Surprise Billing Policies May Decrease Commercial Payer Premiums

For three major payers, surprise billing policies had an impact on premiums, a study published in the American Journal of Managed Care found.

The researchers used data from the Health Care Cost Institute that encompassed hundreds of millions of claims from three of the largest payers in the nation—UnitedHealthcare, Aetna, and Humana. In total, the data represented 44.8 million covered lives.

With this data, the study evaluated how federal surprise billing policies would affect premiums. The researchers expected that these policies would reduce provider leverage and lead to lower payments and, by extension, lower premiums.

Services like radiology, anesthesiology, and emergency medicine make up 10 percent of commercial health plan spending and also frequently lead to surprise bills for patients.

“Unlike most medical services, for which patients have an opportunity to seek in-network providers, patients generally are not able to choose these emergency and ancillary providers,” the researchers wrote.

“As a result, these providers can often remain out of network without significantly reducing their patient volume. Not only can this lead to patients receiving surprise bills, but evidence suggests that the ability to surprise-bill creates leverage that enables these providers to obtain higher in-network payments.”

These higher in-network payments not only result in high bills for the patient who received care but they also have an effect on health insurance premiums more broadly.

Excluding emergency services, a 15 percent reduction in payments to healthcare professions that are most susceptible to surprise billing correlated with a 0.9 to 1.2 percent premium reduction per member. This translates to roughly $37 to $50 less for members to pay per member per year.

Again excluding emergency services, the researchers found that bringing down the payment to 150 percent of Medicare reimbursement levels led to an even sharper decrease in premiums. Members paid around 3.1 to 3.6 percent lower premiums or $129 to $150 less per member per year.

When emergency facility costs and emergency ground ambulance services were included in the calculations, the reductions were even higher.

At 15 percent reduced payments to professionals in healthcare sectors that lead to high rates of surprise billing — including emergency services — members paid around $58 to $67 less per member per year. They paid $187 to $212 less per member per year when these professionals were reimbursed at 150 percent of Medicare reimbursement levels.

If these results were expanded to the entire commercial health payer industry, a 1.6 percent reduction on premiums—resulting from a 15 percent decrease on surprise billing services including emergency services—would lead to savings of $12 billion.

A 5.1 percent decrease in premiums—due to bringing reimbursement down to 150 percent  of Medicare reimbursement for all surprise billing services including emergency services—would result in around $38 billion in savings.

However, the researchers were careful to note that these results were limited to the three payers that they investigated. Thus, the findings do not necessarily mean that such policies would have the same impact nationwide.

Nonetheless, the results are in sync with similar studies.

“The financial burden of surprise bills for individual patients has captured public attention, but this study illustrates that provider leverage derived from the ability to surprise-bill has broader effects on health care spending—resulting in commercial health insurance premiums as much as 5% higher than they otherwise would be in the absence of this market failure,” the study stated.

The study is a timely endeavor as President Trump has recently signed an executive order requiring HHS and Congress to find a solution to surprise billing before the end of the year. Otherwise, HHS will take matters into its own hands. Whether the executive order has any teeth is up for debate, but the order underscores the level of urgency around this issue.

Prior to the coronavirus outbreak, three bills on surprise billing were circulating in Congress. The Ban Surprise Billing Act passed a House Committee in mid-February 2020 but has not gone to a vote and other bills also stalled.

Some states have taken action, specifically California which enacted its surprise billing law in 2017. Since then, studies have estimated that California’s bill, AB 72, may have decreased out-of-network specialty visits by 17 percent.