These days, in order to keep costs down the vast majority of insurance plans use the model that limits the hospitals or physicians from whom patients can get medical services. The “covered services” are determined by the insurer. The plans involve contracts between the insurer and the patient, and the insurer and the “health care providers.” The parties agree upon and know in advance who must pay for medical care—with the amount to be determined by the insurer.
The insurer develops its “provider network” by negotiating discounted prices with hospitals, laboratories, radiology facilities, and physicians. The value to the service providers and physicians is that in exchange for reduced fees, they might have an increased volume of patients.
On the patient’s end, the incentive for using the network personnel is the “discounted” price. After receiving in-network medical treatment, the patient expects to pay out of pocket any co-payment or co-insurance fee, and any deductible that the plan requires. If the patient uses out-of-network services, the insurer generally imposes higher cost sharing. Also, the out-of-network provider can bill the patient the difference between the customary or “market” rate and the in-network contracted rate for the same service or procedure (“balance billing”).
One downside to the networks is that patients may not have access to the care they need because some hospitals lack sufficient in-network hospital-based specialists. Because hospitals fill the gaps with out-of-network physicians, a patient could unknowingly receive care from an out-of-network physician or service at an in-network facility.
No one—particularly your physician—wants to see patients suffer financially. California’s newly-minted solution to “surprise medical bills” is Assembly Bill 72. Under this law, if a plan’s patient obtains medical care at an in-network facility but receives treatment or services from a non-contracted out-of-network provider, the patient would only pay for such services as if they were in-network. (This is already the case for some emergency services.)
Problem solved—no surprise bill.
It’s also no surprise that yet again insurers get the brass ring. Insurers can pay the non-contracted out-of-network physician the same amount they pay the physician on contract with the insurer. And if the doctors don’t like the payment, they can go to arbitration at their expense to seek their usual fee. It is a remedy in name only as the legal costs would outweigh any benefit.
The law allows insurers to extend their corporate reach into the offices of physicians with whom they have absolutely no contractual arrangement. The out-of-network physicians have chosen not to have a contract with the insurer. They have chosen to have more flexibility in their practices. They have chosen not be hindered by the insurers’ rigid rules. They can bill patients on sliding scales or at no charge at all without running afoul of a third party’s rules. The physicians, not the insurers, decide which treatments and services are necessary, and choose specific medications and brands of medical devices for the patient. Additionally, many solo and small-practice physicians stay out of network because the extremely low in-network fees they are allowed to charge wouldn’t cover their costs of doing business.
It also follows that the insurers have no reason to enter into fair negotiations with physicians to fill the gaping holes in their network services. Why should they? By law insurers can pay the same fees to everyone—even those with whom they have no contractual relationship. Quite reasonably, physicians will avoid joining the networks.
Worse yet, knowing they will receive in-network fees without benefit of advance negotiation, physicians will remove themselves from various hospital on-call panels. These panels that provide emergency and safety-net care for uninsured and under-insured Medi-Cal patients will be unable to deliver adequate specialty services.
Assembly Bill 72 is a pro-insurance wolf in patient-friendly clothing. AB 72 authorizes insurers and managed care plans to impose price controls on its competitors: out-of-network physicians. AB 72 allows health plans to systematically underpay California’s safety-net providers while creating shortages of care for patients.