When a State Concern Becomes the Law of the Land

From time to time in political and policy discussions, the phrase comes up, "As goes California, so goes the nation.” We can now say that with what is called “surprise medical billing.”

Back in 2016, California passed AB 72 to forbid balance billing to patients for out-of-network care at in-network facilities. When AB 72 took effect on July 1, 2017, the new law imposed additional balance-billing prohibitions on “non-contracted” physicians beyond the longstanding balance-billing prohibition for emergency services. Substantial opposition to the bill followed from both national and state specialty societies and associations, including the Association of American Physicians and Surgeons, Inc. (AAPS), which had strongly encouraged then-Governor Jerry Brown to veto the bill. AAPS argued that AB 72 was flawed because of its threat to healthcare access, and in a letter pointed out that it “would essentially allow private insurance companies to fix the reimbursement rates for all physicians, including physicians who are not in-network or under contract with the insurance companies.”

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As the topic gained traction, in 2018 members of Congress began to introduce bills addressing the issue and framing the discussion around the need to protect patients from industry practices. U.S. Senator (and physician) Bill Cassidy (R-LA), introduced language in the Senate Health Committee and U.S. Representative (and emergency room physician) Raul Ruiz (D-CA), crafted an approach in the House. At a moment when there had been major political fallout from failing to repeal the Affordable Care Act, passing legislation to protect patients from surprise billing seemed like an easier path to a legislative win for both Republicans and Democrats. Surprise billing was one of the few areas in healthcare where something could actually pass.

But crafting bill language that would not create a greater advantage for one stakeholder over the others, in this case insurers, hospitals, and providers, would prove trickier than expected.

While insurers preferred and lobbied Congress to set reimbursement rates via a benchmark payment mechanism — something the Senate Health Committee bill by Senator Cassidy proposed — hospitals, providers, and a multitude of physician-focused societies and associations (including CAP) advocated and lobbied for an independent dispute mediation process to resolve differences in payment rates. The mediation approach was included in Representative Ruiz’s bill, titled "Protecting People from Surprise Medical Bills Act of 2019." Both proposals went through multiple iterations, all ending in gridlock until February of 2020, when two House committees released new bipartisan proposals proclaiming both parties wanted to get something done. The largest hurdle to overcome on both sides of the aisle was how to best resolve payment disputes between insurers and providers.

Nothing much on the issue was heard again until a few weeks ago when on December 21, 2020, Congress voted on the budget omnibus bill to keep the federal government open and provide additional COVID-19 financial relief. But among the bill’s more than 6,000 pages, language on surprise medical billing had also been included.

Renamed the “No Surprises Act,” the legislation came about after leaders of several House and Senate committees earlier in December rolled out a surprise billing compromise that presented friendlier terms to providers.

The deal, and now the law, fell in favor of providers who wanted an arbitration resolution for out-of-network charges and a loss for payers who endorsed
a benchmark rate for such charges.

The law now prohibits certain out-of-network providers from balance billing patients unless the patient is notified of their network status. The patient must also receive an estimate of any charges 72 hours prior to getting the out-of-network care.

Out-of-network charges will be based on a negotiation between payers and providers, and claims may be batched together to ease administrative burdens. Each party must submit an offer to an independent arbitrator, who will choose one of the amounts. Chief among the concessions is a prohibition on the arbitrator from factoring in Medicare and Medicaid rates when deciding on an out-of-network charge — a change asked for by the American Hospital Association.

Up to 10 other states have now adopted laws to ban balance billing. In early 2020, Colorado, Texas, New Mexico, and Washington began enforcing balance billing laws. Some states also have a limited approach towards balance billing, including Arizona, Delaware, Indiana, Iowa, Maine, Massachusetts, Minnesota, Mississippi, Missouri, North Carolina, Pennsylvania, Rhode Island, and Vermont. With a new federal law, states with current surprise billing laws may find their laws strengthened or in conflict with the new federal law, as in California where AB 72 will fall in some conflict with new federal law.

For states with no standing surprise billing law, something that was created by states laws, now through federal law, will be enforceable in their states. 

Gabriela Villanueva is CAP’s Public Affairs Analyst. Questions or comments related to this article should be directed to gvillanueva@CAPphysicians.com.