(National Park Service photo)

(Bloomberg) – New York state has a new law that is supposed to sharply limit “balance billing.”

“Balance billing” occurs when a physician, hospital or other care provider sends a patient a bill for the difference between the amount the patient’s health insurer has agreed to pay and the full amount the provider has charged.

Because health plan provider networks prohibit most balance billing, the practice usually affects enrollees who are seeing out-of-network providers.

An older New York state balance-billing law protects individuals against high out-of-network ambulance bills. The law also protects health maintenance organization enrollees against balance-billing for emergency room visits.

The new law, which takes effect next year, will require medical providers to warn patients before non-emergency treatment starts if the providers don’t take the patients’ insurance.

If a provider fails to deliver the warning, the patient will have to pay only a regular, in-network co-payment amount.

The law also is supposed to create an independent arbitration process to resolve disputes between insurers and out-of-network providers and insurers.

Insurers will have to update online provider directories within 15 days of receiving information about a change.

New York is one of 13 states that have restrictions on out- of-network balance-billing, according to the Kaiser Family Foundation.

Some states, including Maryland, prohibit out-of-network balance-billing for select services. While Colorado doesn’t explicitly ban the practice, the state instructs insurers to “hold harmless” the patient and take responsibility for surprise bills. In Texas, providers must disclose their network status.

In California, organizers of a 2007 survey found that 1.8 million insured residents who had visited emergency rooms in the previous two years had received extra charges, according to the California Health Plan Association.

“It’s a pretty good bet that, if you’re hospitalized or having any kind of surgery, somebody along the way who touches you or your slides or films will not be in network,” said Karen Pollitz, a senior fellow at the Menlo Park, California-based Kaiser foundation.

Broken leg

Balance-billing happened to Abby Ives, a therapist and clinical social worker from Ossining, N.Y., when she fell in her front yard on June 24, 2012, and shattered a bone in her right leg.

As a health-care provider, 61-year-old Ives knew the importance of insurance.

“As I was laying in the front yard, I told my husband, ‘Honey, get the insurance card, we’re going to need it,’” she recounted in a telephone interview.

The ambulance took her to Phelps Memorial Hospital Center in Sleepy Hollow, N.Y., which was covered by her insurance through Empire Blue Cross Blue Shield. Ives underwent surgery, then X-rays revealed her left leg was also broken, so she had a second surgery. During her month-long stay in the hospital, she said she wasn’t told that many of the providers treating her weren’t included in her insurance plan.

Ives was shocked when, after she was discharged, Empire notified her that both surgeons, the hospitalists who coordinated her care within the hospital and the cardiologists who read her electrocardiograms weren’t part of her coverage plan. One surgeon sent her a bill for $13,000, the hospitalists charged $1,500, and two electrocardiograms were an additional $100 each.

“My reaction is not printable,” she said. “I’m a provider, I see patients and bill insurance companies, I’m supposed to know how this works, but how did they do that to me?”

To pay the bills, Ives said she would have to reach into her and her husband’s retirement funds. She appealed to the surgeon’s billing staff repeatedly, she said, before the surgeon agreed to accept the insurance company’s out-of-network reimbursement of $20,000 and stop pursuing Ives for the balance of $13,000.

As for the hospitalists and cardiologists, “I just paid them,” Ives said. “I wanted to be done, for them to go away.”

A common problem

Elisabeth Benjamin, vice president of health initiatives at the Community Service Society of New York, said balance-billing is the most-common payment problem seen at her nonprofit advocacy organization, which handled 65,000 health-care cases last year.

In some states, ambulance services are often out-of-network, according to Cheryl Fish-Parcham, private insurance program director at Families USA, a nonprofit consumer advocacy organization.

“When you call the ambulance, you’re thinking about getting to the hospital fast,” Fish-Parcham said in a telephone interview. Network status “is the furthest question from your mind.”

Providers object

Providers have concerns about the law.

Phelps Memorial spokeswoman Tina Dorfman said in an e-mail that the hospital “has almost 500 physicians on staff, and only a fraction are employed by the hospital. The remaining physicians take various other combinations of insurance plans. Administratively it’s impossible for a hospital to have current information at all times about which insurance plans every physician is accepting.”

Andrew Kleinman, president-elect of the Medical Society of the State of New York, said he supports more transparency, but he added that the onus to provide information should be on the insurers.

“A lot of doctors don’t know whether they’re in-network or not,” Kleinman said. The society surveyed doctors in December and found that almost 40 percent didn’t know how many plans they were participating in on the New York public exchange, he said.

The American Hospital Association also pointed to the insurers. “Since hospitals deal with more than 1,300 insurers, all with their own policies, insurers are in the best position to provide the information on what a patients’ out-of-pocket cost will be,” spokeswoman Marie Watteau said in an e-mail.

Insurers like the new New York law.

Empire – a unit of WellPoint Inc. – believes the law “will help protect consumers from outrageous, unexpected medical bills,” Sally Kweskin, a spokeswoman, said in an e-mail.

Providers should know which contracts they’ve signed, said Leslie Moran, vice president of the New York Health Plan Association, in a telephone interview.

“Probably the best thing is for patients to call their doctor and ask if they’re participating,” she said.

Emergencies

Even when all parties agree that consumers should be well informed, disclosure alone may not be enough protection in emergency cases, says Georgetown University professor Kevin Lucia.

“When someone’s having a heart attack or a baby, you can tell them someone’s not covered, but can they do anything about it?” Lucia said in a telephone interview. “It still puts the consumer in the awful situation of thinking about insurance when they are supposed to be focused on delivering their baby.”

Getting providers and payers to agree on how to handle reimbursement rates for emergencies is not an easy task.

Insurers say raising out-of- network reimbursement rates would discourage doctors from joining health plans.

Providers, meanwhile, don’t want to settle for lower rates.

“It’s an extremely complex problem,” Dianne Longley, a principal at insurance consulting firm Health Management Associates, said by telephone.

Longley previously worked in the Texas Department of Insurance and oversaw the advisory committee that helped come up with Texas’s patient protection legislation. “Politically it’s a very precarious position when the state starts mandating medical payment rates” typically are set in private contracts, she said.

Still, Longley encourages lawmakers to persevere. “Everyone agrees it’s a problem for the consumer but unfortunately, without regulation and legislation, the consumer is the one left holding the bag.”

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