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June 01, 2017

Bills, Bills, Bills: Alternative Dispute Resolution Takes Center Stage in Health Care Billing Disputes

Michael Kilpatrick Morton, Nevada Legislative Counsel Bureau, Carson City, NV

As the controversy over access and affordability to health insurance and healthcare continues to swirl in the nation’s capital,1 state legislatures, insurers, and providers remain tasked with operating under a framework that provides adequate healthcare to consumers while sufficiently compensating providers for such care. Central to the debate over the cost of healthcare is choosing the most efficient and patient-centered way to settle billing disputes among patients, providers, and insurers. One focus of these disputes is balance billing, which occurs when a provider of healthcare bills a patient for the difference between the provider’s charge for services provided to the patient and the reimbursement for such services paid by the patient’s insurance carrier.2 Charges billed for services rendered by out-of-network providers can cause substantial financial strain or ruin -- according to one study, the average out-of-network charges are three times greater than the corresponding Medicare rate for such procedures.3 Often these out-of-network charges occur in situations when emergency services and care are rendered. Since 2015, some states have taken legislative action to curb the practice of balance billing,4 while others are currently considering policies to both help patients avoid out-of-network charges incurred when receiving emergency care while creating protections to ensure fair payment practices for both providers and insurers through the utilization of alternative dispute resolution (ADR). 

However, not all healthcare billing dispute resolution can be established on the state level. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts access to protected health information (PHI) in ADR proceedings. This article will provide: (1) a legislative review of three states that are currently considering or recently enacting new laws relating to ADR in balance billing disputes and (2) an analysis of how HIPAA applies to ADR.

State Legislation in Out-of-Network Billing Disputes

Since 2014, various states, including Connecticut, Florida, New York and Texas have addressed the substantial bills that their residents were receiving from providers of healthcare for emergency services rendered by out-of-network providers or at out-of-network facilities.5 For example, if out-of-network charges are incurred, the New York law only makes the patient responsible for his or her deductible, copayment, or coinsurance that he or she would have been responsible for if such emergency services were provided in-network.6 In Texas, a patient can file for mandatory mediation with the provider of healthcare for out-of-network charges that exceed $500.7

Other states have used these existing laws as templates to further protect patients from astronomical out-of-network costs. The State of Washington is currently considering HB 2114, which requires insurance coverage for emergency services provided by an out-of-network facility, imposes a prohibition on balance billing under certain circumstances, and establishes a dispute resolution process for providers of healthcare and insurance carriers to utilize to settle billing disputes.8 Specifically, the legislation amends existing law to require an insurance carrier to cover emergency services provided by an out-of-network facility, whether or not a reasonable patient would have believed that seeking such services at an in-network facility would have delayed necessary and urgently needed care.9 The bill also expands the definition of “emergency medical condition” to include mental health episodes and conditions caused by emotional distress.10

After such services at an out-of-network facility are provided, HB 2114 also prohibits the out-of-network facility or an out-of-network provider of healthcare at an in-network facility from balance billing the patient for such emergency services or certain nonemergency healthcare services if those services involve surgery or other required ancillary services.11 Therefore, the only option for the provider to receive payment is to make a non-contracted offer to the insurance carrier for payment of those non-covered services. While HB 2114 does set forth certain requirements for how quickly an offer for payment must be made after an insurance carrier receives a claim for out-of-network services, the bulk of the new balance billing policy revolves around the new framework for dispute resolution established in the bill. Under the proposed dispute resolution framework, either an insurance carrier, an out-of-network facility, or an out-of-network provider may file a request for arbitration with the state’s Insurance Commissioner not later than 90 days after receiving the explanation of benefits or payment offer from the other party.12 After making final offers of payment and acceptance, as well as choosing an arbitrator from a list provided by the Commissioner, the arbitrator must consider the following factors in determining the appropriate amount to be paid for the out-of-network services rendered: (1) whether there is a gross disparity between the amount of payment requested and the amount paid for the same services provided at an in-network facility or by an in-network provider; (2) the unique circumstances of the episode of care at issue; and (3) any unique patient characteristics that had an influence on the location or type of services provided.13 The cost of arbitration, exclusive of attorneys’ fees, must be paid by the party whose final offer was rejected by the arbitrator.14 Under no circumstances does HB 2114 require the patient to pay for any costs of the arbitration, nor require the patient to appear as a witness at the arbitration proceedings.15 At the publication deadline for this article, HB 2114 was placed on the final reading calendar in the Washington House of Representatives, but had not yet been scheduled for a final vote.

Washington isn’t the only state considering ADR fixes for balance billing disputes during 2017 legislative sessions. Texas Senator Kelly Hancock introduced SB 507, which proposed to expand Texas’s existing limited mediation balance billing program. Currently, the Texas Department of Insurance uses a mediation process to resolve billing disputes relating to preferred provider organization patients who are rendered emergency care at an in-network hospital by an out-of-network provider of healthcare. SB 507 adds all types of out-of-network providers rendering emergency services to patients at any in-network facility, including independent emergency medical centers. Further, SB 507 would allow a party to request mediation for a balance bill exceeding $500, whether the emergency services were rendered in-network or out-of-network.16 SB 507 was signed into law by Governor Greg Abbott on May 23, 2017. The Texas Department of Insurance will expand the mediation program when the bill goes into effect on September 1, 2017. Similarly, Nevada Assemblywoman Maggie Carlton introduced AB 382, which, if enacted and approved by the Governor, would create Nevada’s first statutory process to address balance billing issues in the state. AB 382 establishes mandatory, binding mediation through the Governor’s Consumer Health Advocate in the Office for Consumer Health Assistance within the Department of Health and Human Services.17 At press time, AB 382 had been passed out of the Assembly and was being considered by the Senate Committee on Health and Human Services.

Privacy Considerations in ADR Proceedings

Since various types of ADR have often become the favored vehicle for the resolution of healthcare billing and contract disputes, healthcare attorneys must be apprised of how much PHI is used and becomes available to neutral arbiters in their deliberations in such disputes. Specifically, since PHI is governed by HIPAA regulations, arbitrators and mediators need to be aware of how such information needs to be securely stored and retained during and after resolution proceedings.

Under HIPAA, a covered entity must comply with certain rules and regulations to keep PHI private and secure. A covered entity is defined as a healthcare provider, various types of health plans, or a health clearinghouse.18 When a covered entity utilizes the services of a business associate to carry out its healthcare business practices, the covered entity must enter into a business associate agreement in order to ensure that the business associate also complies with HIPAA requirements relating to the security of PHI.19 Here, the issue is whether a third-party neutral who is called upon to arbitrate or mediate a billing or contract dispute becomes a business associate of the provider of healthcare or the insurance carrier by way of receiving PHI in the determination of the dispute. While the definitions of “business associate” and “payment” could implicitly include a third-party neutral,20 the lack of case law on point makes it unclear as to the privacy and security requirements that a third-party neutral must abide by relating to PHI. The most prudent way to address the issue is whoever is providing the PHI to the third-party neutral -- whether the provider or the payor -- should enter into a business associate agreement (BAA) with the third-party neutral to ensure compliance of all parties with HIPAA.

If a covered entity does not want to enter into a BAA with every third-party neutral that may be used to arbitrate or mediate a balance billing dispute, the covered entity may seek to obtain an authorization for disclosure of PHI pursuant to HIPAA regulations.21 Valid authorizations must contain, among other requirements: (1) a description of the PHI to be used or disclosed that sufficiently identifies such information; (2) the name or other specific identification of the person or class of persons authorized to make the requested use or disclosure; (3) a description of each purpose of the requested use or disclosure; and (4) either an expiration date or an expiration event at which the authorization will cease to be valid.22 However, since a number of state laws authorizing or mandating ADR in balance billing disputes require separate arbitration or mediation for each episode of care, requiring a covered entity to obtain a disclosure authorization for each instance of ADR could be time consuming and costly; it also leaves open the possibility of not obtaining every authorization necessary for each episode of care. Each covered entity will have to decide whether entering into multiple BAAs or obtaining specific authorizations for PHI disclosure is the more prudent business decision.


Since uncertainty on the federal level as it relates to access to and affordability of healthcare and health insurance does not seem to be ending in the near future, keeping abreast of state legislation on cost controls for out-of-network care and how payment for such care is reached will be paramount for both providers and payors. As states seek to enact more patient protections to ensure that adequate care is rendered in a timely manner without consideration for cost or location, it is imperative that providers and payors have the right agreements in place to be able to continue to render care and offer adequate payment for emergency services. 

  1.  O’Keefe, Ed, et al. “House Republicans claim a major victory with passage of health-care overhaul,” The Washington Post. May 4, 2011, available at
  2.  Bills, Seth and Rogaliner, Wendi, “Lawmakers Weigh in as Battle Over Surprise Billing Continues.” ABA Health eSource, Vol 12, No. 9. May 2016, available at
  3.  America’s Health Insurance Plans Center for Policy and Research, “Charges Billed by Out-of-Network Providers: implications for Affordability, Sept. 2015, available at
  4.  See N.Y. Ins. Law § 3241(c), N.Y. Fin. Servs. Law Art. 6 (New York); Tex. Ins. Code § 1467.051(a) (Texas); Conn. Pub. Act No. 15-146, Sec. 10 (Connecticut); H.B. 221, 2016 Reg. Sess. (Fla. 2016) (Florida).
  5.  See id.
  6.  N.Y. Ins. Law § 3241(c), N.Y. Fin. Servs. Law Art. 6.
  7.  Tex. Ins. Code § 1467.051(a).
  8.  Engrossed Substitute HB 2114 (Reg. Sess. 2017), Washington.
  9.  Id. at § 2.
  10.  Id. at § 1(11).
  11.  Id. at § 4(1)(a-b).
  12.  Id. at § 7(1)(b).
  13.  Id. at § 7(3)(b)(i-iii).
  14.  Id. at § 7(4).
  15.  Id. at § 7(7).
  16.  Enrolled Senate Bill 507, Texas 85th Legislature, 2017.
  17.  AB 382, Nevada 79th Legislature, 2017.
  18.  45 C.F.R. § 160.103.
  19.  45 C.F.R. §§ 164.502(e), 164.504(e), 164.532(d) and (e).
  20.  See 45 C.F.R. § 164.501.
  21.  See 45 C.F.R. § 164.508.

Michael Kilpatrick Morton

Nevada Legislative Counsel Bureau

Michael Kilpatrick Morton serves as Senior Deputy Legislative Counsel for the Nevada Legislature. He specializes in drafting legislation related to healthcare policy, child welfare, and professional licensing issues. Since 2015, Mr. Morton has been the Web & Technology Liaison for the ABA Health Law Section’s Healthcare Litigation & Risk Management Interest Group, and from 2012-2014 served as a liaison to the ABA Commission on Disability Rights. He can be reached at [email protected].