California Law Regarding Balance Billing
Frequently, a health insurance plan (especially an HMO) and a health
care provider have negotiated terms for payment for the services which
the provider renders for the people insured by that company. By this
agreement, the provider promises to accept an established amount for the
services rendered. These services are first paid for by any co-pay or
deductible that the patient owes under the terms of the plan with the
rest paid by the insurance company or other entity that sponsors the
plan. As a consequence of this agreement, the provider cannot ask the
patient for payment in excess of that established rate for service.
Putting this another way, the provider cannot charge a patient for the
difference between its "full charge" or "usual rate" and what the plan
pays -- a practice which is referred to as "balance billing." Balance
billing is also illegal for Medicare and Medicaid beneficiaries.
When a patient seeks care from a provider who does not have an
existing relationship with the patient's health plan, or does not follow
the plan's rules for using "in network" doctors or for getting a
referral from the patient's primary care physician before seeing a
specialist, the patient is independently obligated to pay for the care.
Sometimes the plan might pay some of the cost (as it were operating
under the old fashioned "medical insurance" type system), but there is
no promise to pay a going rate to the physician, and the physician has
not promised to accept what the insurance company pays under its rate
chart. Here, because the patient has decided to operate outside of the
rules for his health plan, he does not get the cost protection of the
health plan. Payments made by insurance offset but do not satisfy the
patient's debt.
What happens when an HMO plan member must obtain medical care in an
emergency? The hospital he goes to for service and the doctors on duty
there are obligated by law to provide the care needed to stabilize the
patient. The HMO is also obligated by law to pay for its members'
emergency care. A dilemma arises when the provider and the plan have not
already agreed on how payment for services will be handled: how much
must the plan pay, and is the provider obligated to accept the amount
paid by the HMO as payment in full? Providers claim that plans are
setting reimbursement rates unfairly, at sums too low to adequately pay
for the services. Plans claim that providers are charging rates that are
not fair, that are beyond the usual and customary charges for the
location.
The California Supreme Court, in Prospect Medical Group vs.
Northridge Emergency Medical Group (2009) 45 Cal.4th 497, ruled that
California law requires that the dispute about payment for the out of
network provider cannot involve the patient, but is between the provider
who must render the care and the plan which is obligated to pay for the
care. The provider cannot use balance billing to try to force the plan
to pay more by putting economic demands on the patient, and plans cannot
pay too little thereby forcing its members to pay the rest of a fair
compensation to the provider. As a result, when a plan member in an
emergency must get medical treatment from an out of network hospital or
physician, his financial obligations are the exact same as they would be
under the plan terms for in-network providers. The provider cannot bill
the patient but must work out payment with the health plan.