have better results than a state-specific approach. Congress recognized this fact with the passage of the McCarran-Ferguson Act of 1945. Finally, ALEC is concerned about the use of the “ERISA preemption” by insurers to bypass important consumer protections and market stability measures as adopted by state legislatures and implemented by the state Departments of Insurance. ALEC recommends federal action allowing states to apply for waivers to ERISA preemption, and/or recommends state solutions to surprise medical billing to allow for ERISA plans to “opt in” to state regulation for the benefit of consumers.
4. The results of independent dispute resolution should be made public as part of a solution to surprise medical billing.
Finally, ALEC believes there is significant benefit of improved market stability when price transparency is included as part of a solution to surprise medical billing. Insurers and providers both benefit from knowledge about the previous results of IDR in terms of pricing services according to market rates. Over time, the results of IDR, being known, may replace the need for IDR in a majority of circumstances by accurately predicting FMV for medical services. In addition, consumers are given an opportunity to see FMV in advance of services as well, which may help avoid a surprise medical billing situation. Finally, as insurer and providers become better equipped to know what the FMV for services are, contracting as part of the network will undoubtedly increase.