Introduction I. TYPES OF HEALTH CARE CONSUMER FINANCIAL DISTRESS AND POLICY RESPONSES A. Surprise Medical Bills 1. ACA Limits on Cost-Sharing 2. Network Adequacy/Provider Directories 3. Surprise Medical Bills and Balance-Billing Laws 4. Gaps in Policies for Surprise Medical Bills B. Opaque Prices and Facility Fees 1. Price Transparency 2. Site Neutral Payment 3. Gaps in Policies Addressing Opaque Prices and Facility Fees C. Medical Debt Collection and Reporting 1. IRS Rules for Tax-Exempt Hospitals 2. State Medical Debt Collection Laws 3. CFPB Activity on Medical Debts 4. Gaps in Policies Addressing Medical Debt Collection II. CONSUMER FINANCIAL PROTECTION IN HEALTH CARE A. Model Policy to Address Surprise Medical Bills B. Model Policy to Address Opaque Prices and Facility Fees C. Model Policy to Address Medical Debt Collection Practices III. ERISA AND THE NEED FOR A FEDERAL SOLUTION A. ERISA Preemption of State Consumer Financial Protections 1. Express Preemption Under ERISA Section 514 2. Preemption of State Remedies by ERISA Section 502 B. Escaping ERISA's Black Hole 1. Regulation by the Department of Labor 2. Amend ERISA 3. FTC Designation of Surprise Billing as an Unfair Trade Practice CONCLUSION APPENDIX 1 INTRODUCTION
Public school teacher and father of three, John Elfrank-Dana, slipped on the steps of the subway and hit his head, ending up with a serious injury requiring emergency cranial surgery. (1) Although Elfrank-Dana went to an emergency room that was within his insurance network, some of the physicians who treated him were out-of-network, which meant that he faced $106,000 in medical bills for inadvertent out-of-network care that was not covered by his insurance. His insurance covered a portion of the bill, but there was nothing to prevent the out-of-network physicians from billing Elfrank-Dana for the difference between the amount his insurance plan paid and their full charges. (2) Such surprise medical bills are not limited to emergencies--Peter Drier underwent a planned surgery to repair herniated disks from his orthopedist, who was in-network, at an in-network hospital. (3) Nevertheless, Drier received a $117,000 bill from a surgeon he had never met who stepped in to assist with his operation. The surgeon was out-of-network, which meant Drier was on the hook for the six-figure difference between the surgeon's full charges and what his insurance covered. (4)
Surprise medical bills are not the only problems health care consumers face. Another frustration stems from the opaque and a la carte nature of medical bills, such as the unanticipated facility fees that may be added to a physician's fees for outpatient care. David Hubbard had a heart condition and required periodic echocardiograms. (5) When he went to receive his routine echocardiogram at his cardiologist's office, he was shocked that the fee had jumped to $1605 from $373 just six months earlier. (6) Nothing about the service had changed, except that his cardiologist's practice was purchased by a local hospital system and was able to bill an added facility fee as an outpatient department of the hospital. (7)
Even consumers who try to protect themselves cannot always avoid unexpected medical bills. When Rod's wife, Debbie, developed chest pains, Rod tried to shop around. (8) He used an app provided by their insurer, Aetna, to compare prices of emergency rooms nearby. At First Choice, the freestanding ER they selected, they tried to get a sense of how much the visit would cost, but no one at First Choice would give them a cost estimate. First Choice's staff assured them, however, they would not be charged a facility fee. Their $4605 bill for the visit ended up including a $2258 facility fee. The bill was sent to a collection agency, which can occur even while the patients are in the process of disputing or verifying their charges and coordinating with their insurer over how much they owe. (9) Although Rod and Debbie resolved their billing dispute, other patients are not so lucky, with some discovering that their medical bills have harmed their creditworthiness or worse, that they are being sued by a debt collector for their unpaid bills. (10)
These stories paint a fairly common picture of a health care consumer's financial experience with the health care system. Prior to their health care encounter, patients face inscrutable price opacity as they try to anticipate the financial ramifications of touching the health care system. The financial distress mounts after the service has been rendered, with the arrival of involuntarily triggered, surprise out-of-network medical bills or added facility fees. The ordeal continues as the patient tries to sort out the confusing pile of medical bills and insurance statements while unpaid amounts are sold to debt collectors and reported to credit reporting agencies, where the medical bill can become a lawsuit, a damaged credit score, a home foreclosure, or worse.
The United States is the only economically developed country where a slip and fall and a trip to the emergency room could spell financial ruin or bankruptcy. (11) With the implementation of the Affordable Care Act (ACA), many more people have gained insurance coverage and the financial protection that comes with it. (12) Increasingly, however, insurance coverage does not ensure financial protection for patients. (13) With the election of Donald Trump as president, the future of the coverage gains under the ACA is uncertain at best. (14)
There is a great cost shift underway in American health care. (15) The costs of health care are rising, and the patient is picking up a larger portion through out-of-pocket cost-sharing. (16) The financial protection afforded by insurance coverage, even the historically robust coverage provided by employers, is eroding. Although premium growth has moderated, deductibles, which are the amounts patients must pay out-of-pocket before insurance kicks in, have been rising much faster than wages or inflation. (17) Deductibles have more than tripled in the past decade from $303 on average in 2006 to $1221 in 2016. (18) A growing proportion of workers have high deductible health plans, increasing from just 4% in 2006 to 29% in 2016. (19) Nearly 99% of individuals with coverage from an ACA exchange had a high deductible plan. (20)
Although some may blame the ACA for rising out-of-pocket costs, these trends were under way before 2010 and will likely persist regardless of the ACA's future, (21) particularly under Republican proposals to repeal and replace the ACA. (22) This cost shift to individuals is particularly burdensome for lower-income consumers who are unable to afford their health care costs and are finding themselves increasingly underinsured. (23) Medical bill-related financial distress was improved but not entirely solved by the expansion of coverage under the ACA due to rising out-of-pocket expenses. (24)
The increasing out-of-pocket burden on patients is exacerbated by a related trend of narrowing networks of providers participating in the patient's health insurance plan. (25) The ACA prohibits health plans from using traditional insurance underwriting practices to reduce health care spending through risk selection (e.g., avoiding bad risks and cherry-picking good risks). (26) As such, narrow networks have become the primary strategy for health insurers to keep health care premiums from ballooning, by contracting with a limited network of providers who agree to lower fees in exchange for a higher volume of patients. (27)
Narrow networks are correlated with lower health plan premiums, (28) but the increasing use of narrow networks means the patient is more likely to inadvertently find herself out-of-network. Health plan design typically gives patients significant financial incentives to receive health care within the network and, if it is covered at all, financial penalties for straying outside the network in the form of higher co-payments, co-insurance, and a separate, higher out-of-network deductible. (29)
This article's objective is to evaluate the existence and strength of financial protections for health care consumers. Despite consumers' sense that there are few legal protections against medical bill-related financial distress, there is a growing body of financial protections under federal and state law for health care consumers. The ACA contains a handful of consumer financial protections, including limits on cost-sharing and Internal Revenue Service (IRS) rules limiting the worst billing and collection practices of tax-exempt hospitals. (30) Some of these rules will likely remain in place even if the GOP passes a bill to repeal and replace the ACA. (31) The ACA's annual limit on consumers' out-of-pocket spending, however, is threatened. (32) Other federal efforts to make Medicare payments "site-neutral" and the work of the Consumer Financial Protection Bureau (CFPB) on credit reporting of medical debts have created significant protections for health care consumers across the country. (33) It is the states, however, that have led the way with an array of legal innovations to address consumer protections in health care-particularly in the area of surprise medical bills but also in limits to medical debt collection practices. (34) Thus, the optimistic view contends that there are significant policy efforts at the state and federal levels to give consumers meaningful protections from medical bill-related financial distress.
The dimmer view is that the significant state innovation in this area is insufficient, in part because of substantive gaps in these policies' protections and also because of structural limits of state regulation. (35) For the substantive gaps, this article sets forth a model set of policy reforms that build upon recent state legislation to protect health care consumers, including presumptively binding health care price estimates, regulatory caps on out-of-network rates...