HIGHLIGHTS:

  • The ACA does not prevent insurers from declining to directly reimburse out-of-network hospitals for emergency care, and instead adjudicate and administer claims directly with individual patients, the U.S. District Court for the District of Connecticut ruled earlier this month.
  • The decision in Hartford HealthCare Corp. v. Anthem Health Plans, Inc., issued by Judge Janet C. Hall, was a matter of first impression, and required the interpretation of several provisions within the Affordable Care Act (ACA) regulating insurers' coverage of "services in an emergency department of a hospital." The interpretation of the ACA arose as one of several disputed issues in case, which culminated in a successful motion to dismiss by the defendant.
  • The court's interpretation changes the stakes for providers entering negotiations with insurers for provider agreements. Barring state laws providing otherwise, providers may now need to accept lower – and potentially "catastrophic" – reimbursement rates, or play bill collector to the same patients who rely on them for treatment.

Under the Affordable Care Act (ACA), insurers may forgo directly reimbursing out-of-network hospitals for emergency care, and instead adjudicate and administer claims directly with individual patients, a district court held earlier this month. The decision, issued by Judge Janet C. Hall of the U.S. District Court for the District of Connecticut, was a matter of first impression, and required the interpretation of several provisions within the ACA regulating insurers' coverage of "services in an emergency department of a hospital."

Background

The interpretation of the ACA arose as one of several disputed issues in Hartford HealthCare Corp. v. Anthem Health Plans, Inc., which culminated in a successful motion to dismiss by the defendant.1 Anthem, an insurer, and Hartford HealthCare, a network of hospitals and other health services, had a provider agreement which put health services at Hartford HealthCare in-network for those individuals with plans through Anthem. As the expiration of that provider agreement drew nearer, the parties entered negotiations for an extension. The main sticking point was Anthem's reimbursement rates – that is, the costs Anthem would cover for various treatments by the medical professionals at Hartford HealthCare on patients holding Anthem's plans. Hartford HealthCare's stance, as detailed in its amended complaint seeking declaratory and injunctive relief against Anthem, was that Anthem's newly offered reimbursement rates were "unfairly – and catastrophically – low."2 Hartford HealthCare rejected Anthem's offer and became an out-of-network provider for Anthem's members when the existing provider agreement expired.

It can be impossible or unwise for a patient who needs emergency care to go to an in-network provider. Imagine a Connecticut man who loses a finger while in his woodworking shop. He lives closest to a Hartford HealthCare hospital, though that is out-of-network for his employer-provided insurance plan. Nonetheless, he is likely to go, or be taken, to Hartford HealthCare, because he is losing blood and knows that time is of the essence if he wants his finger reattached. Similarly, if that man's wife, covered by the same plan, feels chest pains and shortness of breath late the following Sunday night (she worries these symptoms might precede a heart attack), she will also likely go to Hartford HealthCare, because her primary care provider will almost certainly be closed. Thus, the in-network versus out-of-network provider distinction is especially relevant in the context of emergency care, which is often necessitated by a patient's unexpected medical event or through a lack of other options.3 Accordingly, the ACA provides the following patient protections for patients who receive out-of-network emergency care:

If a group health plan, or a health insurance insurer 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 . . . in a manner so that, if such services are provided to a patient, beneficiary, or enrollee . . . 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 requirement with the plan . . . .4

In the normal course of events under the ACA (according to briefing by Hartford HealthCare), out-of-network emergency departments treat the patient and then send a bill for the cost of those services to that patient's insurance company. The insurance company adjudicates the claim by reimbursing the provider, and provides an explanation for the reimbursement rate. If the provider disagrees with the insurer's reimbursement, the provider appeals the reimbursement and the dispute is settled between the insurer and provider. Any amount billed by the provider but not covered by the insurer is then billed to the patient by the insurer as a copayment amount or coinsurance rate.5

However, when Hartford HealthCare became an out-of-network provider for Anthem, Anthem opted for a different route. Rather than reimburse and adjudicate claims with Hartford HealthCare, Anthem began directly reimbursing patients billed for emergency services by Hartford HealthCare. Patients became responsible for appealing any incorrect reimbursement by Anthem, as well as transferring the money reimbursed by Anthem to the bill they would receive from Hartford HealthCare. Hartford HealthCare sued for declaratory judgment and injunctive relief from the new system of reimbursement based in part on a theory that the above-quoted portion of the ACA prohibited such a method. Anthem moved to dismiss on the grounds that it does not.6

Court's Interpretation

The court confined its interpretation of the ACA to the statutory meaning of the phrase "any requirement under the plan for prior authorization of services or any limitation on coverage," and specifically focused on the definition of "limitation on coverage." It also considered the implementing regulation for the statute, which reads in relevant part:

If a group health plan, or a health insurance issuer offering group health insurance coverage, provides any benefits with respect to services in an emergency department of a hospital, the plan or issuer must cover the emergency services consistent with the rules of this paragraph (b) . . . . If the emergency services are provided out of network, without imposing any administrative requirement or limitation on coverage that is more restrictive than the requirements or limitations that apply to emergency services received from in-network providers.7

While Hartford HealthCare argued that the proscription against "any administrative requirement" included the method by which insurers reimburse providers, Anthem asserted that the implementing regulation must be read in the context of the statute (i.e., interpreting the regulation in the manner Hartford HealthCare suggested would impose an additional statutory requirement), and thus the meaning of "administrative requirement" was limited to issues of "coverage" of services. The court sided with Anthem, stating, "[a]n 'administrative requirement' that violates the regulation . . . must still be an administrative requirement on coverage."8

Thus, the decision turned on the court's interpretation of "coverage." While Hartford HealthCare took the stance that limitations on coverage "include any practice that makes it more difficult for a plan member to reimburse a provider for health services," Anthem argued that coverage related to only "what the plan covered" – in other words, the emergency services rendered. Again, the court agreed with Anthem, stating that coverage refers to "the services and benefits included within the plan." Because "the plain meaning definition of 'coverage' in no way includes the method of payment for the services rendered," the court held that the ACA did not restrict Anthem's ability to administer claims with patients rather than Hartford HealthCare, and granted Anthem's motion to dismiss.9

Public Implications

Public policy is implicated by this decision in at least two ways.10 First, restricting the definition of "coverage" to medical service obtained using healthcare devalues existing insurance plans. Presumably, the cost of administering claims with providers is built into the price of health insurance plans. If patients are given the choice between reviewing and appealing their own incorrect reimbursements versus having a hospital handle that work, many will choose (and currently imagine they are paying for) the latter. Previously, that paperwork was part of the plan; under the court's interpretation, it is not. Plans are also devalued from a bargaining-power standpoint. An insurer is more likely, all else equal, to acquiesce to an appeal of an incorrect reimbursement levied by a hospital, which employs billing professionals and is a repeat player with real leverage against it, than it is against a (possibly still sick) member, who has no expertise in claim administration and can't walk away from his plan if he receives it through work.

Second, the court's decision tips the leverage in negotiations for provider agreements toward insurers. Hartford HealthCare details the new administrative burden it has shouldered because of Anthem's new method of reimbursement:

Now, after Hartford HealthCare issues its bill, it is kept completely in the dark about the process. It has no idea when or how Defendant adjudicates the claim, and it has no idea when Defendant is sending its "reimbursement" check to the patient, or how much is being reimbursed. Thus, Hartford HealthCare is put in the unfortunate position of having to follow up on all of these issues with its sick patients (and their families).11

The court's interpretation changes the stakes for providers entering negotiations with insurers for provider agreements.12 Barring state laws providing otherwise, providers may now need to accept lower – and potentially "catastrophic" – reimbursement rates, or play bill collector to the same patients who rely on them for treatment.