Surprise Medical Bills Study

On June 20, 2019, Peterson-Kaiser published “An examination of surprise medical bills and proposals to protect consumers from them.” The study used “claims data from large employer plans to estimate the incidence of out-of-network charges associated with hospital stays and emergency visits that could result in a surprise bill.” It also surveyed state and federal policies addressing surprise medical bills.

The article cites a KFF Health Tracking Poll from August 23-28, 2018 that found that 38% of the respondents were very worried about being able to afford unexpected medical bills as compared to 17% being very worried about being able to afford food and 22% their rent or mortgage.

The authors[1] found that millions of emergency visits and hospital stays put people with large employer coverage at risk of receiving a surprise bill. For people in large employer plans, 18% of all emergency visits and 16% of in-network hospital stays had at least one out-of-network charge associated with the care in 2017.”

The article correctly notes that the “ACA requires all non-grandfathered health plans to cover out-of-network emergency services and to apply the in-network level of cost sharing to such services. Health plans are also required to pay a reasonable amount for the out-of-network emergency services. However, the ACA does not prohibit balance billing by facilities or providers for emergency care. As a result, patients can and do receive surprise bills for emergency care from the emergency room facility and from providers who treat the patient in the ER. Surprise medical bills might also arise from the hospital and/or other treating providers if the emergency patient is subsequently admitted for inpatient care.“ The authors estimate that “[o]f the emergency room visits in 2017 by people with large employer coverage, … 18% had at least one out-of-network charge (from either the facility, the provider, or both) associated with the visit. This includes out-of-network charges from the emergency facility, emergency room providers, and provider and facility charges associated with a resulting inpatient stay, when applicable.” Material geographical variations were found among large employer plans. “About a quarter or more of emergency visits in Texas (38%), New Mexico (29%), New York (28%), California (26%), Kansas (24%), and New Jersey (24%) resulted in at least one out-of-network charge in 2017, while the rate was under 5% in Minnesota (3%), South Dakota (4%), Nebraska (4%), and Alabama (4%).”

The ACA does not contain the same type of protections for inpatient care as it does for emergency services. Accordingly, “in non-emergency admissions, the patient not only is at risk of being balanced billed by the provider, but also faces higher cost sharing under her insurance plan for the out-of-network claims. If the patient’s health plan is a Health Maintenance Organization (HMO) or an Exclusive Provider Organization (EPO) that does not provide any coverage for non-emergency care received out of network, the surprise medical bill claim may not be covered by the health plan at all.”

“In 2017, among people with large employer coverage who had inpatient stays, the vast majority (90%) were at in-network facilities. Even when patients were admitted to in-network facilities, though, 16% of these stays resulted in at least one out-of-network charge for a professional service. As described above, in many of these cases, the patient not only is at risk of being balanced billed by the provider, but also likely faces higher out-of-pocket costs under her insurance plan for the out-of-network claims. The rate of out-of-network charges for services at in-network inpatient facilities ranged from 2% of in-network inpatient stays in South Dakota, Nebraska, and Minnesota, to about a quarter or more in New York (33%), New Jersey (29%), Texas (27%), and Florida (24%). Inpatient stays in urban areas (16%) are somewhat more likely to result in at least one out-of-network charge than are stays in rural areas (11%).”

The study reports that “[a]t least nine states have enacted and implemented laws taking a comprehensive approach to surprise bills (California, Connecticut, Florida, Illinois, Maryland, New Hampshire, New Jersey, New York, and Oregon). Four more states – New Mexico, Washington, Colorado, and Texas enacted new surprise medical bill laws in 2019 that have not yet taken effect.” States which hold the patient harmless and provide a method for determining the amount of the payment were deemed to have taken a comprehensive approach. “California’s surprise medical bill law, for example, requires state-licensed managed care plans to pay out-of-network providers the greater of 125% of the amount Medicare fee-for-service would pay, or the average contracted amount the managed care plan pays for the same/similar service in that geographic region.”

However, ERISA preemption applies. Thus, “states are preempted from requiring employer plans to cover out-of-network surprise bills; they are also preempted from requiring these plans to apply in-network cost sharing to out-of-network surprise bills; and they are preempted from requiring these plans to settle payment disputes with out-of-network providers over surprise bills using state-established payment rules or procedures. Though ERISA allows states to regulate the group health insurance policies that some employers buy from insurance companies, 61% of covered workers (and 81% of those in large firms) are covered under self-insured group health plans that are beyond the reach of state regulation.”

At least three bills have been introduced in Congress. “All three measures would hold patients harmless from surprise medical bills. All would require health plans and insurers to cover the out-of-network surprise bill and apply the in-network level of cost sharing; and all would prohibit out-of-network facilities and providers from balance billing on surprise medical bills. All bills would apply to group health plans, whether fully-insured or self-insured, and to individual health insurance.

“To resolve the payment amount for surprise bills, the three bipartisan measures take somewhat different approaches. The House Energy and Commerce Committee discussion draft and S. 1895 would require health plans to apply the median in-network payment amount for that service within the geographic region. S 1531 also requires health plans and issuers to initially pay the median in-network rate for surprise medical bills; but it provides for an independent dispute resolution (IDR) process if the out-of-network provider requests. The IDR process would be similar to that established under the New York’s statute. Both parties would submit their best offer, the IDR entity would make a binding decision about which offer prevails, and the non-prevailing party would pay for the cost of the IDR process.”

The full text of the Peterson-Kaiser article may be found at:

[1] Written by  Karen Pollitz, Matthew Rae, Gary Claxton, Cynthia Cox and Larry Levitt.