Surprise medical bills for out-of-network health care cost New Jersey residents nearly $1 billion per year, according to a report released last June by New Jersey Policy Perspective.
An estimated 168,000 people in the state receive out-of-network (OON) bills totaling $420 million per year but the actual cost is much higher because OON charges drive up the cost of the health insurance premiums paid by roughly 5 million New Jerseyans, for an estimated total cost of $956 million.
Here is how easy it is to be hit with OON charges despite your best efforts to avoid them.
You go in for that long overdue colonoscopy. It’s a covered procedure, for which you obtain your insurer’s authorization and you have it done by an in-network doctor at an in-network hospital or other facility.
Nevertheless, a few weeks later, you get a $2,000 bill from the OON anesthesiologist, who showed up when you were lying there all prepped on a stretcher and ready to be sedated — not an ideal moment to inquire about their network status.
Another way it can happen: Your in-network primary care physician orders some necessary tests, which your plan pays for, but the scans wind up being read by a doctor who is not in your network and once again, you are socked with an unanticipated bill.
And of course, it also occurs in emergency situations, where there is no opportunity to select the emergency room, treating physicians, or ambulance service.
Network status matters because health plans negotiate with in-network providers for reduced fee schedules and network contracts typically prohibit them from billing patients for the difference between their full charges and the in-network rate, so called balance billing. OON providers face no such contractual limits on how much they charge or seek to collect.
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Legislators Take a First Step
On June 20, state legislators took a step toward dealing with the OON problem, advancing a measure that is meant to protect patients from that kind of unwelcome surprise.
The legislation, A-1952/S-1285, which won approval from a NJ Assembly committee, would require that patients be informed up front and in writing whether a hospital or provider is in or out of network under their policy.
They could not be charged a higher OON rate unless they expressly agreed to that after being informed how much more it would cost.
In addition, patients could not be billed for OON urgent or emergency care, above what they would have to pay in-network. The same would be true of “inadvertent out-of-network services,” a scenario that could result from going to an in-network facility for covered health care services that turn out not to be available in-network at that facility, such as lab tests.
Disputes over OON charges without receive prior express approval from the patient would go to binding arbitration.
Arbitrators certified by the American Arbitration Association would decide on what sum the health insurer would have to pay the health care provider.
The amount would have to fall within a set range: 90 % to 200% of the applicable payment rate under Medicare.
Basically the same bill was introduced last year and voted out of the same committee in December.
But it faced strong opposition from hospitals and medical providers and never received an Assembly floor vote or a Senate hearing.
It was refiled in January at the start of the current legislative session.
The June 20 committee vote approved the bill with amendments.
Some of the more significant tweaks were added requirements that carriers make a hotline available at least 16-hours per day with information about network status and out-of-pocket costs and that in-network hospitals and other facilities ensure that the medical professionals they contract with to work in the facility are in all the same networks as them.
Perhaps the most significant amendment was importing the Medicare standard for the arbitration awards, replacing earlier language that would have utilized baseball arbitration, in which arbitrators, confronted with a sum submitted by each side, must choose one or the other of the two amounts.
The many groups backing the legislation include unions, social justice organizations, business interests and health carriers, such as New Jersey Citizen Action, New Jersey Policy Perspective, Anti- Poverty Network, New Jersey Business and Industry Association, New Jersey Association of Health Plans, New Jersey Education Association, National Patient Advocacy Foundation, AARP- NJ, CWA Local 1032 and New Jersey Appleseed Public Interest Law Center, which hosts this blog.
Opponents include the New Jersey Hospital Association, individual hospitals and doctor groups, such as the New Jersey College of Physicians and the American College of Surgeons.
Among the first to testify at the June 20 hearing was Citizen Action’s Maura Collingsgru who referred to the “staggering costs” described in the NJ Policy Perspective Report and described the bill as “desperately needed” and a “comprehensive reasonable resolution,”
Those speaking for hospitals and doctors, on the other hand, told the legislators that they still had qualms and wanted further discussion about and revisions to the bill.
A New Jersey Hospital (NJHA) Association spokesman said members wanted to support the bill but had concerns.
For example, while hospitals could require groups they contract with to participate in their networks and prohibit them from balance billing, they can not do the same with regard to independent physicians who treat patients in their facilities. For some subspecialties, it might not even be possible to find a doctor willing to agree to the in-network rates.
The NJHA did not like baseball arbitration and was also against basing arbitration awards on Medicare reimbursement rates, which he said varied throughout the state. Hospitals, which are contractually bound to make up shortfalls to independent doctors at their hospitals who fail to meet their costs, could end up footing the bill, he stated. It might even lead to loss of services, the NJHA warned.
It was also pointed out that Medicare rates are often less than the actual cost of care and using them as the arbitration standard would incentivize health insurers to treat care as OON so they could get away with paying the lower Medicare rate.
The NJ Policy Perspective report compared OON charges received by Aetna with Medicare rates and found dramatic differences. For instance: Medicare paid $9,813 for six days of alcohol abuse treatment while OON charges exceeded $102,000. A two-day hospital stay for kidney stones cost $5,673 versus more than $58,000 in OON charges.
Now that the legislature is back in session after the summer hiatus, consumer advocates and other proponents of A-1952/S-1285 are pushing to have it passed and signed before the end of the year.
Supporters will be gathering at the Statehouse for a press conference on October 13 at which they will call on the legislative leadership to move the bill.
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New Jersey is not the only state taking steps to rein in surprise OON bills.
A comprehensive New York law that took effect in 2015 limits surprise OON medical bills in emergency situations and in non-emergency situations when patients receive treatment at an in-network hospital or facility. For emergency services, patients are held harmless for costs beyond the in-network cost sharing that would otherwise apply. For non-emergency care, patients who receive surprise OON bills can submit a form 
authorizing the provider to bill the insurer directly, and then are held harmless to pay no more than the otherwise applicable in-network cost sharing. In both instances, OON providers are prohibited from balance billing the patient; although providers who dispute the reasonableness of health plan reimbursement may appeal to a state-run arbitration process to determine a binding payment amount. The New York law applies only to state-regulated health plans but patients who are uninsured or covered by self-insured group health plans may also apply to the state-run arbitration process to limit balance billing by providers under certain circumstances.
Florida enacted its own broad law similar to New York’s on April 16.
Many other states have adopted narrower measures such as requiring disclosure (Alabama), barring OON charges for emergency care (Minnesota, Texas), counting OON costs against in-network deductibles (Arizona), or are studying the issue (Nebraska, Tennessee) and a variety of bills are pending around the country.
On the federal level, the ACA requires non-grandfathered health plans to cover OON emergency care services to the same extent as in-network services, even if the plan otherwise provides no out-of-network coverage. The law does not, however, limit balance billing by out-of-network emergency providers.
NJ Appleseed 