Three years ago, California passed one of the strongest laws in the country to outlaw surprise medical billing. That legislation made sure that when patients went to a hospital covered by their insurance, doctors couldn’t later ambush them with unexpected bills.
Now lawmakers who want to ban surprise bills nationally are gravitating toward a California-style approach, making the California experience a key exhibit in the debate.
“Every single office I’d go into, I would start talking about our experience in California,” said Anthony Wright, executive director of the California patient advocate group Health Access, who spent part of this summer lobbying members of Congress on the issue. “And they would stop me and say, yeah, you’re the fifth person who has come in to talk to us about that.”
The parties who have watched California’s performance disagree, sometimes vehemently, on whether the prospect is rosy or grim. Doctor groups, particularly those representing specialties like anesthesia and emergency medicine, argue that a national version of a law like California’s would disrupt medical care so much that patients would have difficulty finding a doctor.
But two new reports — an analysis of state data and a study of insurer claims — found no such warning signs in the state. Those studies, both published this week, suggest the bill has more or less worked as planned.
California’s surprise billing law limited the payments for out-of-network doctors to a formula based on what other doctors were being paid. Bipartisan bills passed by committees in both the U.S. House and Senate this summer use a roughly similar approach, often described as benchmarking.
The legislation, which has yet to advance to the floor of either the House or the Senate, has enemies. One dramatic television advertisement, run by a dark money group called Doctor Patient Unity, shows an ambulance pull up to an abandoned emergency room, warning that benchmarking could mean closed hospitals. The group, which is funded by two large private equity-backed physician staffing firms, has spent more than $28 million to oppose the bills.
A letter to Congress from the California Medical Association described the California law as “failing,” and provided four pages of examples of insurance companies dropping doctors from their networks or demanding substantial payment cuts. “The California law is reducing access for patients to in-network physicians and jeopardizing access to on-call physician specialists needed in medical emergencies,” the letter says.
But new data from California state regulators and other sources suggest that the situation isn’t as dire as the doctors’ groups describe. Since the California law took effect in 2017, there has been little evidence that patients’ access to health care has suffered.
In other words: Some doctors may be hurting from a pay cut, but that doesn’t seem to be hurting patients.
“It is possible that there are cases where they are receiving less money for in-network and out-of-network services,” said Erin Duffy, an adjunct policy researcher at the RAND Corporation and a research fellow at the U.S.C. Schaeffer Center for Health Policy and Economics, who has studied California’s surprise billing law. “They may be experiencing marginal losses and, while loss aversion is real, I don’t think providers are going to be exiting the practice of medicine over this.”
A new analysis, from researchers at the U.S.C.-Brookings Schaeffer Initiative for Health Policy, examined a large sample of insurance claims data from the company FAIR Health to see whether the law had caused insurers to drop doctors from their networks. In contrast with the claims from the California Medical Association, that study found the opposite had occurred: Compared with the period before the law was enacted, the percentage of anesthesiologists, pathologists, assistant surgeons, radiologists and neonatologists whose work was covered by insurance increased by an average of 17 percent. The research team included Ms. Duffy.
A study published by the insurance industry last month in the American Journal of Managed Care also found that the number of California doctors in their networks had increased, not declined, since the law kicked in.
Consumer complaints to the state’s Department of Managed Health Care have been largely flat. A report ordered by the state legislature found that between zero and 20 percent of patients who were treated at an in-network hospital were still receiving out-of-network care, depending on the insurer. Those numbers, which could not be compared with previous rates, were published in March to little fanfare. Only a tiny fraction of doctors have used an appeals process to dispute their benchmark payments. Those state indicators were highlighted in a new white paper from Health Access published Thursday.
“We have not seen evidence indicating negative impacts for consumers’ access to care as a result of this new law,” said Rachel Arrezola, a spokeswoman for the department, in an email.
The California Medical Association noted that the state agency hadn’t examined the full universe of health plans that might have been affected by the law. Around 10 percent of health plans in the state are regulated by a different agency.
There is less data about what doctors are being paid under the new system. The letter from the California Medical Association provides examples of insurers that are demanding rate cuts as high as 40 percent. Blue Shield of California, one of the state’s largest insurers, told Senate staff in a letter that its payment rates had increased since the law went into effect, even as the number of doctors in their network increased. But its experience may not be universal. The Congressional Budget Office estimates that the average payment to affected doctors could end up falling by between 15 percent and 20 percent if the bill before the Senate becomes law.
A recent survey from the Kaiser Family Foundation found that 78 percent of adults favor a solution to surprise medical bills. When told this could reduce doctors’ pay, 57 percent still support the idea.
Michael Champeau, the president of the Associated Anesthesiologists Medical Group in Palo Alto, said he was the first physician to try out California’s appeals process. After the law passed, it prompted his practice to try to sign contracts with all the nearby insurance companies, most of which obliged, offering similar prices. Blue Shield, he said, was the exception. “We made several calls to their contracting officer,” he said. “No one ever returned our phone calls. They just refused to acknowledge we existed.”
Matthew Yi, a spokesman for Blue Shield, said the company did respond to Dr. Champeau’s company in the summer of 2016, with a request for materials to begin a contract negotiation. He said the practice did not reply for several months, and then only to update its address.
After his practice treated Blue Shield patients at Stanford Hospital, Dr. Champeau received an automatic payment 35 percent lower than what the other insurers pay him, he said. After a long process, he lost the appeal. “Why on earth would they want to contract with me for the average going rate in my area when they knew they were going to be able to pay me 35 percent less?” he said.
Dr. Champeau, who is now the treasurer for the American Society of Anesthesiologists, has been to Washington and discussed his experience with Anna Eshoo, the chairwoman of the Energy and Commerce Health Subcommittee, and with Speaker Nancy Pelosi.
Ms. Duffy, the RAND researcher, said this was a common refrain from the doctors she interviewed for her study, who lamented that the new law meant they had less leverage in contract negotiations.
“They said the tenor of the conversation had changed,” she said. “It had been made clear to them they were in a weak position. And that was very upsetting to them.”