Executive Budget Proposes Changes to Out-of-Network Billing

February 10, 2014 | Health Services

Governor Cuomo’s budget contains many proposed changes to the Public Health Law (some of which are discussed here), but another set of significant changes that will affect providers and patients is contained in the Insurance Law. The Transportation, Economic Development, and Environmental Conservation (“TED”) Article VII bill contains proposed legislative changes that would alter the dispute process for out-of-network claims, require insurance carriers to offer a plan that minimizes out-of-network costs, and increase disclosures to patients about out-of-network coverage.

One of the changes receiving industry-wide attention is the proposed change to dispute resolutions arising from emergency treatments or treatments where the patient is not informed of all the specialists, anesthesiologists, and other providers involved, and whether those providers are in or out of network for the patient. The proposed legislation would remove the patient from the dispute by requiring that the insurer make a “reasonable payment” immediately. Following the payment, the legislation would require that the physician or hospital and insurance carrier resolve the dispute, and disputes that cannot be resolved would be sent to arbitration. The arbitration would require both sides to present a proposal to an independent arbitrator, who would then choose one of the proposals to be binding. In theory, this method would bring the two sides closer together when entering arbitration, perhaps avoiding the need to arbitrate the issue at all. The arbitrator would consider (i) fees paid to the non-participating provider in other situations, (ii) fees paid to similar providers in the same geographic area, (iii) the circumstances and complexity of the procedure performed, and (v) the usual and customary cost of the service. 

In addition to a new dispute process, insurers will also be required to offer new services to potential customers. The new legislation would require that any insurance provider that offers out-of-network coverage must make available to a policyholder of such a policy coverage for at least 70% of the usual and customary cost of an out-of-network service, after deductible. As discussed below, the “usual and customary” cost is calculated based on all charges for a designated service within a designated geographic area. This out-of-network coverage would be optional for policyholders so long as the policy already offers coverage for out-of-network services. Some have argued against this piece of the legislation by pointing out most of the policies on the New York State exchange do not include out-of-network benefits. They expressed additional concern that out-of-network costs would be passed on to individuals that do not choose this additional coverage through hidden premium adjustments.  

Also included in the bill are requirements to disclosure to patients the nature of the out-of-network coverage. Insurance companies will now be required to provide beneficiaries with (i) a clear description of the reimbursement methodology, (ii) a description of the amount the insurer will reimburse for out-of-network services, expressed as a percentage of the “usual and customary” cost, and (iii) examples of anticipated out-of-network costs for frequently billed services. On top of these disclosures, insurers must make available (both in print and online) information that allows a prospective patient to determine anticipated out-of-network costs for services within a zip code, based on the difference between what the insurer will reimburse under the patient’s particular policy as compared to the “usual and customary” cost for out-of-network services. Usual and customary costs is defined in the legislation as 80% of all charges for a particular service performed by a provider in the same specialty and geographical area. The “usual and customary” amount will be maintained in a benchmarking database maintained by the Department of Financial Services.

Insurers are not the only ones that will be required to make disclosures to patients under the proposed changes, however. Amendments to the Public Health Law will require that all health care professionals disclose to patients which health care plans the professional participates in, as well as the hospitals with which the professional is affiliated with. The disclosure must first be in writing or on a website, and also must be made verbally when an appointment is scheduled. If the professional is out-of-network for a patient, the professional must (i) inform the patient of the availability of information of the estimated amount the patient will be billed for the service, and (ii) provide the information upon request.

Hospitals, too, will be required to post a schedule of their standard charges, as well as list the health plans the hospital participates in and make patients aware that physician’s services will be billed separately.

The legislation is still under review and insurers, hospitals, and physician’s groups alike are lobbying the legislature regarding these proposed out-of-network changes. The legislation will require transparency of data that historically has not been disclosed. For example, insurers disclosing the usual and customary feed and hospitals disclosing standard charges are unlikely to be viewed favorably by those within the industry. Whether all of the proposed changes discussed in this article survive to the final passage of the bill into law remains to be seen. Updates to this bulletin will follow as the bills progress through the Legislature.

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