|Note: This is TOA’s analysis of the final version of SB 1264. It has yet to be signed into law by Governor Abbott. In addition, it will require an extensive rule-making process by the Texas Department of Insurance.
The following is provided for informational purposes only. It does not provide legal guidance.
A 2009 Texas law created a mediation process in which a patient who receives a balance bill for a certain amount may trigger a mediation process to address the balance bill. In these scenarios, a patient must start the mediation process.
The 2019 Texas Legislature – led by Sen. Kelly Hancock (R-North Richland Hills), Sen. John Whitmire (D-Houston), Rep. Tom Oliverson, MD (R-Spring) and Rep. Trey Martinez Fischer (D-San Antonio) – created an overhaul of the state’s out-of-network law as it relates to “surprise billing” through SB 1264. In short, it bans the practice of sending a balance bill to a patient for out-of-network services (with certain exceptions).
It is important to note that this law does not extend to ERISA-based plans and certain types of services, such as emergency medical services (EMS). In addition, a provider may have sign-off from a patient for a balance bill (more below).
SB 1264 applies to health care provided beginning on January 1, 2020; an extensive rule-making process at the Texas Department of Insurance (TDI) will be necessary to define many of the standards.
- SB 1264 prohibits out-of-network physicians and mid-level providers providing services in a licensed facility from balance billing a patient for an amount that is beyond the usual and customary (or agreed to rate) initial payment to the provider, the payment of copays, coinsurance, and deductible. In addition, SB 1264 prohibits out-of-network facilities (hospitals, ASCs, birthing centers, and freestanding emergency medical centers) from balance billing for the same scenarios.
- Out-of-network diagnostic imaging (defined later in this summary), laboratory services, and “supplies” are also affected by this ban on balance billing.
- EMS agencies are exempt from the ban.
- An out-of-network physician providing a service at an in-network licensed facility may balance bill for a scheduled service with a written acknowledgment from the patient.
- If a physician or mid-level provider does not agree with the payment they may go to arbitration. Facilities may go to mediation.
- SB 1264 does not apply to ERISA plans, which are regulated by the federal government. There was a discussion about bringing ERISA plans into the state’s current mediation process.
- “The changes in law made by this Act apply only to a health care or medical service or supply provided on or after January 1, 2020.”
SB 1264 applies to state-regulated HMOs, PPOs, EPOs, and the Employees Retirement System of Texas (ERS) and the Teacher Retirement System of Texas (TRS).
The bill exempts from these requirements a nonemergency health care or medical service:
- that an enrollee elects to receive in writing in advance of the service with respect to each out-of-network provider providing the service; and
- for which an out-of-network provider, before providing the service, provides a complete written disclosure to the enrollee that:
- explains that the provider does not have a contract with the enrollee’s health benefit plan;
- discloses projected amounts for which the enrollee may be responsible; and
- discloses the circumstances under which the enrollee would be responsible for those amounts.
This will require clarification in the TDI rule-making process.
A carrier, after determining coverage and receiving a clean claim, which is defined in statute as complete with an enumerated list of information, shall pay the physician, provider, or facility the usual and customary rate (UCR). For emergency care, the UCR is defined as the 50th percentile of the maximum allowable rate as provided in the carrier’s master benefit plan.
The payment shall be sent directly to the physician, provider, or facility within 30 days of an electronically submitted clean claim and 45 days for a paper-submitted clean claim.
The carrier must send an explanation of benefits to the patient and the provider that itemizes the copay, coinsurance, and deductible for which the patient is liable and for what they may be billed. In addition, the carrier must include a statement indicating that the insured may not be billed and is not liable beyond the enumerated amounts.
Physician & Midlevel Provider Arbitration
SB 1264’s new arbitration process applies to physicians and midlevel providers:
- If an out-of-network physician or midlevel provider providing care at an in-network facility cannot settle the claim for emergency or scheduled care (that did not receive sign-off from the patient) within 30 days and cannot mutually agree on an arbitrator, the provider will notify TDI, which will then choose an arbitrator from a list of approved arbitrators.
- Arbitrator’s decision: Not later than the 51st day after the date the arbitration is requested, an arbitrator shall provide the parties with a written decision in which the arbitrator:
- Determines whether the billed charge or payment made by the health benefit plan issuer or administrator, as those amounts were last modified during the issuer’s or administrator’s internal appeals process, if the provider elects to participate, or the informal settlement teleconference required by Section 1467.084(d), as applicable, is closest to the reasonable amount for the services or supplies determined in accordance with Section 1467.083(b); and
- Selects the amount determined to be closest under Subdivision (1) as the binding award amount.
- An arbitrator may not modify the binding award amount selected under Subsection (a).
- If either party is still aggrieved within 45 days of the arbitrator’s final report, the aggrieved party may file a suit to determine whether the arbitrator’s decision is properly based on substantial evidence standard of review. As a result, the court may only consider the documents submitted to the arbitrator and the criteria by which the decision was required to be made to determine whether the correct decision was made.
- The parties shall evenly split and pay the arbitrator’s fees and expenses.
An arbitrator is required to consider the following items to determine a reasonable payment:
- Fees paid to the out-of-network provider for the same service/supplies in out-of-network situations.
- Fees paid by the carrier for the same services to other out-of-network providers in the same region.
- Level of training, education, and experience of the out-of-network provider.
- The out-of-network provider’s billed charges for out-of-network services.
- Circumstances and complexity of the particular case.
- Patient’s characteristics.
- The 80th percentile of billed charges in the geozip according to a benchmarking database selected by TDI.
- 50th percentile of rates in the geozip according to a benchmarking database selected by TDI.
- The history of network contracting between the parties.
- Historical data for the 80th and 50th
- An offer made by either party in the informal teleconference.
SB 1264 prohibits TDI from selecting an organization that is financially affiliated with a health benefit plan issuer. The organization is likely to be FAIR Health, and those rates may not be based on facility payments.
Mediation for Facility Services
Instead of being subject to arbitration, out-of-network facilities would be subject to mediation (with the patient taken out of the process). The legislation does indicate that facility mediation process does not apply to the professional or technical component of a physician service.
SB 1264 requires TDI to take the following actions:
- Establish and administer a mediation program to resolve disputes over out-of-network provider charges.
- Adopt rules, forms, and procedures necessary for the implementation and administration of the mediation program, including the establishment of a portal on the TDI website through which a request for mediation may be submitted and to maintain a list of qualified mediators for the program.
- Maintain a list of qualified mediators for the program.
Facility Mediation Process
The following process has been put in a place by SB 1264:
- If an out-of-network facility and a carrier cannot settle the claim for emergency care or mutually agree on a mediation within 30 days of the initial require for dispute resolution, the facility must notify TDI, which will then choose a mediator from an approved list of mediators.
- Mediation shall be no later than the 180th day (six months from the request for dispute resolution).
- The mediator must file the report within 45 days after the mediation.
- If there is no agreement, a party may file a civil action within 45 days after the mediator’s report is filed to determine the payment.
- A facility or health benefit plan may request mediation through a portal on TDI’s website.
Diagnostic Imaging & Laboratory Services
Diagnostic imaging and laboratory services are listed in both the mediation and arbitration portions of the bill for emergency services. Whether the services are subject to the mediation or arbitration depends on whether the service is affiliated with a physician or a facility.
SB 1264 indicates that the balance billing prohibition does not apply to out-of-network diagnostic imaging for non-emergency services if the enrollee elects to receive in writing in advance of the service with respect to each out-of-network provider providing the service and that the enrollee receives a written disclosure with the following terms:
- An explanation that the provider does not have a contract with the enrollee’s managed care plan.
- A disclosure that projects amounts for which the enrollee may be responsible.
- A disclosure regarding the circumstances under which the enrollee may be responsible for those amounts.
Diagnostic Imaging & Laboratory Service Definition
According to the SB 1264:
“Diagnostic imaging provider” means a health care provider who performs a diagnostic imaging service on a patient for a fee or interprets imaging produced by a diagnostic imaging service.
“Diagnostic imaging service” means magnetic resonance imaging, computed tomography, positron emission tomography, or any hybrid technology that combines any of those imaging modalities.
“Laboratory service provider” means an accredited facility in which a specimen taken from a human body is interpreted and pathological diagnoses are made or a person who makes an interpretation of or diagnosis based on a specimen or information provided by a laboratory based on a specimen.
“Smaller” disputes with the same carrier and the same provider may be bundled together if they do not exceed $5,000. In addition, no claim in the bundle may not exceed $1,500.
Balance Billing Prohibition Report
SB 1264 requires TDI to conduct a study each biennium on the effects of SB 1264. The study will include:
- Trends in billed amounts for health care or medical services or supplies, especially emergency services, laboratory services, diagnostic imaging services, and facility-based services.
- Comparison of the total amount spent on out-of-network emergency services, laboratory services, diagnostic imaging services, and facility-based services by calendar year and provider type or physician specialty.
- Trends and changes in network participation by providers of emergency services, laboratory services, diagnostic imaging services, and facility-based services by provider type or physician specialty, including whether any terminations were initiated by a health benefit plan issuer, administrator, or provider.
- Trends and changes in the amounts paid to participating providers.
- The number of complaints, completed investigations, and disciplinary sanctions for billing by providers of emergency services, laboratory services, diagnostic imaging services, or facility-based services of enrollees for amounts greater than the enrollee’s responsibility under an applicable health benefit plan, including an applicable copayment, coinsurance, or deductible.
- Trends in amounts paid to out-of-network providers.
- Trends in the usual and customary rate for health care or medical services or supplies, especially emergency services, laboratory services, diagnostic imaging services, and facility-based services.
- The effectiveness of the claim dispute resolution process under Chapter 1467.
- In conducting the study described by Subsection (a), the department shall collect settlement data and verdicts or arbitration awards, as applicable, from parties to mediation or arbitration under Chapter 1467.
TDI will be required to collect data on a quarterly basis from the health plans.