State moves to protect citizens from surprise medical bills

House OKs bill focusing on out-of-network costs

PHOENIX — State lawmakers agreed Wednesday to give hospital patients at least some protection against facing a nasty financial surprise when they get their bills.

SB1441 is aimed at situations where a patient gets notified after a medical procedure that one or more of the doctors that provided the services are not within their “in-network” insurance coverage. That, said Sen. Debbie Lesko, R-Peoria, leaves the patients out of luck as the doctor demands payment and the insurance company won’t cough up any cash.

The legislation, approved by the House on a 40-19 margin, does not guarantee that will never happen. But it provides a method of getting at least some of disputes resolved — and in a way that caps the patient’s liability.

Central to the issue is the change in how hospitals operate.

It used to be that a patient who specifically chose a hospital within his or her insurance coverage for elective surgery could pretty much be guaranteed that all costs would be picked up, above and beyond what would be the person’s normal copay or deductible.

But the current practice of many hospitals is to contract with outside doctors for everything from emergency room care to pathologists and anesthesiologists. And it is only after patients get a bill that they find out that medical provider has billed for and wants the full amount — and the insurance company refuses to pay any of it.

The legislation says patients go to an in-network hospital and get one of these “surprise” bills for at least $1,000 can ask the state Department of Insurance to set up a teleconference to see if something can be worked out. Lesko said a similar program in Texas resolves 94 percent of complaints this way.

But if there’s no meeting of the minds, there’s an arbitration between the insurer and the out-of-network doctor. And the patient’s maximum liability would be only what he or she would normally have to pay in deductibles.

Rep. Pamela Powers Hanley, D-Tucson, said patients are currently at a disadvantage.

“The patient has all of his ducks in a row before he goes in to the surgery,” she said.

“He knows his doctor’s in network, he knows his hospital’s in network and he’s surprised by miscellaneous personnel who aren’t,” Powers Hanley said. “The person did not make that choice. The hospital made that choice.”

Yet she voted against the measure, saying it does not go far enough to protect patients and lets the hospital off the financial hook for the surprise bill.

The legislation also was fought from the other side of the issue by lawmakers who said the state has no business telling medical professionals how much they can charge and forcing them to accept whatever payment an arbitrator determines is appropriate.

Rep. Regina Cobb, R-Kingman, said the legislation will do one of two things: force doctors to either become part of insurance company networks and accept the amounts they’re willing to pay, or decide to stop providing services at hospitals because they know they won’t get paid the amount they believe they are due.

Cobb, who is a dentist, said there have been situations where what insurance companies are willing to pay “doesn’t even cover my lab costs.”

She said that’s fine in situations where she wants to accept that payment. But Cobb said it should not be forced on her.

“This is going to have a chilling effect on health care, on doctors,” said Rep. Maria Syms, R-Paradise Valley, particularly those in rural communities. “They are not going to be able to set their own fees.”

Syms, whose husband is a doctor, called the measure “very anti-free market’’ and said government has no business getting involved in disputes between doctors and patients, forcing doctors to accept the payment amount that the arbitrator decides is appropriate.

But Randall Friese, D-Tucson, who also is a doctor, said the concerns about doctors miss the point of the legislation.

“I think about the patient,” he said, the person who makes a good-faith effort to ensure that the procedure -- and the place it is being done -- is within the insurance company network only to find out later that the hospital has substituted a doctor who is not part of the network.

“The patient shouldn’t be a victim of not knowing everybody who works in the hospital at the time they have the procedure,” added House Majority Leader John Allen, R-Scottsdale.

And Rep. Cesar Chavez sniffed at claims that the mandatory arbitration process in cases of surprise billing somehow is an attack on free enterprise.

He pointed out the legislation does not preclude doctors from charging what they want.

More to the point, doctors are not subject to mandatory arbitration if they tell disclose in writing up front, ahead of the medical procedure, that they are not part of the patient’s insurance network, will be charging a specific amount, and that the insurance company won’t cover the amount.

“What SB1441 does is it provides transparency to those individuals who go into these procedures,” he said.

Cobb, however, warned legislators they were setting a dangerous precedent in mandating arbitration in these kinds of disputes.

For example, she said an individual who takes a car in for repairs may be given an estimate. Only after the vehicle is in the shop are other problems found, with a commensurate increase in cost.

“Those are all surprise billings,” she said, but should not force the repair shop to accept only what an arbitrator decides is appropriate.

Allen, however, said Cobb has it backward.

He said a better example would be if a vehicle is in a crash and the insurance company has arranged with a specific shop to pay a set amount for repairs.

Allen said it would not be fair if the repair shop had to bring in someone else to fix the windshield, someone who charges more, and then bills the owner for the difference. He said once there’s a deal for a set payment, that should not be subject to change based on something over which the customer had no control.

Wednesday’s vote does not end the battle.

The version up for vote in the House differs in some ways from what was previously approved by the Senate. That means the need for another Senate vote -- and another chance of foes to sideline the measure.