Background:

Balance Billing.

When a covered person receives covered health services from an in-network health care provider, he or she is held harmless for the difference between what the health carrier pays the provider and what the provider normally charges for the services. If the person receives services from an out-of-network provider, however, the provider may bill the person for this difference. This practice is known as "balance billing."

Emergency Services Under Federal Law.

Under the Emergency Medical Treatment and Active Labor Act, a hospital must screen, evaluate, and provide treatment necessary to stabilize any patient who comes to the emergency department with an emergency medical condition. Under the Affordable Care Act (ACA), a health carrier that offers coverage for services in an emergency department must cover emergency services without prior authorization, without regard to whether the provider is in-network or out-of-network, and with no differential copayments or coinsurance for out-of-network services. "Emergency services" and "emergency medical condition" are defined the same as in state law.

The rules implementing the ACA provide a payment methodology for emergency services provided by out-of-network providers. An out-of-network provider may "balance bill" the patient for the balance between the provider's billed charges and the amount the provider was paid by the carrier.

Emergency Services Under State Law.

Under state law, a health carrier must cover "emergency services" provided at an out-of-network emergency department if the services were necessary to screen and stabilize a covered person and a prudent layperson would reasonably have believed that use of an in-network hospital would result in a delay that would worsen the emergency or if use of a specific hospital is required by federal, state, or local law. Likewise, a health carrier may not require prior authorization of emergency services in an out-of-network emergency department if the prudent layperson standard is met. If the carrier authorizes coverage for emergency services, the carrier may not retract the authorization or reduce payment after the services have been provided unless the approval was based on the provider's material misrepresentation about the covered person's health condition. Coverage of emergency services may be subject to applicable copayments, coinsurance, and deductibles. Except under certain circumstances, a carrier may impose reasonable differential cost-sharing arrangements for in-network and out-of-network emergency services.

"Emergency services" are defined as a medical screening examination within the capability of a hospital emergency department, including ancillary services routinely available to the emergency department to evaluate the emergency medical condition, and further medical examination and treatment to the extent they are within the capabilities of the staff and facilities at the hospital, as required to stabilize the patient. "Emergency medical condition" is defined as a medical condition manifesting itself by acute symptoms of sufficient severity, including severe pain, such that a prudent layperson could reasonably expect the absence of immediate medical attention to result in a condition placing the person's health in serious jeopardy, serious impairment to bodily functions, or serious dysfunction of a bodily organ or part.

Summary of Engrossed Substitute Bill:

Emergency Services.

A carrier must cover emergency services provided by an out-of-network emergency department regardless of whether a prudent layperson would have reasonably believed that using an in-network emergency department would result in a delay that would worsen the emergency or whether federal, state, or local law requires the use of a specific provider or facility. A carrier may only retract authorization or reduce payment for coverage of previously authorized emergency services if the provider's material misrepresentation was made with the patient's knowledge and consent. Coverage of emergency services may be subject to applicable in-network copayments, coinsurance, and deductibles, and provisions related to differential cost-sharing for emergency services are removed. The definition of "emergency medical condition" includes mental health and substance use disorder conditions, as well as conditions that manifest themselves by symptoms of emotional distress.

Prohibition on Balance Billing.

"Balance bill" is defined as a carrier bill sent to a covered person by an out-of-network provider or facility for health care services provided to the person after the provider or facility's billed amount is not fully reimbursed by the carrier, exclusive of permitted cost-sharing. An out-of-network provider or facility may not balance bill a covered person for:

emergency services provided to a covered person; and
nonemergency health care services provided to a covered person at an in-network hospital or ambulatory surgical facility if the services: (1) involve surgical or ancillary services; and (2) are provided by an out-of-network provider because an in-network provider was unavailable or the need for the service was unforeseen and arose at the time they were rendered.

"Surgical or ancillary" services are defined as surgery, anesthesiology, pathology, radiology, laboratory, or hospitalist services.

The balance billing provisions apply to health carriers regulated under the insurance laws and health plans offered to public employees and their dependents, but do not apply to Medicaid. The provisions must be liberally construed to ensure that consumers are not billed out-of-network charges.

Payments by the Covered Person.

Before billing a covered person for in-network cost-sharing, an out-of-network provider or facility must request from a carrier a written explanation of benefits specifying the applicable in-network cost-sharing amounts owed by the covered person. The carrier must provide the explanation of benefits within 60 days. A carrier must calculate the in-network cost-sharing amount using the carrier's median contracted rate for similar services in the geographic area where the services were provided. If there is more than one level of cost-sharing, the amount most beneficial to the covered person must be used.

If a covered person receives health care services for which balance billing is prohibited:

The covered person satisfies his or her obligation to pay for the services if he or she pays the in-network cost-sharing amount.
A carrier, out-of-network provider, or out-of-network facility, or agent, trustee, or assignee:
- must ensure the covered person incurs no greater cost than he or she would have incurred if the services had been provided in-network;
- may not balance bill or otherwise attempt to collect from the covered person more than the in-network cost-sharing amount;
- may not report adverse information to a credit reporting agency or bring suit against a covered person until 150 days after the initial billing; and
- may not use wage garnishments or liens on a primary residence to collect unpaid bills.
The carrier must treat any prior cost-sharing amounts paid in the same manner as cost-sharing for in-network services and must apply paid cost-sharing amounts toward the limit on in-network out-of-pocket maximum expenses.
If the covered person pays an amount in excess of the in-network cost-sharing amount, the provider, facility, or carrier must refund the excess within 30 days. After 30 days, interest is owed on the unrefunded payment at a rate of 12 percent.

Payments by Carriers.

Upon receipt of a bill for services for which balance billing is prohibited, a carrier must make payment directly to the provider or facility. If the billed amount is less than $300, the carrier must pay the full billed amount. If the billed amount is more than $300, the parties may agree to resolve the dispute using arbitration if the amount in dispute is $2,000 or more, or using mediation. If the amount in dispute is less than $2,000, mediation expenses must be divided equally among the carrier, provider, and facility. The Uniform Mediation Act applies.

Dispute Resolution.

A carrier, out-of-network provider, or out-of-network facility may initiate arbitration by filing a request with the Insurance Commissioner (Commissioner) within 90 days of receipt of the explanation of benefits. Each proceeding may not involve more than one episode of care or more than one provider or facility, and the arbitrator may not consolidate multiple disputes. The party requesting arbitration must notify the other party and state its final offer, and the non-requesting party must provide its final offer to the requesting party within 30 days. The Commissioner must provide the parties with a list of approved arbitration entities or arbitrators, who must be trained by the American Arbitration Association or the American Health Lawyers Association. If the parties do not agree on an arbitrator, the Commissioner provides a list of five arbitrators. Each party may veto two arbitrators, and if more than one remains, the Commissioner chooses the arbitrator. This process must be completed within 20 days.

Within 30 days of requesting arbitration, each party must make its written submissions to the arbitrator. Within 30 days of receiving the submissions, the arbitrator must provide a written decision to the parties requiring payment of one of the final offer amounts, notify the parties, and provide information regarding the decision to the Commissioner.

In making a decision regarding the appropriate amount to be paid to the out-of-network provider or facility, the arbitrator must consider the following factors:

whether there is a gross disparity between the amount at issue and amounts paid to the provider or facility for the same services by other carriers for which the provider or facility is out-of-network, and amounts paid by the carrier to reimburse similarly qualified out-of-network providers or facilities for the same services in the same region;
the circumstances and complexity of the case; and
patient characteristics.

The covered person may not be required to appear as a witness. Expenses must be paid by the party whose final offer was rejected by the arbitrator. The covered person is not liable for any arbitration costs. The parties must enter into a nondisclosure agreement to protect personal health information and fee information. Arbitrations are governed by the Uniform Arbitration Act, except in cases of conflict with the bill.

Annually until January 1, 2023, the Commissioner must prepare a report summarizing dispute resolution information, post the report on the Office of the Insurance Commissioner's website, and submit it to the Legislature by July 1.

Facilities' Network Status.

A nonemployed provider group providing surgical or ancillary services must notify a hospital or ambulatory surgical facility of the carriers with which it contracts and whether the contract will be terminated. Hospitals and ambulatory surgical facilities must notify the carriers with which they contract of the network status of their contracted provider groups on a quarterly basis. The notice must include, for each type of surgical or ancillary service, whether at least 75 percent of the providers providing the service were in-network during the previous three months. If the 75 percent threshold is not met, the carrier must treat the facility as out-of-network for nonemergency services and notify the Commissioner.

Notification Requirements.

The Commissioner, in consultation with stakeholders, must develop standard template language for notifying consumers of the circumstances under which they may not be balance billed. A hospital or ambulatory surgical facility must post on its website the carriers with which it contracts and whether each nonemployed provider group providing surgical or ancillary services contracts with the same carriers. When a patient is scheduled for nonemergency health care services, a hospital or ambulatory surgical facility must provide the following notice at least 10 days before the service:

If the facility is in-network, the notice must: advise the patient that he or she may request only in-network providers; disclose the names and network status of providers who will provide surgical or ancillary services; advise the patient of his or her rights under the bill using the standard template language; and provide an estimated range of the cost.
If the facility is out-of-network, the notice must: advise the patient that the facility is out-of-network and that he or she may choose an in-network facility; advise the patient regarding out-of-network financial responsibility; provide an estimated range of the cost of services; and inform the patient that he or she may qualify for a discount.

If the facility's network status changes after providing its notice, it must promptly notify the patient.

A health care provider's website must list the carriers with which the provider contracts. An in-network provider must submit accurate information to a carrier regarding network status in a timely manner, consistent with the contract between the carrier and the provider. When a patient is scheduled for nonemergency health care services at an out-of-network hospital or ambulatory surgical facility, an out-of-network provider must provide a notice at least 10 days before the service: disclosing that the provider is out-of-network; advising the patient that he or she may seek alternatives; advising the patient about out-of-network financial responsibility; and providing an estimated range of the cost of services.

A carrier must update its website and provider directory within 30 days of an addition or termination of a facility or provider, as long as the carrier had notice. A carrier must provide a covered person with: a clear description of the plan's out-of-network benefits; notice of rights under the bill using the standard template language; notification regarding out-of-network financial responsibility; information on how to use the carrier's transparency tools; upon request, information on a provider's network status; and upon request, an estimated range of out-of-pocket costs.

Enforcement and Rulemaking.

The Commissioner may adopt rules (including rules related to the dispute resolution process) and may issue a cease and desist order, levy a fine of up to $1,000 per violation, and take additional action as permitted under the insurance laws. The Commissioner's enforcement authority extends to any person, including a health care provider, hospital, or ambulatory surgical facility.

Staff Summary of Public Testimony (Health Care & Wellness):

(In support—from testimony on HB 1117, which is identical to HB 2114 except for the title, on January 18, 2017) The goal of the bill is to get the patient out of the dispute between the provider and the carrier. A significant number of people experience surprise bills and medical debt. The Office of the Insurance Commissioner received 260 complaints about the issue, but that does not represent the full scope of the problem. It is especially problematic in emergency departments, laboratories, and for outpatient surgery. If either the provider or the carrier is dissatisfied, they have the opportunity to use binding arbitration.

Patients have been surprised about their financial responsibility for services from in-network providers at out-of-network facilities. They are expected to research every single provider and facility. Patients who are in shock from a serious diagnosis are too stressed to do that research. Even if they check the provider and facility's network status, they may receive a bill from another provider, like an anesthesiologist. A patient can't check on a provider's network status when he or she is unconscious. Narrow networks have made it more complicated to inform consumers about provider networks. Patients may not have computer access and may need language access. In a fair, free market economy, a consumer would be informed of the cost before receiving services and be able to make informed economic decisions. That information is missing in the health care industry. Group Health helps covered persons determine their costs up-front.

(Opposed—from testimony on HB 1117, which is identical to HB 2114 except for the title, on January 18, 2017) Very few patients experience balance billing, but the bill would impact the broader market. Providers want to protect patients from balance billing. Providers offer discounts for in-network care and get paid higher out-of-network rates for fewer patients. Patients are best served by in-network providers, but it is difficult to contract with carriers. The incentives to contract are critical. If the bill allow carriers to pay out-of-network providers less, it creates a perverse incentive for carriers to terminate provider contracts. The rates in the bill are arbitrary and lower than market rates. The bill tilts the playing field to insurers. This bill threatens emergency room care and the safety net by significantly reducing payments to doctors. It will lead to more consolidation. The medical community proposed a solution based on the New York model. The solution should be data-driven.

To solve balance billing, narrow networks must be addressed. Hospital-based physicians should be part of network adequacy. Carriers should only call a hospital in-network if it contracts with hospital-based physicians. The hospital's role in providing transparency is unclear, because the hospital does not know all providers' network status. Patients using ambulatory surgical facilities for elective surgeries have time to look at providers' network status.

The bill has technical flaws and grants the Insurance Commissioner broad rulemaking authority.

(Other—from testimony on HB 1117, which is identical to HB 2114 except for the title, on January 18, 2017) The reimbursement policies should incentivize contracting and good networks. The entire system should not be disrupted by treating a minority of providers differently. Tying reimbursement to charges incentivizes increasing reimbursement. In Alaska, the FairHealth standard has driven rates up. The reimbursement rate for emergency care should be the same as for qualified health plans under the Affordable Care Act. The $300 threshold for emergency care will create a disincentive for contracting and drive up costs. Arbitration would not be needed if the bill sets a fair reimbursement rate.

There are some technical issues with the bill, but the concept is supported. High performing networks are compliant with the rules. Participating provider agreements have hold harmless requirements, which offer consumer protection. There should be transparency about out-of-network providers at in-network facilities. Carriers are not set up to monitor compliance.