First surprise medical bills head to arbitration under Virginia’s new balance-billing ban

Doctors and hospitals are up 2-1 over insurance companies as the first three disputes resolved under the state’s ban on balance billing emerge from arbitration, according to a report released this month by state regulators.

The new approach, which went into effect Jan. 1, removes patients from fights between providers and insurers over unexpected medical bills.

In a typical case, someone might find themselves seeking treatment at an in-network hospital only to later learn that the facility contracted with an out-of-network doctor, who billed them for thousands of dollars that their insurance company wouldn’t cover.

Under legislation the General Assembly passed last year, patients will no longer receive those bills as long as they’re covered by a state-regulated health plan. Instead, when providers and insurance companies can’t agree on a fair payment, the case heads to arbitration and the two parties work it out amongst themselves.

In the first five months of the year, the State Corporation Commission’s Bureau of Insurance says it received 120 arbitration requests, accepted 102 and resolved three.

In the case won by an unnamed insurance company, a patient was billed $3,262 for anesthesia at an outpatient surgery center. The plan ultimately offered to pay $549 of the tab, while the anesthesiologist offered to lower the bill to $1,310.

The arbiter reviewing the case sided with the insurance company and the case was resolved. In either case, the amount owed by the patient would not have changed.

The two cases won by providers revolved around emergency treatment in a community hospital. The insurance company offered to pay $291. The provider requested $1,310.

Both sides stuck to their initial offer throughout the arbitration process.

All three cases were reviewed by different private arbiters, the costs of which were paid by the companies involved in the disputes.

Neither hospitals nor insurance industry representatives, both of which have been swamped with COVID-19, have much to say about how the new process is working.

“We haven’t heard any significant feedback at this point,” said Julian Walker, a spokesman for the Virginia Hospital and Healthcare Association.

The legislation lawmakers ended up passing after years of debate and work on the subject ended up hewing more closely to the approach favored by hospitals and doctors groups. Insurance companies had advocated for setting regional rates at which out-of-network providers would be compensated.

But Doug Gray, the director of the Virginia Association of Health Plans, said everyone is still feeling out the process.

“It’s early,” he said. “We really didn’t know what to expect.”

He said the big question facing state lawmakers is whether it will make sense to continue to keep the state-level system in place now that Congress has begun addressing the issue on the national level.

The new protections are scheduled to take effect in 2022 and, while the regulations are still being hammered out, the law lays out a system that removes patients from disputes at the outset and relies on arbitration when providers and insurer can’t agree.

The federal approach, however, will cover nearly all insurance plans, whereas Virginia is limited to state licensed plans, which excludes insurance provided by many large employers.