By Thomas LaGreca, Esq. and JoAnne LaGreca, Esq.

Introduction

Discussions surrounding the American healthcare system generally focus on the uninsured or the costs compared with other western countries.  Typically excluded from the discussion is the state of the universe of the insured.  There seems to be an underlying assumption that in the context of patients with healthcare insurance all is right with the world.  Nothing could be farther from the truth. 

It is misguided at best to judge the American health care industry without also judging the American health insurance industry.  By virtue of the evolution of healthcare in America, the two are inextricably intertwined.  When people are asked if they like their healthcare, it is difficult to assess whether the answer applies to the quality of care they receive or the quality of the coverage they receive.  “I am unhappy with my healthcare” very often refers to the quality of the patient’s insurance rather that the proficiency of the surgeon or the care received from a facility.  It is safe to say that as coverage diminishes, so do people’s perceptions of the quality of healthcare they receive.  This is important because fixing the American healthcare system requires not only ensuring the highest quality of care by our medical practitioners and facilities but also repairing the broken health insurance industry along with it.  See https://www.ajmc.com/view/us-health-care-system-ranks-last-overall-among-other-high-income-countries; https://www.risehealth.org/insights-articles/commonwealth-fund-report-us-health-care-system-worst-of-high-income-nations/

Three characteristics of the American system, insofar as it relates to the insured, are particularly troubling. 

First, far too often carriers reimburse the medical provider at very low levels, while the billed charges are exponentially higher than the payments.  The industry evolved to be a negotiation between the medical provider and the carrier as to what “usual, customary, and reasonable rates” means, resulting in medical providers billing too much and carriers paying too little, knowing the negotiation would lead to a more-wquitable middle-ground between the two positions.  The danger in this situation is that, at least in theory if not in practice, the patient, in an out-of-network context, could be held responsible for the difference between the billed charges and the amount paid by the carrier.

Second, the medical provider must often rely on non-medical insurance company personnel for authorization, which oftentimes seems to be withheld randomly, and, even if the services are authorized, payment for the service is not guaranteed by the authorization.  The insurance industry, in turn, feels as if—or at least acts as if–much care is unnecessary.  This is a natural result of the fact that a third party, the carrier, is the payer, not the patient.

The third troubling characteristic is that there has been no readily available, comprehensive legal mechanism for medical dispute resolution in an industry that is, as a result of the above two characteristics, fraught with disputes.  The medical industry and the health insurance industry are constantly at odds regarding whether particular care is medically necessary and/or what the appropriate reimbursement should be for any given medical service.

The result for the medical provider is a Hobson’s choice between going in-network (INN), and thereby agreeing to unreasonably low rates, or be out-of-network (OON) and face greater uncertainties surrounding payment as well as frustration in the form of carrier unresponsiveness, bureaucratic inertia, purposeful obfuscation, and outright malfeasance.  This is grossly unfair to the medical community and undermines the goal of quality patient care.  Moreover, the patient must make a similar choice between INN care, which could very well not be the preferred medical choice for a patient, or OON care and risk the financial burden that decision might impose.

There has been no overarching remedy in this arena . . . until now.  The No Surprises Act (NSA) and the Federal Independent Dispute Resolution (IDR) process instituted by the NSA provide the perfect platform for remedying all three of these shortcomings.  Fixing these problems, which are largely administrative and financial, and not medical in nature, would go a very long way toward repairing the American healthcare industry overall.

The NSA and the IDR Currently

The NSA is a very welcome addition to the American medical landscape.  The NSA, among other things, establishes an arbitration process for reimbursement of services in two categories of claims:  emergency OON medical treatment and “inadvertent” OON medical treatment at INN facilities, essentially by ancillary service providers, such as anesthesiologists and intraoperative neuromonitoring providers.  The law requires that the patient be treated as if the encounter was INN because the patient did not make a conscious, educated decision to be treated on an OON basis.  So, if a patient is injured while cleaning gutters in the backyard, and is taken to the hospital where the patient is treated by an OON spine surgeon, the carrier pays the surgeon at a median INN rate (the so called “Qualified Payment Amount” or QPA), so as to establish the patient’s INN cost-share, and the surgeon can arbitrate for more money, with the patient left out of the dispute.  Similarly, in an elective surgery context, a patient undergoing a knee replacement, for example, at an INN facility, is “surprised” when receiving a balance bill from an OON anesthesiologist.  In this case, the patient likewise is to be treated as if it were an INN encounter, with the anesthesiologist being able to pursue additional reimbursement through the IDR. The process is limited to underpaid codes and claims, not denials.   See 26 U.S. Code Section 9816.  

The benefits of this process are numerous and substantial:

Where the NSA falls short is in its limited application.  As mentioned previously, the law applies only to emergency OON treatment, and “inadvertent” OON treatment at INN facilities, and the IDR process only entertains underpayments of medical claims, and not denials of claims.  The process, in addition, is not inexpensive with its initial non-refundable filing fee, payable to CMS, and arbitrator fees, which both parties have to post with the payment being refunded to the prevailing party.  These fees often exceed even the charges of some specialties like radiology and emergency evaluations.  As discussed below, what the NSA has done for surprise bill claims, it can also do, with certain modifications for all medical disputes between carriers and medical providers, both OON and INN.

The IDR Process Needs to be Available for Denials

Medical claim denials represent one of the thorniest challenges facing the industry.  https://www.commonwealthfund.org/publications/issue-briefs/2024/aug/unforeseen-health-care-bills-coverage-denials-by-insurers,

The recent horrific and cold-blooded murder of the CEO of United Healthcare has brought–and should continue to bring–attention to the behavior of the health insurance industry when it comes to authorizing treatment and paying for treatment.  It is sad, but nevertheless true, that it took such a callous event to finally bring attention to the sorry state of our health insurance world.  For the most part, carriers have carte blanche when it comes to denying authorization for treatment or denying claims even after authorization was granted.  The medical community has little or no practical recourse.

If denials remain outside of the IDR process, carriers are afforded a convenient escape route from an arbitration forum they might regard as unfavorable.  The first two years of the NSA were characterized by delay and ineffectiveness for a whole host of reasons—such as understaffing of IDR entities (IDREs) and vacatur by the courts of rules promulgated by federal regulators.  Now, however, in 2024, the process is functioning quite well, and the carrier community is being called upon to pay arbitration awards to a significantly greater degree than they had been in 2022 and 2023.  It would not be surprising that, as a result, the industry sees an increase in denials of medical claims eligible for the IDR that would otherwise be paid, albeit underpaid.  Denials would be a very convenient mechanism to allow the insurance industry to moderate the ill effects of losing arbitrations.  To suggest carriers would not respond in such a way is simply naïve.  In fact, denials are already on the rise.  https://www.healthcaredive.com/news/provider-claims-denials-increase-2024-experian-health-study/727999/.

At a minimum, the unavailability of the IDR process to address denials is a glaring deficiency in the NSA and can be remedied with a simple amendment to the statute.

The IDR Should Be Available for All OON Claims

For primary OON surgical claims and for OON ER facility claims, the NSA requires that certain disclosures, known as good faith estimates, be made.  This requirement ensures that a patient who is treated OON makes an informed, educated decision to do so.  Of course, a noble and desirable objective.  The problem arises in the mechanics of performing these estimates. 

The medical provider is charged with explaining the financial ramifications to the patient of going OON, but the OON medical provider has no idea what the carrier will pay and therefore what the real burden will be on the patient.  OON reimbursement provisions of health plans are notoriously vague and confusing.  Indeed, it is safe to say that the provisions are intentionally opaque, with multiple definitions, cross-references, and terms like “Allowed Amount,” “Maximum Reimbursable Charge,” and “Eligible Expense.”  Often plans will refer to a carrier’s internal “proprietary” data base for determining the payable amount, rendering the process completely hidden from the medical provider.

Moreover, the appeal process, for the most part, involves sending an appeal for more money to the very entity that underpaid the claim in the first place.  The analogy here is to being embroiled in an ugly divorce and the Family Court Judge is your abusive spouse.  That analogy is not a stretch.

Medical providers are often met also with carriers sending payments to the patient rather than the medical provider.  Carriers tend to rationalize this by arguing that since the provider is OON, the carrier has privity only with the patient.  But the carrier does this even when they are aware the patient has executed an assignment of benefits, transferring to the medical provider the patient’s rights under the insurance contract.  This type of behavior has all the earmarks of intentionally undermining the financial stability of the OON community.  More and more plans also contain anti-assignment clauses whereby carriers refuse to honor assignments of insurance benefits notwithstanding that the medical community depends on the enforceability of these assignments for its financial stability.  Courts have routinely enforced these provisions. See, e.g., American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, 890 F.3d 445 (3d Cir. 2018)

So, how is a medical provider supposed to inform an OON patient of the financial implications of being treated OON without knowing what the carrier will pay the OON provider?  Even with the health plan in hand, this is a genuine challenge.

The IDR process presents a convenient and effective forum for any OON reimbursement dispute and should be expanded to include even primary OON claims, and not just for surgeries.  All primary care providers should be able to arbitrate their claims in the IDR process.  The provisions of the NSA should be modified to enable ongoing care providers such as chiropractors and physical therapists, mental health and home nursing services to arbitrate their claims in ways that make economic sense, perhaps a few weeks or months after the patient is done treating.  Arbitration arenas at the state level, such as those related to the New York and New Jersey No Fault laws, allow for arbitration of medical disputes by these ongoing care specialists.  

As it stands, these ongoing care providers now have no mechanism for recovery of OON commercial insurance claims except to sue in federal or state court under state regulations or federal ERISA laws.

The IDR Batching Rules Should Be Loosened for Specialties with Smaller Medical Claims

The provisions in the NSA allowing for batching should be modified not only to make it possible for ongoing caregivers, such as those described above, but also for medical specialties with relatively small claims.  The NSA as it exists today makes it uneconomical for certain vital medical specialties to arbitrate.  Emergency Room physicians, radiologists, and anesthesiologists have claims that are relatively small and so cannot realistically be arbitrated on a single code or single claim basis.  Though the NSA contains “batching” provisions, whereby more than one patient claim can be batched with others, the requirements are overly stringent.  Claims can be batched if they 1) involve the same medical provider, 2) the same payer, 3) the same or a similar service, and 4) occur over the same 30-day treatment period.  The first 3 criteria are completely understandable and necessary to simplify the arbitration.  The fourth, however, is completely unnecessary and serves to render batching to any significant degree impossible.  Certainly a 90-day or 120-day period would be both fair to the payer involved and the medical provider who is likely to have a more significant number of claims that can be batched over the longer period.

As it stands, the claims are simply too small to make arbitration economical.  The $115 filing cost and the arbitrator fee, which can range from a few hundred dollars to nearly $1,000, renders claims worth a few hundred dollars impossible to arbitrate.  Who will risk $800, for example, to recover $400.  The fact that the arbitrator fee is refundable if the medical provider prevails provides little solace, because winning is not a foregone conclusion, and there have been and continue to be delays in the process, so that significant sums are required just to enforce a medical provider’s rights.

The IDR Should Be Available for INN Disputes as Well

It is natural to assume that INN disputes are rare and minor.  After all, the parties have an agreement they signed after negotiating in good faith from equal bargaining positions.  But the reality is that the INN world is not so simple.  Shockingly, approximately one in five INN claims are denied by the carrier. Seehttps://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/; https://www.kff.org/affordable-care-act/issue-brief/consumer-survey-highlights-problems-with-denied-health-insurance-claims/.

Moreover, it is only the very large practitioner groups or facilities that are in the position to negotiate objectively reasonable rates.  Much of the INN space is filled with relatively young practitioners, who learned no marketing or business skills in medical school, and so feel tremendous pressure to be INN with carriers to obtain access to patients.  These practitioners and facilities usually must accept low rates in the hope of making up the revenue with volume. 

In fact, when you look up the history of health insurer network agreements, the whole point was to drive down reimbursements to the medical industry by creating an entire market of low-paid medical care against which they could drive down their own costs and thereby increase their profits. See https://agentsync.io/blog/loa/the-history-of-health-insurance-past-present-and-future.

Certain medical claim arbitration forums at the state level allow for INN disputes to be resolved in the same forum as OON disputes. Administrative Law Judges in the New Jersy Division of Workers’ Compensation, for example, entertain INN as well as OON disputes between Workers’ Compensation insurance carriers and medical providers who treat injured workers.  There is no valid reason Federal IDREs cannot do so in the context of commercial insurance reimbursement.

The IDR Process Will Reduce Healthcare Costs

Another noble and effective aspect of the IDR process is the fact that it calls for baseball-style arbitration, which requires the arbitrator to choose one side or the other with no compromising.  This serves to draw the parties’ positions, over time, closer together.  The result is that the wide variance between the carriers’ positions and the medical providers’ positions will be smaller and smaller rather than more and more divergent.  This can serve the purpose of reducing healthcare costs.  If the medical provider demands too much, they will receive nothing additional.  If the carriers pay or offer too little, they will be required to pay the full amount demanded by the medical provider.  This fosters constant adjustments to the demand and payment amounts, always serving to draw the parties closer, eventually doing much to reduce the number of arbitrations.

Rather than the random reimbursement process that exists today, largely controlled by the for-profit health insurance industry, the costs of healthcare will be in the hands of a neutral, objective third-party decision-making body, the IDREs, the entities charged with conducting the arbitrations under the NSA. These entities in turn answer to the federal government.  The result is that even though the healthcare and health insurance markets will remain free, an entity under the auspices of the federal government will be the overseer, not the for-profit health insurance industry.

Conclusion

With the above-described expansions of the NSA, the American medical industry would now be characterized by the following:

These desperately needed improvements to the American medical industry could be effectuated quite readily with an amendment to the NSA, which, by all appearances, would be welcomed by both sides of the political spectrum.  Only the health insurance industry will likely be unhappy with this expansion because it will mean the insurance industry will have less power over healthcare than they currently do, which, for all other participants, will be a blessing indeed.