Economics 101 taught us that in a capitalist economy, prices are generally set by the market. This is also true, by and large, for healthcare services planned in advance – for providers in-network, insurers negotiate these rates. For providers out-of-network, healthcare consumers can agree to either pay the amount charged less the out-of-network reimbursement or move on to another provider. A condition precedent for this to work smoothly is ensuring the consumer knows the network status of the provider, the amount they will charge for the service to be provided, and the amount, if any, to be reimbursed by an insurer for the out-of-network services. Notice requirements, then, are the first prong of the federal No Surprises Act and many of the state laws aimed at this issue.

Economics 101 also taught us that market pricing doesn’t work when there is a monopoly on the service or supply. The hospital closest to where you got hit by that bus, and the anesthesiologist you met for the first time in the operating room who you had no voice in selecting or making any agreement with, have the ultimate monopolies. For many years this subjected the patient to possibly astronomical costs with no recourse.

During my tenure at the Department of Banking and Insurance, this author represented the Department on an ad hoc work group chaired by Assemblyman Gary Schaer and ably assisted by Dave Knowlton of the NJ Health Care Quality Institute. Payers and providers were also represented. The group was to study the issue of these surprise bills and make recommendations. If there is no contract and no ability to choose in advance, how are the prices for these essential medical services to be set?  We anticipate parties in a capitalist system acting in their economic self-interest.  For carriers this is the lowest reimbursement; for providers it is the highest, which catches the healthcare consumer in the middle to make up the difference. The next prong of the No Surprises Act and its state progeny, therefore, is a prohibition on balance billing to keep the patients who had no role in selecting the provider from being whipsawed by these competing interests.

Insurers and providers may be able to reach agreement on a level of reimbursement that provides fair reimbursement without balance billing, which could be the end of it. But if they don’t?  Enter the next prong of the No Surprises Act, an Independent Dispute Resolution process.  Independence takes the economic self-interest of the parties out of the equation, but in and of itself doesn’t get to what constitutes fair reimbursement, which would reasonably consider such factors as the level of training or experience of the provider, the quality and outcomes measurements of the provider or facility, the market share held by the out-of-network provider or carrier in the geographic region, the patient acuity and complexity of services, the teaching status, case mix, and scope of services of the facility, any good faith effort—or lack thereof—to join the insurer’s network, and, most controversially, average payments to network providers.

In a series of upcoming blog posts, we will take a deeper dive into the law, regulations and court challenges associated with each prong of the No Surprises Act and related issues. Stay tuned.