An Executive Order’s Potential for Setting a Precedent With Regard to the Reimbursement Rate for Out-of-Network Emergency Services

Emergency Order Issued by Governor Baker of Massachusetts

On April 9, 2020, Governor Baker issued an emergency order (the “Order”), mandating that insurers cover all medically necessary emergency department and inpatient services costs of COVID-19 treatment at both out-of-network (“OON”) and in-network hospitals and other medical facilities, without any cost to the patient, setting the OON reimbursement rate at 135% of Medicare, and prohibiting providers from balance billing.  The Governor appears to have relied on § 7 of the Massachusetts emergency preparedness and response law in issuing the Order.  Section 7 gives the Governor broad powers during a state of emergency, including “[r]egulation of the business of insurance and protection of the interests of the holders of insurance policies and contracts and of beneficiaries thereunder and of the interest of the public in connection therewith.”

Provider Concerns with the Emergency Order

From a provider perspective, the Order raises at least three concerns.  First, the OON payment is based on the Medicare rate, a rate set by the government, not intended to reflect market rates.  Second, the Order does not include the right to resolve payment disputes between an insurer and a provider.  Third, the excessively low reimbursement rate is problematic because emergency departments, and the physicians staffing them, face unprecedented financial strain because of the ongoing COVID-19 pandemic.  To address and allay these concerns, physician groups generally advocate a commercially reasonable payment, based on local charges as determined through a known independent, transparent, and verifiable database (such as FAIR Health), using baseball-style binding arbitration to resolve payment disputes between the insurer and the provider.

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Recent Federal Legislative Activity to Address Surprise Billing

States increasingly pass laws to protect patients from surprise billing, varying widely in scoop.  Surprise bills occur when a patient is treated by an out-of-network provider and receives a bill from the provider for the difference between the payment made by the health plan and the patient’s cost-sharing amount.  Typical scenarios are when a patient accesses emergency services outside the health plan’s network or receives services at an in-network hospital from an out-of-network physician (e.g., anesthesiologist, radiologist, pathologist).  Despite state legislative activity, state protections are limited by the Employee Retirement Income Security Act of 1974 and do not apply to self-funded employee welfare benefit plans.  According to the Kaiser Family Foundation, approximately 60 percent of workers get coverage through a self-funded health plan.  Because these state-level protections vary widely in scope and do not apply to patients in self-funded health plans, federal legislation may provide an opportunity to more comprehensively address surprise billing. Continue reading “Recent Federal Legislative Activity to Address Surprise Billing”