Ruling slows out-of-network doctors’ fight for fair pay

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The Washington State Medical Assn. is back to square one after a three-year court battle with the state over what constitutes fair payments for out-of-network emergency services.

The Court of Appeals of the State of Washington in May threw out a lawsuit by the medical association, saying doctors had no grounds to sue state Insurance Commissioner Mike Kreidler. Physicians had asked the court to compel Kreidler to enforce a state law that doctors say directs insurers to pay the full cost of patients’ out-of-network emergency treatment. Insurers’ failure to do so is forcing physicians to balance-bill patients, doctors said.

The decision highlights the ongoing frustration physicians face over out-of-network underpayments by insurers. Legal experts say such court decisions show the judicial system’s reluctance to interfere in state disputes regarding out-of-network payment issues. The Washington decision is discouraging to doctors across the country who are fighting for fair payments from insurance companies, physicians said.

The case illustrates the fact that state regulatory agencies often neglect their responsibility for ensuring fair payment of emergency care, said Myles Riner, MD, a managed care consultant and past president of the American College of Emergency Physicians California chapter.

“These agencies are responsible for ensuring the financial viability of, and access to, the emergency care safety net, the adequacy of health plan provider networks and the appropriate setting of benefits for covered services,” Dr. Riner said in an email. “Many have fallen down on this responsibility.”

The ruling stems from a 2010 lawsuit against Kreidler filed by the WSMA and the Washington chapter of the ACEP. The medical organizations said Kreidler was improperly interpreting a 1997 state law that says health carriers must cover emergency services provided by “noncontract providers,” according to court documents. The law means insurers are obligated to pay the full amount billed by noncontracted doctors, except for co-payments and nominal cost sharing, the plaintiffs said. But Kreidler has allowed health plans to pay only a portion of the noncontracted emergency doctors’ rates, the suit said. A trial court ruled in favor of Kreidler, and the medical association appealed.

In its May 21 opinion, the appeals court dismissed the suit, ruling that the plaintiffs should be suing a health insurer, not the insurance commissioner, judges said.

The state law “does not mandate the commissioner to do a particular, nondiscretionary act,” the opinion said. “If this statute creates one, is not a commissioner’s duty but is a health carrier’s duty, because it is directed at the health carriers, requiring them to cover certain services.”

Physicians left with few options

The medical associations’ complaint is with Kreidler, not an individual health plan, said Denny Maher, WSMA director of legal affairs. Suing a health plan would be a more complex and expensive legal fight, he said.

“We believed joining a health plan into the lawsuit was not necessary, because it is our feeling that the insurance plans are doing what the commissioner is allowing them to do,” he said. “Once you bring a health carrier in, they have a lot of legal resources in which the plaintiffs, including the WSMA, do not.”

The court’s decision was correct, said Stephanie Marquis, a spokeswoman for the Washington state Office of the Insurance Commissioner. She said the state’s interpretation of the law requires carriers to pay contracted and noncontracted emergency department doctors at the same rate, subject to the same “cost-sharing” arrangements such as co-pays, co-insurance and deductibles.

“What WSMA apparently wants is for carriers to be required to pay 100% of billed charges, or the amount that an ER doctor unilaterally decides to charge, when an ER doctor is not contracted with the carrier covering the patient,” she said. “As for what is fair, the important question isn’t what is fair to ER doctors, who can afford to pay lobbyists and law firms to protect their interests, or insurers, who can afford the same. The real issue is what is fair to patients.”

If carriers are required to pay 100% of billed charges to noncontracted physicians and clinicians, there is little incentive for providers to negotiate their rates with insurers, Marquis said in an email.

Maher said the medical association has decided to drop its legal fight for now and discuss other options.

The Washington ruling is one of several court battles in recent years related to insurer underpayments. In July 2012, the California Medical Assn. and more than 50 physicians sued Aetna for allegedly underpaying out-of-network physicians. CMA said the insurer is refusing to authorize some out-of-network services and illegally terminating the contracts of doctors who make such referrals. Also in 2012, the Los Angeles County Medical Assn. sued Health Net, claiming that the plan routinely denies payment for lifesaving health care services.

Fears of ban on balance billing

When insurers do not fairly pay out-of-network doctors, in-network physicians lose their negotiating power with such companies, said emergency physician Liam Yore, MD, a spokesman for ACEP.

“It’s much more difficult for emergency physicians to contract with insurance companies,” he said. “If we threaten to go out of network, the insurer stands to save money.”

When out-of-network physicians attempt to recoup the remainder of their bills from patients, they often are seen as the enemy to patients and legislators, Dr. Yore said.

“It makes us look like the bad guys, because we’re the ones sending the bill, when from our perspective, it’s the insurers that are the bad actors,” he said. “The patients pay their premiums. They expect that their medical bills will be covered. The insurers are defaulting on that expectation.”

In Washington, physicians are concerned that the appeals decision will lead to legislation banning balance billing, Maher said. While the case was pending, a bill that would restrict balance billing was introduced, but lawmakers halted the bill until the WSMA lawsuit was resolved.

At least eight states restrict noncontracted physicians’ ability to bill patients. In California, the prohibition came from a 2009 state Supreme Court decision concluding that state laws clearly prohibit doctors from turning to patients for outstanding bills that health plans refuse to cover.

The decision has resulted in a substantial reduction in pay for out-of-network physicians and a decrease in on-call specialists who previously provided emergency care, Dr. Riner said.

The decision has “really hurt the emergency services safety net in California and was responsible for a lot of the on-call specialists leaving on-call rosters,” he said. “We have a serious problem with on-call specialists to the extent that we have to transfer patients long distances to receive care they used to receive at their local hospitals.”

American Medical Association policy supports the right of the physician to balance-bill a patient for any care given, regardless of method of payment, where permissible by law or contractual agreement.

Patients and legislators will continue to fight balance billing as long as states refuse to step in and address the problem of underpayment by insurers, Dr. Yore said.

“Patients understandably get angry when they receive bills that they feel they shouldn’t be responsible for,” he said. “Patients are going to continue to complain, and lawmakers are going to view it as a consumer protection issue they need to solve. We’re going to see this issue cropping up until it gets resolved, and you’re going to see this in other states where there hasn’t been a definitive solution.”