N.J. lawmakers target surprise medical bills

The sponsors of a measure to protect patients from surprise medical bills say their proposed law would rely on an arbitration system to determine what doctors and hospitals can charge in contested cases, rather than set caps on medical fees.

The proposed legislation is intended to help consumers, who can face higher — sometimes enormously higher — bills than they expect when they get care at hospitals or from physicians not in their insurer’s network. The measure says that patients can’t be billed more than in-network rates, if the care is provided in an emergency or by physicians at a hospital that is part of the patient’s insurance plan. That part of the measure remains the same.

But the bill’s sponsors decided late last week to drop a requirement that out-of-network bills to insurers be capped at 2½ times the average insurance payment for a service. Under current regulations, insurers can be billed any amount by out-of-network health-care providers, and some have used that loophole to demand reimbursement that is many multiples of what Medicare, a standard benchmark, pays. Insurers say it causes premiums to go up for everyone.

Related:  Out-of-network medical bills a costly shock in N.J.

The arbitration system the bill’s Democratic sponsors want to pass is called baseball arbitration, in which an arbitrator chooses one side’s final offer. The arbitrator does not have the discretion to come up with an independent idea of the best settlement amount. The Department of Banking and Insurance will have a contract with the arbitrator, and each side would pay its own expenses related to the arbitration.

The legislation’s sponsors believe that system will encourage both sides to make reasonable offers, rather than risk having the arbitrator choose the opponent’s final offer.

“Both sides are afraid of losing it all,” said Assemblyman Gary S. Schaer, the Passaic Democrat who heads the Assembly Budget Committee. “We believe we will have the same effect without the [fee] limitations as we have with them, and that is critical.” Illinois enacted a measure calling for baseball arbitration in disputed bills arising from out-of-network, hospital-based physicians a few years ago, he said, “and there have been zero cases of arbitration.”

The lawmakers’ revision to the measure came after hours of private meetings with physicians, hospital executives and others affected by the proposed law, two of the measure’s sponsors said. Lobbyists and representatives of various stakeholder groups met with the sponsors in a daylong series of meetings on May 22.  

The measure will be discussed today at a hearing before the Assembly committee that oversees insurance.

“The real thrust of the bill is to protect consumers … and that is wholly unaffected” by the change, said Assemblyman Craig J. Coughlin, chairman of the committee and a prime sponsor of the bill. The change answers one of the opponents’ main objections, and “shows we are listening,” he said.

“We were persuaded to take a hard look at it,” Coughlin said of the original version’s proposed fee caps, “because it was something we heard universally — all the parties were concerned.” Out-of-network doctors and hospitals say the ability to set their own fees balances out the power of the insurance companies, whose rates are often too low.

The other sponsors of the measure are state Sen. Joseph Vitale, chairman of the Senate Health Committee and a Woodbridge Democrat, and Assemblyman Troy Singleton, a Mount Laurel Democrat.

Physicians who do not participate in an insurer’s network and do not accept an insurer’s reimbursement as payment in full sometimes bill patients for the remainder of their fee, a practice known as balance billing.

The Record has reported on many examples of such surprise medical bills from hospital-based physicians, including anesthesiologists and neonatologists. In one case, a collection agency sued a Franklin Lakes family over an $1,800 bill for services by an out-of-network anesthesiologist at The Valley Hospital in Ridgewood during an emergency C-section birth. In another, an orthopedic surgeon on-call at Hackensack University Medical Center’s emergency room billed a family $73,000 for an operation to repair a broken clavicle; the hospital was in the patient’s insurance network, but the surgeon was not.

Public testimony is to be heard today by the Assembly Financial Institutions and Insurance Committee on the measure, known as the Out-of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act. No vote is planned.

The measure was introduced May 14, and some provisions remain unchanged. For example, it calls for full, written disclosure 30 days in advance of elective surgery of the charges patients can expect to pay when they receive care at hospitals or from physicians that don’t participate in their health plan’s network. And a database of payments made by all insurers for various services would be compiled and kept at the state Department of Insurance and made available to the public.

“You know more about the used car you’re going to buy than you do about your health-care costs — and that’s ridiculous,” Schaer said.

Even without a cap on fees, the measure will have the effect of limiting charges, both Coughlin and Schaer said.

Additional public hearings have yet to be scheduled in the Legislature.

“It’s our hope and aspiration to get this through” the Legislature in June, Schaer said, though he was not certain that would be possible.

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