Balance Billing is the term given to a medical provider charging a patient more than an already established rate for the medical services provided. For example, lets assume that a patient has a hospital bill of $1,000, and the patient's insurance plan states that the patient owes a $100 deductible and then the insurance company will pay the rest of the medical bills. The patient pays the $100 deductible, and the insurance company decides to pay $800 to the hospital. Balance billing would be the practice of the hospital charging the patient for the last $100 that they did not receive on the bill.
Balance billing is illegal in California, and is also illegal for Medicare and Medicaid beneficiaries. This ruling was put into place by the California Supreme Court in 2009 when it ruled that the dispute about payment for out-of-network providers cannot involve the patient, but is between the provider who must render the care and the plan which is obliged to pay for the care.
The most common instance of balance billing occurs when a patient vists an out-of-network emergency room. The hospital to which the patient goes for service and the doctors on duty there are obligated by law to provide the care needed to stabilize the patient. The HMO is also obligated by law to pay for its members' emergency care.
A dilemma arises when the provider and the plan have not already agreed on how payment for services will be handled: how much must the plan pay, and is the provider obligated to accept the amount paid by the HMO as payment in full? Providers claim that plans are setting reimbursement rates unfairly, at sums too low to adequately pay for the services. Plans claim that providers are charging rates that are not fair, that are beyond the usual and customary charges for the location.
When a patient seeks care from a provider who does not have an existing relationship with the patient's health plan, or does not follow the plan's rules for using "in network" doctors or for getting a referral from the patient's primary care physician before seeing a specialist, the patient is independently obligated to pay for the care. Sometimes the plan might pay some of the cost (as it were operating under the old fashioned "medical insurance" type system), but there is no promise to pay a going rate to the physician, and the physician has not promised to accept what the insurance company pays under its rate chart. Here, because the patient has decided to operate outside of the rules for his health plan, he does not get the cost protection of the health plan. Payments made by insurance offset but do not satisfy the patient's debt.
Since the ruling of the California Supreme Court, in Prospect Medical Group vs. Northridge Emergency Medical Group 45 Cal.4th 497 in 2009, a medical provider cannot use balance billing to try to force the plan to pay more by putting economic demands on the patient, and plans cannot pay too little thereby forcing its members to pay the rest of a fair compensation to the provider. As a result, when a plan member in an emergency must get medical treatment from an out of network hospital or physician, his financial obligations are the exact same as they would be under the plan terms for in-network providers. The provider cannot bill the patient but must work out payment with the health plan.
Prior to the court's decision, ER physicians had been going around HMOs and seeking payment from patients who were often surprised by an additional bill for their services. "This is a clear victory for ER patients," noted California personal injury attorney John Bisnar. "Patients who made good faith premium payments to HMOs had a reasonable expectation that the HMO would pay for their ER expenses, less any deductibles.
In 1975, the Legislature banned balance billing when an HMO is contractually obligated to pay the bill. Since 1994, HMO's have been obligated to pay for emergency care and that the Knox-Keene Act permits emergency room doctors to sue HMO's directly over billing disputes. These provisions strongly suggest that doctors may not bill patients directly when a dispute arises between doctors and the HMO's. Other provisions point in the same direction, requiring emergency room doctors to render emergency care without questioning a patient's ability to pay. Such provisions call for the patient or their legally responsible relative or guardian to execute an agreement to pay for services rendered or supply insurance or credit information promptly after the services are rendered. This implies that once patients who are members of an HMO provide insurance information, they have satisfied their obligation towards the doctors. The legislative intent was to ensure the best possible health care for the public at the lowest possible cost by transferring the financial risk of health care from patients to providers.
The Legislature further contemplated there may be disputes over the amounts owed to non-contracting providers such as emergency room doctors, and therefore the Knox-Keene Act requires that each HMO "shall ensure that a dispute resolution mechanism is accessible to non-contracting providers for the purpose of resolving billing and claims disputes."
"The goal here was to ensure that each HMO adopts a dispute resolution mechanism that is 'fair, fast, and cost-effective for contracting and non-contracting providers,'" notes John Bisnar. "The legislature acted to protect the interests of non-contracting providers in reimbursement disputes by prohibiting HMO's from engaging in unfair payment patterns, unjust payment reductions, claim denials, and other unfair practices."
While the bill an ER doctor submits may or may not be the reasonable payment to which they are entitled, an HMO does not have limitless discretion to determine unilaterally the amount it will reimburse a non-contracting provider. Conversely, emergency room doctors do not have unfettered discretion to charge whatever they choose for emergency services. Emergency room doctors and HMO's must resolve their disputes among themselves.