Doctors and insurers clash over US law that protects against surprise billing

A law passed by Congress to end one of the most hated practices in US medicine – surprise billing – has become a behind-the-scenes battleground between doctors and insurers.

The No Surprises Act was passed in 2020 in a rare bipartisan effort to end so-called surprise or balance billing – a practice where healthcare providers who do not have contracts with insurance companies charged patients directly for hundreds or thousands of dollars.

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“One of the important things to remember is the core purpose of the law was to protect consumers from getting these surprise balance bills,” said Jack Hoadley, an emeritus research professor at the Health Policy Institute of Georgetown University. “That part of the law is actually working quite well by all indications.”

But litigation and aggressive billing by physician staffing companies, some backed by private equity, have continued as insurance companies and doctors duke it out in court. The result is an enormous backlog of cases in arbitration, cashflow problems for independent doctors, and the potential for patients to once again be stuck with the costs. Some argue that there’s also a balance of power tilted toward insurance companies.

Notably, surprise bills often arrive after emergency situations. Ambulances, emergency room doctors and anesthesiologists are among the most likely to send such unwelcome statements.

With patients unable to choose a physician for most emergency services, private equity-backed physician staffing agencies became key players in surprise billing. Companies stayed out-of-network for all or most insurance plans, which allowed patients to inadvertently see doctors not covered by insurance (“out-of-network”) even at hospitals that insurance approved. As a result, staffing companies in effect charged patients whatever they wanted after the fact.

The practice was dramatically curtailed after the Biden administration signed the legislation, with an estimated 1 million patients a month protected from surprise bills. Two private equity-backed physician staffing companies have gone bankrupt since the implementation of the law.

That is perhaps why patient advocates are shocked at the group leading the charge against the arbitration process: the Texas Medical Association (TMA), the largest association of doctors in the state. The group has filed four lawsuits against different aspects of the arbitration process.

“It’s quite disappointing that the medical association, or the association of doctors, is leading the charge against this,” said Patricia Kelmar, an attorney who directs the US Public Interest Research Group’s (PIRG) healthcare campaign. PIRG has fought vociferously in favor of the law, arguing in favor of its consumer protections and potential to lower healthcare costs. “The reality is that balance billing – these surprise bills – were really only being sent by a small portion of specialists.”

The TMA is by no means alone. More than 20 lawsuits have been filed against the No Surprises Act. But TMA’s lawsuits have proved effective. Four suits filed by the TMA have resulted in two pauses in arbitration, creating a huge backlog.

“Everyone agrees patients should be protected from surprise medical bills,” the TMA said in a statement to the Guardian. The group declined a request for an interview citing ongoing litigation.

“Federal departments’ implementation of the No Surprises Act has been the subject of conflict, because their regulations have sought to skew the independent dispute resolution process against physicians,” the group said. “This has given insurers leverage to significantly reduce physician payment, to the detriment of access to care for the patients we serve.”

To leave patients out of surprise billing disputes, Congress set up an arbitration process for doctors and insurers. But implementing the arbitration process has proved difficult. The House held a hearing into the “flawed implementation” of the law as recently as mid-September.

In the first year of arbitration alone, disputing parties filed more than 334,000 cases, a fraction of the total surprise bills each year, but still nearly 14 times more than federal regulators expected, according to the Centers for Medicare and Medicaid Services (CMS).

The top users of the arbitration process are responsible for more than 71% of disputes, with private equity-backed companies among them. For example, in one-quarter of 2022 alone, the private-equity backed physician group TeamHealth filed more than 8,200 cases in arbitration, making it the third largest user of the system.

TeamHealth staffs hospitals with emergency physicians and anesthesiologists, among other specialties, and also operates free-standing emergency rooms in states such as Texas. The company was purchased by Blackstone for $6.1bn in 2016.

“Private equity has sunk a lot of money into creating and sustaining the free-standing emergency room industry,” Dr Stephen Chao, a family medicine doctor in Houston, Texas, and vice-chair of Healthcare for All Texas, said.

“What has been detrimental to many of our patients, including my own, is when they are sick they will go to a free-standing emergency room and see an out-of-network provider and they will get hit with this enormous bill.”

Private equity also threw millions at trying to defeat the law before it was passed, spending $28m in ads through the dark-money group Doctor Patient Unity. Similarly, two states account for an outsized share of cases: there have been more than 40,000 claims in Texas and Florida in just one quarter.

The latest lawsuit brought by the Texas Medical Association challenged the “qualifying payment amount” (QPA), or a central part of the arbitration process that concerns cost-sharing for patients.

The TMA’s lawsuit challenged the calculation used to reach that payment amount, a central tenet of arbitration meant to lower overall healthcare costs. If insurance companies and doctors agree on higher payment amounts in arbitration, then patients could be stuck with higher – potentially hundreds of dollars more – cost-sharing afterward.

Consumer advocates said they worry a rocky arbitration process could further affect patients by inflating insurance premiums or be used as an argument to scrap the arbitration process altogether.