Washington, Texas Use Arbitration to Take Steps Against Surprise Billing

States continue their efforts to curb surprise medical bills, even as lawmakers push for a federal solution.

Washington and Texas became two of the latest states this week to take steps against surprise billing. States continue to move on the issue, even as action at the federal level heats up.

Under a new law in Washington taking effect Jan. 1, 2020, the amount an out-of-network provider will be paid by an insurer must be the "commercially reasonable" amount, based on payments for the same or similar service in a similar geographic area.

It will use a binding arbitration approach when an insurer and provider can't agree on a price for the covered services.

The law also will:

• Prevent patients from getting a surprise medical bill when they receive emergency care from an out-of-network hospital or get care at an in-network facility but are treated by an out-of-network provider
• Require insurers, medical providers, and facilities to give consumers a new notice detailing their rights and letting them know when they can and cannot be balance billed
• Require insurers, medical providers, and facilities to keep updated information about provider networks on their websites
• Allow the state insurance commissioner's office to refer the provider to the Department of Health for disciplinary action if a provider is continuing to surprise bill consumers

Arbitration is also part of surprise billing legislation in Texas, where the legislature passed SB 1264 this week. It prevents surprise medical billing of Texas consumers with state-regulated plans, according a statement from Sen. Kelly Hancock. The Texas Hospital Association supports the legislation.

The legislation:

• Prohibits surprise billing of consumers in situations where the patients have no choice which provider they see or which facility they visit, including medical emergencies, non-network care at in-network hospitals, and out-of-network lab and imaging work
• Establishes an arbitration process to eliminate the need for patient-triggered mediation and provides state regulatory authority over that arbitration

The merits and pitfalls of arbitration was a topic of debate yesterday at a House Ways and Means Health Subcommittee hearing on surprise medical bills, during which witnesses from the American Medical Association, American Hospital Association, America's Health Insurance Plans, and ERISA Industry Committee each offered their own—often differing—solutions to the surprise billing problem.

"Any solution to this multi-faceted issue must include a future payment structure to providers in out-of-network situations," Ashley Allen, vice president of solution strategy for Waystar, noted via email. "Options such as bundled payments, paying in-network rates, or a percent of Medicare rates are being debated, but it's clear that identifying a payment structure that satisfies all stakeholders is going to be a challenge."

"The winning solution will likely entail a combination of process change, incentive alignment, and the adoption of modern technology to facilitate," she continued. "One thing remains clear, everyone wants to remove this financial burden from patients and move forward with a legislative solution."