Volume 6 Number 21 May 22, 2009

Florida Consumer Advocate urges governor to veto managed care legislation

Florida’s Insurance Consumer Advocate, Sean Shaw, sent a letter to Governor Charlie Crist today urging him to veto SB 1122, managed care legislation.

“Allowing SB 1122 to become law would be a backward step from attempts to corral the spiraling cost of health care and more specifically, the direct cost to consumers,” Shaw said. “Florida would be heading in the wrong direction and at the wrong time.”

A copy of ICA Shaw’s letter is attached below:

Dear Governor Crist,

I am writing to urge you to veto SB 1122. Supporters of SB 1122 claim that all the bill does is change who the insurance company sends the check to for payment of covered medical services rendered by an out-of-network medical provider. Instead of sending a check to the insured patient, the check will be sent directly to the provider of services.

If it were this simple, no one would be opposed. Yet insurers and employers who provide group health insurance to their employees believe this bill will increase health care costs and health insurance premiums. I will leave it to insurers to explain why they think it will increase their costs and therefore premiums for employers and employees. The issue that concerns me the most is “balance billing.”

First of all though, it needs to be pointed out that the alleged justification for this bill is that many consumers do not pay their medical bills even when they have insurance. In other words, the insurance company pays money to the policyholder in order for the policyholder to pay a medical bill and the policyholder just keeps the money. Except for a single provider of drug and alcohol rehabilitation services, there was no evidence or testimony that this is in fact true. Supporters of the bill failed to show that it is justified.

This bill applies to health insurance plans that utilize a "preferred provider organization" (PPO) to provide medical benefits to their policyholders. A PPO consists of physicians, hospitals and other health care providers that are under contract with an insurer. Under the terms of the contract, the providers agree to accept reduced rates of payment from the insurer. The providers also agree that they cannot bill patients in the plan for any additional amount above what they are paid by the insurer.

The question of balance billing arises when patients receive treatment from providers who under contract with their PPP, usually through no fault of their own such as in emergency situations. Under current law and under this bill, a health care provider who is not in the insurer’s PPO can receive payment directly or indirectly from the insurer and then bill the patient more on top of that payment. This is the practice referred to as “balance billing.”

Instead of encouraging this practice, which this bill does, the Legislature should prohibit this practice altogether. This not a new concept. Under Florida law, if a health maintenance organization is liable for services rendered to a subscriber by a provider, regardless of whether a contract exists between the organization and the provider, the subscriber is not liable for the payment of any fees to the provider (Section 641.3154, Florida Statutes.) Providers are prohibited from collecting or attempting to collect any fees from the subscriber. In other words, whether under contract or not, a provider who provides services that are covered by an HMO may not balance bill the patient.

Federal law prohibits balance billing by providers of services covered by Medicare and Medicaid.

As an example of the unfairness of balance billing, a business owner, who purchased a health care plan for his 250 employees, contacted the Office of the Insurance Consumer Advocate for assistance on a claim. The man’s son had a medical emergency. The child was air lifted by air ambulance to the PPO's contract facility where emergency surgery was performed.

The PPO did not have a contract provider for land or air ambulance services although such services were covered by the policy. The ambulance service submitted a bill for $12,000 to the insurer. The insurer determined that $4000 was the usual and customary fee and paid this amount. The ambulance service billed the balance of their fee, $8,000, directly to the policyholder.

The PPO did not have contract for anesthesia services needed for the surgery, even though the services were delivered in a PPO facility. The insurer paid $13,387.32 for anesthesia performed by a non-contract anesthesiologist. The physician billed an additional $5,170 in charges to the policyholder.

There was nothing that we could do for this consumer. The consumer was on the hook for over $13,000.

The scope of the network of preferred providers in a PPO is not subject to review or regulation – i.e., there is no requirement of law or regulation that a PPO network must include every provider specialty or contract service that could reasonably be expected to be required in order to deliver the benefits of a "major medical" health insurance contract. As a result, consumers who receive services from out of network providers usually haven’t done so by choice, contrary to statements by supporters of the bill.

A common problem for PPO’s across the country is the refusal of radiologists, anesthesiologists, pathologists and emergency service providers to participate in a PPO even when working within a participating hospital. Radiologists, anesthesiologists and pathologists are hospital based physicians but they are almost never hospital employees. Therefore, they are not subject to the hospital’s contact with the PPO. Some commentators refer to this situation by the acronym “RAPE.” In instances of emergency care, patients can not reasonably be expected to exercise "choice" of provider services or treatment. They are shocked when they receive bills from providers who they thought were covered by their insurance plan.

Supporters of the bill claim that the bill doesn’t impact these problems. They are certainly correct that the bill does not fix the problem with balance billing. In fact, the supporters successfully fought off repeated attempts to amend a balance billing prohibition onto the bill. They wrongly claim that the problem will not be exacerbated by the bill. The problem is that by allowing policyholders to assign their benefits to non-contract providers, it will encourage non-contract providers to provide services to policyholders because it will assure them of at least some payment for their services. If a person believes the argument that consumers don’t pay their medical bills, it appears that providers are willing to be paid at the same rate as contracted providers and therefore should have been willing to accept a prohibition against balanced billing. I doubt this is the case.

Balance billing is a nationwide problem. In a Wall Street Journal article from December 8, 2008, it was reported that “A growing number of state regulators are moving to crack down on balance billing.” The “New York State Insurance Department …is drafting proposed regulations that could force more disclosure by medical providers and insurers and shield consumers from unexpected charges. California regulators recently made it illegal for people covered by health-maintenance organizations to be balance-billed for out-of-network emergency services. And late last year Illinois put out a bulletin that protects many consumers from balance bills in certain situations if they make a "good faith" effort to use in-network doctors.”

Allowing SB 1122 to become law would be a backward step from attempts to corral the spiraling cost of health care and more specifically, the direct cost to consumers. Florida would be heading in the wrong direction and at the wrong time.