Part Three
Implications for workers’ compensation?
Most readers of these notes (i.e., those following along because the topic is “UCR”) know that some states publish comprehensive workers’ compensation fee schedules while others do not. In states without fee schedules, a statute or regulation (or court decision) limits payments to health care providers with language such as “reasonable charges,” “usual and customary charges,” “prevailing charges,” or the like. The meaning of this language remains untested in many states.
Another provision in the national health care reform legislation, by the way, makes UCR one of the standard insurance terms the Secretary must define for uniformity’s sake in the Exchanges.
SEC. 2715. DEVELOPMENT AND UTILIZATION OF UNIFORM EXPLANATION OF COVERAGE DOCUMENTS AND STANDARDIZED DEFINITIONS ...
(g) Development of Standard Definitions.–
(1) In general.--The Secretary shall, by regulation, provide for the development of standards for the definitions of terms used in health insurance coverage, including the insurance- related terms described in paragraph (2) and the medical terms described in paragraph (3).
(2) Insurance-related terms.--The insurance-related terms described in this paragraph are premium, deductible, co- insurance, co-payment, out-of-pocket limit, preferred provider, non-preferred provider, out-of-network co-payments, UCR (usual, customary and reasonable) fees, excluded services, grievance and appeals, and such other terms as the Secretary determines are important to define so that consumers may compare health insurance coverage and understand the terms of their coverage.
At present, what UCR means for each group health insurer in my home state is as varied as Cuomo found it to be in New York. One local insurer defines UCR as a certain percentile in the Ingenix database, another defines it as an estimate of actual cost plus a reasonable profit, and still another as a percentage of the Medicare rate.
The PPACA is not workers’ compensation law, of course, but will the Secretary’s definition of UCR and other such terms for the purposes of the Exchanges constitute some persuasive authority as to what the same or similar terms mean in states’ workers compensation laws?
Likewise, will the numbers in a PPACA-funded independent UCR database (as well as its methodology) offer persuasive evidence to determining reasonable payment for the same or similar services provided to an injured worker?
Same question with respect to the FAIR Health database: will its numbers (as well as methodology) offer persuasive evidence to determining reasonable payment for the same or similar services provided to an injured worker? This question is pressing for two reasons. Just a few days ago FAIR Health issued a summary of its methodology for a Phase I release of the new database. The first surprise was that the database will be national in scope, not just for New York.
Another surprise was that FAIR Health will continue to use “derived,” as opposed to actual data, to fill gaps. Expect providers and payers both to complain about the following:
“3. In the event that there are fewer than 40 observations for a given CPT-geozip cell, FAIR Health will employ the following methodology:
· If there are fewer than 40 observations in a cell, FAIR Health will use claims data from the prior five years on a graduated basis proceeding year to year as necessary to broaden the cell to the requisite 40 observation threshold (adjusting charges from prior years using the Consumer Price Index);
· If the above adjustment yields fewer than 40 observations, FAIR Health will use two-digit geozips to broaden the cell;
· If the above adjustment still yields fewer than 40 observations, FAIR Health will use a state average to fill the cell
· If the above adjustment yields fewer than 40 observations, FAIR Health will use the regional average to fill the cell; and
· If the above adjustment yields fewer than 40 observations, FAIR Health will use the national average to fill the cell
This means if the number of records in a set is too small to determine “usual and customary charges in the community,” then FAIR Health will use historic data with an inflation factor to estimate “charges.” And if the number of records in the set is still too small, then it will enlarge “the community.”
Part Four
The last provision of the national health care bill I want to mention does not say “UCR,” but that has been read into it with new rulemaking.
SEC. 2719A. PATIENT PROTECTIONS ...
(b) Coverage of Emergency Services.--
(1) In general.--If a group health plan, or a health insurance issuer offering group or individual health insurance issuer, provides or covers any benefits with respect to services in an emergency department of a hospital, the plan or issuer shall cover emergency services (as defined in paragraph (2)(B))--
(A) without the need for any prior authorization determination;
(B) whether the health care provider furnishing such services is a participating provider with respect to such services;
(C) in a manner so that, if such services are provided to a participant, beneficiary, or enrollee--
(i) by a nonparticipating health care provider with or without prior authorization; or
(ii)(I) such services will be provided without imposing any requirement under the plan for prior authorization of services or any limitation on coverage where the provider of services does not have a contractual relationship with the plan for the providing of services that is more restrictive than the requirements or limitations that apply to emergency department services received from providers who do have such a contractual relationship with the plan; and
(II) if such services are provided out-of- network, the cost-sharing requirement (expressed as a copayment amount or coinsurance rate) is the same requirement that would apply if such services were provided in-network ....
To be perfectly honest, I did not realize at the time the national health care reform bill was passed, or at the time I said I would discuss this subsection at the upcoming CLE, that this was one of those parts in the legislation with an effective data six-months after passage and requiring rulemaking by the Secretary of HHS for its implementation. At the time, my topic was: expect the meaning and effect of this law to be tested in court (as well as predictions for the outcome in light of cases like Banner in Arizona, Baker County in Florida, and Prospect in California.)
It turns that while I was sleeping, the Secretary was drafting rules to implement this subsection. Interim final rules released June 22 by the departments of Health and Human Services, Labor, and Treasury that implement several provisions of the PPACA included rules interpreting this subsection. These interim final rules, Requirements for Group Health Plans and Health Insurance Issuers Under the Patient Protection and Affordable Care Act Relating to Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections, prohibit health insurance plans from excluding children under 19 from coverage due to pre-existing conditions, prohibit lifetime limits on coverage, restrict annual coverage limits, prohibit plan rescissions, and guarantee patients the right to choose basic health care professionals and receive emergency services. The rules take effect September 23. Comments were due August 27.
The rule interpreting this subsection reads:
[A] plan or issuer satisfies the copayment and coinsurance limitations in the statute if it provides benefits for out-of-network emergency services in an amount equal to the greatest of three possible amounts--
(1) The amount negotiated with in-network providers for the emergency service furnished;
(2) The amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable charges) but substituting the in-network cost-sharing provisions for the out-of-network cost-sharing provisions; or
(3) The amount that would be paid under Medicare for the emergency service.
The Secretary’s introduction to this rule offers the following:
“For a plan or health insurance coverage with a network, these interim final regulations provide rules for cost-sharing requirements for emergency services that are expressed as a copayment amount or coinsurance rate, and other cost-sharing requirements. Cost-sharing requirements expressed as a copayment amount or coinsurance rate imposed for out-of-network emergency services cannot exceed the cost-sharing requirements that would be imposed if the services were provided in-network. Out-of-network providers may, however, also balance bill patients for the difference between the providers' charges and the amount collected from the plan or issuer and from the patient in the form of a copayment or coinsurance amount. Section 1302(c)(3)(B) of the Affordable Care Act excludes such balance billing amounts from the definition of cost sharing, and the requirement in section 2719A(b)(1)(C)(ii)(II) that cost sharing for out-of-network services be limited to that imposed in network only applies to cost sharing expressed as a copayment or coinsurance rate
“Because the statute does not require plans or issuers to cover balance billing amounts, and does not prohibit balance billing, even where the protections in the statute apply, patients may be subject to balance billing. It would defeat the purpose of the protections in the statute if a plan or issuer paid an unreasonably low amount to a provider, even while limiting the coinsurance or copayment associated with that amount to in-network amounts. To avoid the circumvention of the protections of PHS Act section 2719A, it is necessary that a reasonable amount be paid before a patient becomes responsible for a balance billing amount. Thus, these interim final regulations require that a reasonable amount be paid for services by some objective standard. In establishing the reasonable amount that must be paid, the Departments had to account for wide variation in how plans and issuers determine both in-network and out-of-network rates. For example, for a plan using a capitation arrangement to determine in-network payments to providers, there is no in-network rate per service. Accordingly, these interim final regulations consider three amounts: the in-network rate, the out-of-network rate, and the Medicare rate.
The American Medical Association (AMA) and the American Hospital Association (AHA) both weighed in by letters to the Secretary dated August 27.
The AHA asked that this provision be withdrawn for reconsideration.
“First, by setting a default rate, the Department of Health and Human Services (HHS) is engaging in rate setting without the apparent authority to do so. Second, the approach adopted will not protect enrollees as intended and will have several unintended consequences:
· Insurers will have no incentive to form adequate networks, thereby undermining the purpose of contracting to form networks.
· Providers will lose any limited leverage they may have to “vote with their feet” when confronted with an unfair contract, and participating provider rates will eventually drop even further.
· Insurers will be the primary beneficiary of the provision by limiting plan liability at an artificially low level.
· Consumers may be the biggest losers as they may be asked to close what will be a growing gap between the “default” payment rate and the emergency providers’ expectations, leaving them vulnerable to even larger balance bills.
“While we understand the logic behind the proposed rule and its intent to require that a reasonable amount be paid by insurers for emergency services before a patient becomes responsible for a balance billing requirement, recent history suggests that neither the concept of a default rate – the median in-network rate or the Medicare rate – nor the other proposed alternative – to pay out-of-network providers the UCR charge for emergency services – are viable options. The in-network rate and the Medicare rate are both highly discounted.
“The problem with the other alternative – to use the same method the plan generally uses to determine payments for out-of-network services, generally UCR – is that no reliable database exists to calculate UCR. The only widely used database (owned by Ingenix, a wholly owned subsidiary of United HealthCare) has been under investigation and attack by law enforcement officials and in private litigation.
“It has been a long-held belief in the provider community that the Ingenix database routinely undervalued UCR. It was therefore no surprise to providers that New York Attorney General Andrew Cuomo accused Ingenix of operating “a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses.”
“Mr. Cuomo’s investigation quickly led to multiple multi-million dollar settlements with insurers who had relied upon the database. A portion of the settlement monies are now to be used to fund an independent not-for-profit database through FAIR Health, Inc., to properly and transparently calculate UCR. But this database does not yet exist. It is premature to finalize a rule that must rely on calculating UCR using a methodology that is, at a minimum, flawed.
“The AHA recommends that you withdraw the provision in 45 CFR 147.138(b)(3)(i) for reconsideration of its unintended consequences. We agree that it is critical to address reasonable compensation for out-of-network providers who render emergency services for plan enrollees. However, we believe this provision, as written, will create a disincentive for insurers to engage in good faith negotiations with providers, resulting in unreasonable payments for emergency services rendered by out-of-network providers and large balance bills for consumers. As such, it may benefit only health plans, to the detriment of consumers and health care providers ....
The AMA in its letter covered most of the same, but--instead of withdrawal--urged replacement of the HHS’ s proposed rule with the following language:
A group health plan or health insurance issuer complies with the requirements of this paragraph (b) (3) if it provides benefits with respect to an emergency service equal to the lowest of the three amounts specified in paragraphs (b) (3) (i) A); (b)(3) (i) (B), and (b) (3) (i) (C) of this section: (A) the billed charge; (B) the 80th percentile of the accurate UCR charge (see discussion of requisites for an accurate UCR database and methodology below); or (C) the rate negotiated with and agreed to by the non-contracted provider for the emergency services provided.
And, addressing the requisites for an accurate UCR database and methodology, the AMA wrote:
“... any UCR database must avoid all conflicts of interest. The database must exclude charges that reflect payments discounted under governmental or non-governmental health insurance plans. UCR rates must be calculated based on either 100 percent of the retail charges from all legally separate and distinct physician practices in the same geographic area and specialty or subspecialty or data from a random sample of no less than ten legally separate and distinct physician practices in the same geographic area and specialty or subspecialty, and exclude charges which are outdated. In determining a charge, the data must account for physician experience and expertise, and cannot include physician charges that reflect discounted payments. Data cannot exclude valid high charges, exclude charges accompanied by modifiers that include procedures and complications or pool data from physicians and non-physician providers. Any database must use data sources drawn from a diversity of health insurers and health care providers. All calculations should be based on a single database that is updated regularly, audited, certified and approved as statistically relevant by an independent auditor.
“... The AMA understands that the UCR database being developed by FAIR Health, the nonprofit entity established by AG Cuomo to implement his UCR settlements, is intended to meet these standards. Of course, evaluation of this new database will be necessary to ensure that it achieves its aspirational goal ....
Interestingly, the language proposed by the AMA resembles that of a Florida law on the same topic. Compare Sec. 641.513(5), Fla. Stat.
Reimbursement for services pursuant to this section by a provider who does not have a contract with the health maintenance organization shall be the lesser of: (a) The provider's charges; (b) The usual and customary provider charges for similar services in the community where the services were provided; or (c) The charge mutually agreed to by the health maintenance organization and the provider within 60 days of the submittal of the claim.
In Baker County Medical Services, 31 So. 3d 842 (2010), the First District Court of Appeals interpreted that law this way: “In the context of the statute, it is clear what is called for is the fair market value of the services provided. Fair market value is the price that a willing buyer will pay and a willing seller will accept in an arm's-length transaction.” The court said determining the “usual and customary charges in the same community” included “consideration of the amounts billed by providers, as well as amounts accepted.”
The latter part of that quote means that providers lost one of the principal arguments they were trying to win: that payment “amounts accepted” under network contracts should not be considered in determining “usual and customary charges” for out-of-network services.
Also compare Cal. Code Regs., tit. 28, § 1300.71, which reads :
(B) For contracted providers without a written contract and non-contracted providers, except those providing services described in paragraph (C) below: the payment of the reasonable and customary value for the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration: (i) the provider's training, qualifications, and length of time in practice; (ii) the nature of the services provided; (iii) the fees usually charged by the provider; (iv) prevailing provider rates charged in the general geographic area in which the services were rendered; (v) other aspects of the economics of the medical provider's practice that are relevant; and (vi) any unusual circumstances in the case; and (vii) any other relevant documentation necessary to determine reasonable and customary value.
The group health regulation in California adopting these factors did so following a 1992 workers’ compensation decision: Gould. The “fees usually charged by the provider” factor in Gould has been read to mean “payment amounts accepted” because the sometimes considerable difference between “charges” and “accepted payments” is “another aspect of the economics of a medical provider's practice that is relevant.” See Tapia v. Skill Master Staffing et al, 73 Cal. Comp. Cases 1338 (2008) (Appeals Board en banc decision).
