Balance-billing by facility providers requires a second look

September 1, 2005

In Some Parts of the United States, health plans have observed a growing trend of hospital-based provider groups, such as radiologists, pathologists, anesthesiologists, and emergency room physicians refusing to contract with health benefit plans. When a health plan enrollee seeks services from an in-network hospital in order to obtain lower out-of-pocket costs (for a PPO product) or full benefits (for an HMO product), the enrollee can be hit with a large, unexpected bill from the provider.

In Some Parts of the United States, health plans have observed a growing trend of hospital-based provider groups, such as radiologists, pathologists, anesthesiologists, and emergency room physicians refusing to contract with health benefit plans. When a health plan enrollee seeks services from an in-network hospital in order to obtain lower out-of-pocket costs (for a PPO product) or full benefits (for an HMO product), the enrollee can be hit with a large, unexpected bill from the provider.

While a hospital or other facility may be a network provider under a managed care health plan, physicians and other healthcare providers offering services through such a network facility actually may not be contracted with the network. Under many states' laws, these non-contracted providers may bill an enrollee of the health plan for any balance of charges over the allowed amount paid by the health plan, in addition to any required deductibles, copayments or coinsurance. Often, the enrollee is not aware that the provider is out-of-network until the enrollee is "balance-billed" by the individual provider, thus creating a financial hardship on the enrollee.

In a managed care environment, enrollees are supposed to be rewarded for using in-network services through lower copayments and deductibles and ultimately lower premiums. In HMOs, services from non-network physicians are not covered unless there is no physician available in the network to provide these services or in an emergency situation.

ALLEVIATE THE BURDEN

Because these facility-based providers often demand payment of full-billed charges rather than accepting the usual and customary (U&C) amount offered by the health plans, actual health costs can be dramatically higher for the enrollee. Since these are non-contracted, non-network providers, their billed charges are often the full responsibility of the health plan enrollees.

Facility-based providers frequently have exclusive arrangements with key network hospital facilities so that the enrollee is forced to use the services of these provider groups, since there are no other physicians allowed to practice at those hospitals.

Some insurance regulators have taken the position that facility-based providers are not allowed to balance-bill enrollees. Because of the contract between the hospital and the health plan, and the exclusive arrangement between the hospital and the facility-based provider, these regulators have determined that there is an implied contract between the health plan and the facility-based provider. The regulators have concluded that, as a result of the implied contract, the provider is further bound by the typical "hold harmless" provision and thus may not balance-bill the enrollee.

Notwithstanding this regulatory solution, legislation is needed limiting the ability of the facility-based providers to balance-bill enrollees for charges over the plan's U&C amount. To buttress this proposal, it may also be appropriate to revise provider licensing laws such that a provider's failure to provide required notices to an enrollee or to balance-bill the enrollee for excessive amounts would constitute unprofessional conduct, sanctionable by the applicable licensing board.

This column is written for informational purposes only and should not be construed as legal advice.

Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP, and is located in the firm's Austin, Texas, office.