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Four Essential Elements of a Comprehensive State Approach to Surprise Medical Billing

Governors and legislators are increasingly concerned about the impact of surprise medical bills on consumers. Now, the National Governors Association is offering strategies to help them limit the costly practice.

A patient in Salem, Virginia, reviews medical bills at home. In a new report, the National Governors Association offers strategies states can use to protect consumers from surprise medical bills. (Don Petersen/Associated Press file)

While consumers are still waiting for relief from surprise medical bills at the federal level, there are a few things state officials can do now to shield individuals from this costly practice, according to a new report by the National Governors Association (NGA)

Eleven states have already enacted laws giving consumers some protection from surprise medical bills since 2017, including six — Colorado, Missouri, Nevada, New Mexico, Texas, and Washington — that enacted major legislation this year. More states should follow suit, and governors can lead the way using a range of approaches outlined in the report from the NGAs Center for Best Practices Health Division. It offers insights gleaned from roundtables and subsequent research on how to implement comprehensive protections for consumers.

Here are four strategies for states to consider:

1. Work with key stakeholders to understand their unique perspectives.

Governors should engage with legislators and individual industry and consumer groups (typically the most engaged) to understand their unique perspectives on the issue of surprise billing, the report suggests.

They should also collect data and projections from stakeholder groups to understand the impact of surprise billing on cost and coverage. This is particularly important as states must rely on accurate data to evaluate reimbursement methodologies. All-payer claims databases (APCDs) are large state-run databases that collect medical claims from all payers and are usually a rich source for health care cost and utilization data. Currently, 20 states have or are implementing an APCD. (Oregon, for example, uses its APCD as the reference for determining the median contracted rate for services. New Hampshire and Washington use their APCDs to determine a commercially reasonable” rate.)

2. Prohibit surprise medical billing by out-of-network providers.

This would apply to providers in 1) out-of-network emergency situations, 2) out-of-network non-emergency situations at in-network facilities and 3) ground ambulances.

States can also limit patient cost-sharing to the amounts they would owe to an in-network provider for out-of-network emergency situations and out-of-network care delivered at an in-network facility in non-emergency situations (and count these contributions toward a consumer’s deductible and out-of-pocket maximum).

3. Establish limits on reimbursement for surprise medical bills.

Many states, including Oregon, New Mexico, Missouri, Nevada, Connecticut, Colorado, and California, have implemented a set benchmark rate or payment formula to limit surprise billing. Most states use some sort of percentage of contracted rates to determine the payment in an out-of-network situation. 

States can also create a binding dispute resolution process to determine a fair rate of payment for out-of-network providers in surprise medical billing scenarios. The two most common forms of dispute resolution are arbitration and mediation. Some states have state officials who serve as arbitrators or mediators; others use an independent third party.

4. Expand application and enforcement of surprise medical billing protections.

States should allow self-insured employers and their employees to opt in to surprise medical billing protections, the report says. While states cannot require self-insured employers to comply with surprise medical billing laws because the Employee Retirement Income Security Act (ERISA) precludes them from regulating these health plans, they can offer employers and their employees an opportunity to opt into the protections. 

Providing enforcement authority for surprise medical billing is key. Insurance companies don’t have the authority to enforce surprise medical billing laws, so states must include provisions in their legislation that allow for these laws to be enforced. For example, New Mexico’s 2019 legislation expanded the enforcement authority of insurance regulators to include jurisdiction over health care providers for purposes of surprise medical billing. Alternatively, insurance regulators can coordinate with other regulatory bodies, such as state medical boards, which are typically responsible for the licensure and oversight of providers.

For more information, read NGA’s full report.