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Banning ‘Balance Billing’

medical professional with gloves putting a vial of blood into a centrifuge

You would be hard-pressed to find someone more critical of Obamacare than I am.

But despite the protests of some Florida lawmakers, the practice of “balance billing” has nothing to do with Obamacare, and legislation to ban this financial trap is a consumer protection measure, plain and simple. Republicans ought to be at least as inclined as Democrats to support it.

Balance billing refers to a provider’s ability to charge a patient for the remaining balance after insurance coverage for out-of-network care falls short. It can make for nasty surprise bills, especially because so few consumers understand how it works.

In a study published last fall, the Henry J. Kaiser Family Foundation assessed Americans’ grasp of basic health insurance terms and concepts. One question asked people to calculate the patient’s out-of-pocket cost for an out-of-network lab test with a total bill of $100, when the insurance plan pays 60 percent of allowed charges and the allowed charge is $20. The correct answer is $88; the plan pays $12 (60 percent of $20), and the patient is left with the rest. In the real world, patients can often expect one or more zeroes added on to those figures, but the principle holds. Only 16 percent of those surveyed got the question right.

The question generously assumes that the patient knows several important pieces of information at the outset: that the lab is out-of-network, what the total bill will be and the amount of the insurance’s company’s “allowed charge.” In reality, patients may not know all or any of this prior to receiving treatment. Consider Robert Delfino, of Delray Beach, Florida, whose in-network cardiologist recommended that he undergo an outpatient procedure to determine the cause of his heart condition. Two months later, Delfino discovered the hospital to which his doctor had referred him was not an in-network provider, after it sent him a bill for $15,000.

“I thought my in-network doctor would take me to a network facility,” he told the Miami Herald. “I thought the insurance company would call me if it was out of network.”

Unfortunately for consumers, health care providers and insurers are both quick to say “not it” to making sure patients understand whether care providers are part of their network. Doctors and hospitals claim that they do not have the resources to track the hundreds of insurance plans they deal with, and that insurers should provide more transparency to their customers. Meanwhile insurers argue that providers should know which contracts they have signed. The end result is patients who are charged thousands of dollars for care they often did not know was out-of-network when it was provided.

Balance billing is governed by state law, and some legislatures have stepped in to protect patients from nasty financial side effects of medical care. Florida law currently prohibits balance billing for health maintenance organizations, better known as HMOs, but does not restrict it for customers of preferred provider organizations or exclusive provider organizations. A bill pending in the Florida House seeks to expand the existing statute’s protection.

Currently, about a quarter of states offer some sort of legal restriction on out-of-network balance billing. New York’s law, which was expanded last year, has been recognized by consumer advocates as a model. Patients are generally protected from owing more than their in-network copayment, coinsurance or deductible on out-of-network emergency services or “surprise” bills. The latter category includes situations in which a patient is referred to an out-of-network provider but does not sign a written consent form, or those in which a patient receives care from an out-of-network doctor at an in-network hospital.

The onus should be on health care professionals, not consumers, to know which members of a medical team accept which insurance plans and to clear that among themselves before holding patients responsible for tens of thousands of dollars in billings. While everyone agrees the problem is complex, that does not mean that customers should be held hostage to a system where they have no way to know what they can expect to pay before receiving care - or, worse, one in which they have to worry about who on their team accepts what insurance in the middle of a medical emergency.

An alternative solution, which health care providers would like even less, would be for providers to specifically disclose all fees in advance of a procedure and to obtain informed consent. (New York, and some other states, require the latter, though the consent may only reflect acknowledgement that out-of-network care can result in higher out-of-pocket costs, rather than specific dollar amounts.) But in many places, such requirements will not work without major changes to the way both insurers and health care providers operate. And requiring informed consent would never cover emergencies or situations in which a patient is too incapacitated to give proper consent for whatever reason. Consumers still need legal protection for such instances.

Providers understandably want insurers to pay higher rates and to include more doctors, hospitals, labs and other vendors in their networks. This is a business arrangement that should be settled between the provider and the insurer. It ought not to be the patient’s concern.

Some conservative lawmakers in Florida are opposing the balance billing legislation by comparing it to Obamacare, but this is exactly backwards. Republican principles favor free and open markets; the only way an open market for health care can possibly work is with price transparency. Just as their free-market instincts impel Republicans to oppose the Affordable Care Act, which renders care unaffordable by imposing layer upon layer of mandates and market distortions, those instincts ought to inspire the GOP to line up behind a proposal that enables consumers to protect themselves.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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