July 30

Legislation Aims to Tackle Health Care Costs

The Senate Health Committee in May 2019 released a draft bill that aims to reduce health care costs, taking particular aim at the lack of transparency in the system and the scourge of surprise medical bills.

The draft legislation is the first serious attempt at addressing the drivers behind costs in a system that is starting to see double-digit inflation again.

Surprise bills

Unusually, the draft puts forward three options for tackling surprise medical bills:

Option 1: This would require hospitals to make a guarantee to patients that all of its physicians are in-network. The option gives doctors the choice to either contract with the hospital’s insurers or stay out of network and subject their own charges through the hospital. That way, the insurer would get just one bill and the fees would be charged at in-network rates.

Option 2: Insurers, hospitals or doctors could opt for arbitration to resolve any disputed charges that are more than $750. The mediator would research median insurer-negotiated rates for the same procedures and in the same geographical area before deciding on a settlement amount.

Option 3: An insurer would pay the surprise bill at the median contracted rate for that region to the hospital or doctor in question.

Tackling transparency

The bill also has a number of other provisions, including:

  • Requiring air ambulances to itemize medical charges apart from transportation costs in their bills to health plans and patients.
  • Requiring that patients receive their full bill within 30 business days of treatment. If it’s later than that, the patient would not have to pay the bill.
  • Hospitals, doctors and health insurers would be required to provide, upon request by a patient, a “good faith” estimate of their out-of-pocket costs for a procedure within 48 hours of the request.
  • Plans would be required to keep their provider directories up to date. If patients can prove that their plan’s directory steered them to an out-of-network physician or hospital, they would not be required to pay out-of-network rates and instead pay the negotiated rates of their plan.
  • Banning gag clauses that some hospitals include in their insurer contracts. This means that patients must be allowed to see a hospital’s cost and quality data.
  • Barring “all-or-nothing” clauses, through which hospitals force insurers to contract with all of their facilities or none.
  • Pharmacy benefit managers (PBMs) would have to send quarterly reports on the costs, fees and rebates to the employer plans they contract with.
  • PBMs would be barred from charging higher prices for drugs than what they pay drug-makers, and they would be required to pass along 100% of manufacturer rebates to plan sponsors.


Employee Benefits, Group Benefit Solutions, Healthcare, Healthcare costs, surprise bills

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