'Balance billing' can leave patients stuck with unexpected debts

McClatchy Newspapers (MCT) - Phil Heidelberger did what savvy patients are supposed to do.

When he needed a cardiac procedure in 2007, the semi-retired Fort Worth salesman confirmed ahead of time that his doctor and the hospital belonged to his health insurer's network.

That way, he'd be sure to avoid the extra expense that comes with treatment at outside facilities.

Here's what Heidelberger didn't know until it was too late: The anesthesiologist who assisted on his case didn't have a contract with the health plan.

It's a distinction that could cost him a whopping $1,005.

What Heidelberger encountered was an all-too-common practice known as "balance billing," which has drawn complaints for years from hospital patients, lawmakers and regulators nationwide.

It happens when anesthesiologists, pathologists, radiologists and emergency-room physicians at a hospital on a health plan's network aren't on the network.

Those out-of-network doctors, who don't have an agreement with the insurer for discounted fees, can demand full price.

Then, insurers can determine what portion of the bill they're willing to pay. And the physicians can collect the remainder of the tab from patients.

Those bills, which can be far more expensive than patients would have paid to in-network specialists, are the target of scrutiny in various quarters. For example:

_ New York officials in January reached a $50 million settlement with UnitedHealth Group, after allegations that a company subsidiary manipulated reimbursement rates for out-of-network healthcare providers.

The deal, which followed an industrywide investigation, could have ramifications across the country.

_ Several medical societies joined forces this month to sue health insurers Aetna and Cigna over their out-of-network rates. Those two lawsuits raise issues similar to those in the New York case, and both insurers said they intend to defend themselves vigorously.

The California Supreme Court ruled last month that doctors there are prohibited from billing patients for emergency services that their HMOs fail to pay, effectively creating a ban on balance billing for ER care.

In Texas, Blue Cross and Blue Shield of Texas reached a $3.9 million deal last summer with the Department of Insurance, which had accused the company of setting "allowed" rates for out-of-network facilities that were inadequately low.

Those rates are important because the lower the allowed rate, the higher the patient's share of a medical bill will be.

Texas lawmakers are widely expected to address balance billing during this legislative session.

That would follow steps they took two years ago, including a law aimed at alerting patients to the practice.

That law requires that hospitals and insurers inform patients beforehand if they may be treated by out-of-network specialists. But even with those warnings, patients often find themselves stuck, because hospitals may not have any in-network doctors available.

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The Texas Legislature also created a committee to look at the issue, which released a report in January noting big disparities in the amounts that various health plans pay to out-of-network physicians.

This time around, the Texas Medical Association is lobbying for rules that would force health plans to reveal details about how they set their out-of-network rates.

The doctors also want to prohibit insurers from selling a health plan if regulators conclude that its network is too narrow.

As Heidelberger remembers it, no one discussed his insurer's network in 2007, when he underwent his medical procedure.

An anesthesiologist at the hospital spent a few minutes giving him a local anesthetic, he said.

Then, his physician tinkered successfully with a device that previously had been implanted in his heart.

Months later, the anesthesiologist's bill arrived for $1,005.

That's when Heidelberger discovered that the doctor didn't have a contract with his PPO.

The anesthesiologist had set a fee of $2,020 for his services, and the insurer had paid only the amount it deemed fair for an out-of-network doctor _ $1,015. So, the doctor turned to Heidelberger in October for the remainder of the bill.

Heidelberger has refused to pay.

He said he believes that the bill is too high and took too long to arrive.

And he contends that he should have been warned that the anesthesiologist was a costly out-of-network provider.

"My strong belief is this: If ... you take your car to a garage, because the engine is acting peculiarly, the garage calls you and says: 'The engine's wrong. This is wrong. It'll cost you thus-and-such to repair it,'" Heidelberger said. "I think I should've been made aware of that and had the option to choose another anesthesiologist."

Predictably, health insurers and doctors have staked out opposing positions on balance billing, with each side pointing to the other as the culprit behind exorbitant costs.

Jared Wolfe, who is director of the Texas Association of Health Plans, said insurers want a ban on out-of-network doctors charging patients their full fees, except in cases where patients know ahead of time that the physician is out-of-network, has an alternative and selects the outside doctor by choice.

"You did everything in your power to do the right thing, and now you're getting stuck with a bill," Wolfe said. "That's the situation we oppose."

Dr. William Hinchey, a San Antonio pathologist and previous president of Texas' medical association, said a prohibition on balance billing would force doctors to accept an insurer's rate, no matter how low, even though the physician never agreed to the health plan's discounted fee.

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Most hospital-based doctors are willing to join insurers' networks, said Hinchey, who served on the advisory committee that studied balance billing.

"Being able to be out-of-network is sometimes a (physician) group's only position to take to get a plan to negotiate," he said. "There's a lot of reasons groups don't go in-network. They're low-balled."

Hinchey points to the New York attorney general's settlement with UnitedHealth and a related deal with Aetna.

Those cases centered on UnitedHealth subsidiary Ingenix, which operates a database of billing information that many insurers use in setting their "usual and customary" rates for out-of-network doctors.

Attorney General Andrew Cuomo alleged that the company's ownership created a conflict of interest and that it had intentionally skewed rates downward, effectively saddling consumers with too-high costs for their portion of medical bills.

In the settlement, UnitedHealth agreed to stop using the Ingenix information and to pay $50 million toward a new, independent database. Aetna subsequently agreed to pay $20 million toward the new database as well.

Texas insurance regulators had similar complaints about Blue Cross, alleging that the company set unreasonably low rates for uncontracted facilities.

Blue Cross admitted no wrongdoing but agreed in June to use a different payment method, pay a $250,000 fine and pay $3.9 million in restitution to affected members.

Hinchey said it's too difficult for patients to find out ahead of time what their medical bills will cost.

And he complained that insurers' out-of-network rates vary tremendously, even though they're supposed to be based on the going rate in a community.

One example: The advisory committee's review of five Texas health plans' payments found that one paid 95 percent of out-of-network radiologists' total bills, while another plan paid 39 percent of the full amount.

"We want more transparency," Hinchey said. "Let people know how you calculate your out-of-network benefits."

Wolfe, who also served on the advisory committee, said the problem stems in part from the perplexing gaps between some doctors' sticker prices and what they typically get paid.

"That charge data is completely divorced from reality," he said.
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HOW BALANCE BILLING WORKS:

Say Pete goes to the hospital for a minor abdominal procedure. He makes sure ahead of time that his surgeon and the hospital are in his health plan's network. That's smart because his insurer pays 80 percent of the bill from in-network healthcare providers, but only 60 percent of out-of-network physicians' bills.

Unfortunately, no one tells Pete that the anesthesiologist isn't in the insurer's network. Even if he'd known in advance, there probably would have been no other in-network anesthesiologist at the hospital to treat him anyway.

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Once he's home and feeling better, Pete gets a bill for $1,000 from the anesthesiologist. He would have owed no more than $200 _ 20 percent of the tab _ if the doctor had been in his plan's network. And because insurers typically negotiate discounts with physicians, Pete's 20 percent share of the bottom-line price likely would have been significantly less than $200.

However, because it turns out that the anesthesiologist was out-of-network, Pete now figures he'll be on the hook for 40 percent of the bill, or $400.

That's a bummer, right? It gets worse.

Pete's health plan has no intention of paying 60 percent of the full $1,000 bill. Rather, it pays 60 percent of the "usual and customary charges" in Pete's area. The insurer picks a fee that its number-crunchers believe is the going rate for local anesthesiologists. Maybe $650.

Based on that estimate, the health plan pays $390. And Pete gets an unexpected bill for the balance on his account. Instead of the less-than-$200 he'd anticipated, his final tab is $610.

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© 2009, Fort Worth Star-Telegram.