Health Care Equitable Payment Act Exposed

The Health Care Equitable Payment Act was considered by ALEC's Health and Human Services Task Force at the 2011 States and Nation Policy Summit on December 2, 2011. 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

SUMMARY

This Act allows puts certains guidelines in place to prevent third-party payers from engaging in discriminatory payment practices with independent healthcare providers and self-paying patients.

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 patients.

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 and most economical method of purchase of medical services.

Another important aspect of MSAs was the projected growth of cash balances over the years, as judicious use would likely allow excess funds to accumulate. A restricted form of the idea, Health Savings Accounts (HSAs), enacted into federal law, permits a federal tax advantage.

The concept should have been a great success in reducing spending and prices, while expanding freedom of choice. However, success has been greatly limited, largely because of discrimination against self-paying patients, or patients using an out-of-network provider. Hospitals have a practice of charging 400% to 1,000% of their baseline rates to these non-preferred consumers.

Thus, even if a patient using an HSA plus a high-deductible health plan (HDHP) should receive a 25% discount after being subjected to a 400% increase, he would still be paying 300%, or three times the amount the hospital willingly accepts from contracted insurers. If a 1,000% charge rate were to be used, a 25% reduction would result in the individual paying 750%, or 7.5 times as much as multi-billion-dollar insurance cartels pay for the same service.

As other large insurers developed HSAs and HDHPs, they tied them to in-network “providers,” negating their most important purpose, to provide complete freedom to choose one’s physician and hospital by using one’s own money.

Third-party payers are now punishing their subscribers for seeking out-of-network physicians, even in the event of a medical emergency. 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—often a larger one. Additionally, the percentage copay is always higher for the out-of-network physician, even if he was the only one available in an emergency.

Worse, it is not based upon the billed charges, but rather upon the “usual and customary rates” (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 they 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.

Another major problem with third-party payment is that it is much lower for surgery performed in a physician-owned outpatient surgery center, or for imaging studies or other procedures done in independent facilities, than for exactly the same procedures performed in hospital-owned facilities. This payment scheme discriminates against truly independent practitioners and stifles competition. It promotes the formation of cartels, contrary to the purpose of the Sherman Antitrust legislation. Discriminatory payment is threatening the viability of independent physicians and facilities.

The Patient Protection and Affordable Care Act apparently realizes this, and prohibits hospitals that 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 501(r)(5).

MODEL LEGISLATION

Section 1. Short Title.

This Act shall be known as “Health Care Equitable Payment Act.”

Section 2. Antitrust.

A. Any express or implied agreement with an insurance company concerning prices charged to the self-paying patient or out-of-network patient shall constitute unlawful restraint of trade and be actionable.

B. For state accreditation, hospitals must modify their nondiscrimination policy to include self-insured patients. For example: “The hospital must not discriminate on the basis of age, gender, race, ethnicity, national origin, sexual orientation, disability, or payment method.”

Section 3. Prohibition of State Discrimination Against Independent Providers.

A. No state-funded benefits programs, including but not limited to worker’s compensation, Medicaid, or state employee benefits, shall pay more to favored providers such as hospitals or hospital-owned facilities than to independent physicians or facilities for equivalent services.

Section 4. Protection of the Right of Private Contract of Individuals.

A. Any agreement, understanding, or practice, written or oral, implied or expressed, between any hospital and insurance company that shifts higher costs to the self-paying patient is hereby declared to be unlawful, null and void, and of no legal effect.

(Drafting Note: This prevents insurers from interfering with the free bargaining between an individual and a hospital, and is analogous to “right-to-work” legislation.)

B. Hospitals that claim tax benefits under Section 501(c)(3) must offer self-insured or self- paying patients, including those with HSA/HDHPs, billing rates that are comparable to those that the hospital generally accepts from insurance companies.

C. No hospital or medical facility may refuse to accept payment from a patient based directly or indirectly on a contract with an insurance company.

(Drafting Note: This prevents insurers from interfering in the right of hospitals to offer and be paid by patients for services that are “covered” but denied.)

Section 5. {Severability Clause}

Section 6. {Repealer Clause}

Section 7. {Effective Date}