All of us in California should get behind the opportunity to protect patients from out-of-insurance-network health care bills. That’s why it is unfortunate that some in the Legislature want to couple this unifying issue of helping patients with other controversial and polarizing issues that threaten the outcome.
In February, Assemblymember David Chiu (D-San Francisco) introduced the broad strokes of a proposal, AB 1611, to close state loopholes and insulate people from unexpected bills incurred when receiving emergency care at a hospital that is not in their insurance company’s provider network.
Some believe the state should step in and set lower rates for hospitals to make care more affordable.
Immediately, California’s hospitals stood firmly and vocally behind the proposal, tweeting on Feb. 25: “The last thing patients should worry about when in the hospital is their bill. #AB1611 helps protect against balance billing and we look forward to working with @DavidChiu and @Scott_Wiener on a smart solution. @JimWoodAD2 #CAleg.”
But in putting pen to paper, the author and sponsors of this bill introduced a second, controversial issue: in addition to ensuring patients pay no more than in-network amounts for out-of-network care (good), they inserted a provision that will discourage insurance companies from contracting with hospitals, which will likely result not in lower consumer costs, but in even higher insurance company profits (bad).
Proponents of the added provision, including insurance companies, say the state should step in and set lower rates for hospitals to make care more affordable. But the outcome will be much different if you look carefully at what rate-setting would actually do.
The bill already protects consumers by ensuring out-of-network patients are treated in the same manner as in-network consumers who need ER care. The added rate-setting provision in AB 1611 primarily serves to lower what insurance companies pay hospitals for that care. Rate setting, in this case, benefits insurance companies, not consumers. And there is nothing in this bill that requires or ensures that insurance company savings will be actually passed on to consumers in the form of lower health insurance premiums. In fact, recently released data show the Consumer Price Index for health insurance costs spiking 10.7%, while costs for hospital and related services rose just 1.4% for the same period.
AB 1611 puts a thumb on the scale of negotiations in favor of insurance companies, not consumers.
By legislating the amount insurers pay hospitals for ER care, AB 1611 helps insurance companies by making it easy for them to circumvent good-faith business practices. Insurance companies should be contracting widely with hospitals and doctors to ensure their networks of available providers are adequate to serve their customers. Broad-based contracting would prevent many patients from being out-of-network in the first place.
Unfortunately, AB 1611 creates a disincentive for insurance companies to contract with hospitals because, absent a contract, the amount an insurance company will owe a hospital will “default” to a rate set in law. And if insurance companies contract less and less, benchmark rates become meaningless.
The bottom line: in its current form, AB 1611 puts a thumb on the scale of negotiations in favor of insurance companies, not consumers.
Hospitals agree that patients should be protected from unexpected medical bills. We agree and will continue to work with the Legislature to explore paths toward more affordable care. Right now, California has the opportunity to protect patients from out-of-network billing without involving the controversial practice of rate-setting and its consequences. Let’s not squander this opportunity by conflating these two issues.
Editor’s Note: Carmela Coyle is the president and CEO of the California Hospital Association.