A new report from USC-Brookings Schaeffer Initiative for Health Policy found that New York patients are still exposed to significant charges from out-of-network providers under the state’s arbitration model – underscoring the harmful cost consequences if arbitration was required nationwide.
Key highlights from the report are included below:
- “In April 2015, New York implemented one of the first state laws addressing surprise out-of-network billing at in-network facilities in both emergency and non-emergency situations (other than a few exemptions) … If the insurer and out-of-network provider(s) are unable to agree on a payment amount, disputes are settled by a final-bid, ‘baseball-style’ arbitration process – what the state refers to as independent dispute resolution (IDR) – in which the arbiter must decide whether final payment should be the insurer’s initial allowed amount or the provider’s charges.”
- “The biggest concern raised about NY’s arbitration process is the state’s guidance that arbiters should consider the 80th percentile of billed charges (as calculated by FAIR Health, an independent insurance claims database) when determining the final payment amount. Providers’ billed charges, or list prices, are unilaterally set, largely unmoored from market forces, and generally many times higher than in-network negotiated rates or Medicare rates. And telling arbiters to focus on 80th percentile of charges—that is, an amount higher than what 80% of of physicians charge for a given billing code—drives this standard still higher.”
- “Unfortunately, however, the New York Department of Financial Services report finds that arbitration decisions have averaged 8% higher than the 80th percentile of charges.”
- “Therefore, it is likely that the very high out-of-network reimbursement now attainable through arbitration will increase emergency and ancillary physician leverage in negotiations with commercial insurers, leading either to providers dropping out of networks to obtain this higher payment, extracting higher in-network payment rates, or some combination thereof, which in turn would increase premiums. If insurers are additionally increasing out-of-network payment for services in order to reduce the risk of losing in arbitration, that would further amplify this inflationary impact on premiums. Forthcoming research with coauthors will examine these effects.”
- “…it is important to note that consumers and taxpayers appear to be ‘losing’. That is, even arbitration decisions in favor of the health plan have averaged only 11% below the 80th percentile of charges, still far above in-network rates or typical out-of-network payments – implying that health plans only ‘win’ in arbitration when they offer to pay extremely high rates, which is then paid for through higher premiums.”
To view the full report, click here.