Health Care Equitable Reimbursement Act Exposed
The Health Care Equitable Reimbursement Act was considered at ALEC's 38th Annual Meeting on August 4, 2011 by the Health and Human Services Task Force. This bill was part of the ALEC task force agenda between 2010 and 2012, but due to incomplete information, it is not known if the bill passed in a vote by legislators and lobbyists at ALEC task force meetings, if ALEC sought to distance itself from the bill as the public increased scrutiny of its pay-to-play activities, or if key operative language from the bill has been introduced by an ALEC legislator in a state legislature in the ensuing period or became binding law.
ALEC Draft Bill Text
BACKGROUND
Medical Savings Accounts (MSAs) were introduced largely due to the efforts of the late J. Patrick Rooney, whose Golden Rule Insurance Co. had experimented with high-deductible health insurance policies offering greater control and freedom of choice for the health care consumer.
An important selling point of these MSAs (subsequently known as Health Savings Accounts—HSAs) was that the individual had complete control of health care decision-making. That is, there were to be no restrictions concerning which physician, which hospital, or which form of treatment was elected. This is consistent with economic principles where the buyer and seller freely compete for goods and services without third party intervention, thus providing for the best method of distribution of those medical services.
Another important aspect of HSAs was the projected growth of HSA balances over the years, as judicious use would likely allow excess funds to accumulate over the years. These HSAs were so popular with Golden Rule employees, Mr. Rooney started Medical Savings Insurance Co., devoted entirely to HSAs. This should have been a blazing success, but sadly, was not. This company went out of business. Why? Hospitals have a practice of charging 400% to 1,000% of their baseline rates to the general consumer.
Thus, even if such an HSA holder should receive a 25% discount after being subjected to a 400% increase, he would still be paying 300%, or three times the going rate. If a 1,000% charge rate were to be used, a 25% reduction would result in the individual paying 750%, or 7.5 times the standard rate.
It is quite easy to see that hospitals using these surcharge rates would quickly bankrupt anybody outside their system, which is precisely what happened.
As other large insurers developed their high-deductible HSA products, they always tied these to HSAs to in-network “providers,” which completely negated the most important purpose of HSAs—which was to provide complete freedom to choose one’s physician and hospital by using one’s own money.
Third party payors are now punishing their subscribers for seeking out-of-network physicians, even in the event of medical emergencies. If a patient has met his in-network deductible for the year, but is subsequently treated by an out-of-network physician, a whole new deductible applies. This is often a larger deductible and is extracted from the patient/subscriber even though the deductible had already been met, and even in the event of a medical emergency.
As if this is not enough, the percentage co-pay is always higher for the out-of-network physician. Why? Simply as a means of punishing the patient for using an out-of-network doctor, even in a medical emergency.
Additionally, the percentage co-pay is not based upon the billed charges, but rather, upon the “usual and customary rates,” or UCR. These rates have absolutely nothing to do with actual rates charged by physicians, but rather, are numbers that vary widely from one company to another, and can be essentially whatever the company decides it should be. There is no way for the subscriber/patient to know in advance what the UCR is, because his insurer refuses to divulge this information.
There is another major issue with third party reimbursement. If a patient should seek surgery in a physician-owned outpatient surgery center, the reimbursement will be much less for the exact same procedure as compared to hospital reimbursement.
Similarly, reimbursements for imaging studies and other procedures/therapies are much greater for hospitals as contrasted with non-hospital entities. Is this the kind of payment discrimination we want to see in order to maintain truly independent practitioners?
When Sherman Antitrust legislation was passed, the notion of protecting the small consumer from the monopolistic producer seemed noble. However, here we have payment discrimination from the buyer toward the physician, whether participating or not. This amounts to forced participation. Otherwise, the patient will be seriously penalized. Furthermore, the physician is discriminated against simply because he owns the surgery center or MRI machine rather than a hospital.
The ultimate effect of these practices will be to stifle competition and independence, with patients and physicians being little more than small cogs in the big wheels of hospitals and reimbursers.
Unfair discriminatory reimbursement is wreaking havoc on patients and physicians, threatening the viability of independent physicians. The Patient Protection and Affordable Care Act (PPACA) apparently realizes this, and prohibits hospitals which claim tax benefits under Section 501(c)(3) from charging certain uninsured patients “more than the amounts generally billed to individuals who have insurance covering such care.” 26 U.S.C. Section 5019(r)(5).
MODEL LEGISLATION
Section 1. Short Title.
This Act shall be known as “Health Care Equitable Reimbursement Act.”
Section 2.
A. Health care insurers shall be prohibited from decreasing reimbursement, voiding previously met deductibles, or increasing co-pays to health care insureds who, for any reason, seek care from an out-of-network physician.
B. Health care insurers are prohibited from decreasing reimbursements for facilities and services, including operating room, imaging, or any other service, due to an out-of-hospital setting or non-hospital ownership. Non-hospitals shall not be reimbursed at different rates than hospitals for equivalent services, and there shall be no additional site of service surcharge for hospitals.
C. In accordance with the Patient Protection and Affordable Care Act (PPACA), hospitals which claim tax benefits under Section 501(c)(3) are prohibited from billing individuals who are self-insured “more than amounts generally billed to individuals who have insurance covering such care.” 26 U.S.C. Section 5019(r)(5), and hospitals are likewise prohibited from billing individuals with high deductibles “more than the amounts generally billed.”
Section 3. {Severability Clause}
Section 4. {Repealer Clause}
Section 5. {Effective Date}
