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An Arbitration Solution to Surprise Medical Billings

Mark A Kantor

An Arbitration Solution to Surprise Medical Billings
skynesher via Getty Images

A form of binding arbitration is slated to play a role in addressing the problem of “surprise medical billings” in U.S. medical services. A bipartisan group of Congressional legislators proposed a compromise solution that passed as part of a larger legislative package to fund the U.S. government as the “lame duck” session of Congress ended. President Trump signed the bill, and it is now law.

A debate has existed in the U.S. medical field for some time about “surprise medical billing” arising out of the use of “out-of-network” medical providers/facilities to deliver medical services to patients. The fees charged for these “out-of-network” services often exceed the rates covered by the patient’s medical insurance.

In the United States, most individuals obtain their medical services from a “network” organized by a medical provider (mostly, doctors’ groups) whose charges for services are covered by the patient’s medical insurance. Networks have negotiated “rates” for those services with the insurer. Sometimes, though, the patient receives services from an “out-of-network” provider or facility, such as for emergency care or ancillary medical services. Out-of-network providers and facilities are not bound by the rate schedules agreed between the medical network and the insurance company covering the patient. Consequently, out-of-network charges may greatly exceed network charges and be a “surprise” to the patient unless the patient has given informed consent for the use of out-of-network providers/facilities. The problem is particularly acute for emergency care, where the patient may not be able to make a choice regarding providers or facilities; ambulances are a good example.

Congress has been considering solutions to this “surprise billing” issue for some time. Early on in the debate, it became clear that billing amounts in excess of approved “network” charges should not be absorbed by the patient, but rather divided between the “out-of-network” medical services provider/facility and the insurer covering the patient. If the provider/facility and the insurer disagree about the appropriate amount for the “out-of-network” payment, however, there have been differences of opinion as to how that disagreement should be resolved. A compromise solution surfaced in Congress this past session involving both a binding quasi-arbitration process and comparisons with “in-network” payment rates. 

The negotiators decided on an arbitration process between insurers and providers, which resembles the process that doctors’ groups wanted. But the arbiters would be guided by the median in-network rates for the services covered, which resembles the price-benchmarking approach that consumer advocates [and insurers] favored. 

That Independent Dispute Resolution (IDR) process is described in the summary of Section 103 from the House of Representatives Ways and Means Committee Section-by-Section analysis for the proposed legislation, the “No Surprises Act.”

The full text of the legislation, which is part of the Appropriations Bill 2021, No Surprises Act describes the “entities” that may be certified to serve as an IDR entity—essentially they are entities certified by the secretary of the U.S. Department of Health and Human Services to act as the arbitrator that have sufficient medical, legal and other expertise to make the necessary billing rate decisions and do not have conflicts of interest. Notably, the legislation contemplates an entity acting as the arbitrator, not an individual, but one may presume the entity will assign individual employees or contractors to perform the requisite tasks.