So-called surprise medical bills were among the hottest topics in the news nationwide in 2019 and generate significant political activity. The term describes the situation in which a patient who has health insurance receives care from a facility or provider that is not in-network with the patient’s insurance carrier and the patient subsequently receives a bill for that care. This month, Colorado joined the handful of other states that have begun to put in place consumer protections addressing surprise bills when its new out-of-network law, HB19-1174 (“OON Law”), took effect on Jan. 1, 2020.

Colorado’s OON Law addresses two out-of-network care scenarios: when a patient goes to a health care facility that is in-network with his or her health insurance plan but receives care from an out-of-network provider there, or when a patient receives emergency care at an out-of-network facility or from an out-of-network provider. The OON Law sets reimbursement rates in these scenarios and provides that payment pursuant to those rates will be payment in full, except for certain cost-sharing owed by the patient. Additionally, and importantly for out-of-network facilities and providers, the OON Law provides for an arbitration process to resolve disputes over inadequate reimbursements for higher-complexity patient care. Out-of-network facilities and providers will likely want to take advantage of the quick and simple arbitration procedure.

Reimbursement rates

The reimbursement rates for the various scenarios addressed in the OON Law vary slightly. However, the OON Law provides that the payment made pursuant to any of the reimbursement provisions is presumed to be payment in full for the services provided, except for any coinsurance, deductible or copayment owed by the patient. The OON Law also provides that the carrier and the provider or facility are free to negotiate a different reimbursement rate than those set forth in the law.

Out-of-network providers. When covered services are provided to a covered person at an in-network facility but by an out-of-network provider—or when emergency services are provided by an out-of-network provider—the insurance carrier must reimburse the provider directly the greater of: (a) 110% of the carrier’s median in-network rate of reimbursement for the same service in the same geographic area; or (b) the 60th percentile of the in-network rate of reimbursement for the same service in the same geographic area for the prior year based on data from Colorado’s All Payer Claims Database.

Out-of-network facilities. When emergency services are provided to a covered person at an out-of-network facility (other than a facility operated by Denver Health), the insurance carrier must reimburse the facility directly the greater of: (a) 105% of the carrier’s median in-network rate for the same service provided in a similar facility or setting in the same geographic area; or (b) the median in-network rate of reimbursement for the same service provided in a similar facility or setting in the same geographic area for the prior year based on data from Colorado’s All Payer Claims Database.

Dispute resolution procedure

The complexity of each patient’s condition, and the circumstances in which the patient’s condition arises, will necessarily differ from case to case. Consequently, the “one size fits all” approach to reimbursement described above will not be appropriate in all cases, and disputes will inevitably arise over whether the reimbursement paid to the provider or facility is appropriate given the circumstances of the patient’s condition and treatment. Fortunately, the Colorado General Assembly anticipated that such disputes would arise and provided for a dispute resolution mechanism for a provider or facility unhappy with the reimbursement rate.

Specifically, the OON Law provides an arbitration process by which a provider or facility may seek additional payment if the amount paid “was not sufficient given the complexity and circumstances of the services provided.” On Dec. 20, 2019, the Colorado Division of Insurance adopted emergency regulations to implement the arbitration process. Neither the OON Law nor the regulations set a minimum amount for claims that may be arbitrated—rather, a claim in any amount may be arbitrated.

A provider or facility may initiate arbitration by filing a form request for arbitration with the Colorado insurance commissioner, as well as the insurance carrier, within 90 days of receipt of payment for the disputed claim. The parties may request that the commissioner arrange an informal settlement teleconference, which if requested is to be held 30 days after the arbitration demand is filed. However, the informal settlement teleconference is not mandatory. Additionally, the OON Law does not contemplate that the commissioner will attend or facilitate the informal settlement conference. Rather, the parties are to notify the commissioner of the results after the fact.

If the parties request an informal settlement teleconference that proves unsuccessful, the commissioner is to appoint an arbitrator to resolve the dispute within 15 calendar days of receiving notice that no settlement agreement was reached. If the parties do not request an informal settlement teleconference, the commissioner is to appoint an arbitrator to resolve the dispute within 30 calendar days of receipt of the arbitration demand.

To resolve the dispute, the OON Law provides for “baseball-style” arbitration rather than full-blown litigation. That is, within 30 calendar days of the appointment of the arbitrator, each party must each submit to the arbitrator, in writing, the party’s final offer of the amount to be paid and an argument in support of that final offer. Importantly, any patient information submitted to the arbitrator in support of a party’s position must be de-identified in order to ensure that the patient’s protected health information is not disclosed.

By no later than 15 calendar days later, the arbitrator must pick one of the two amounts submitted, which becomes the arbitrator’s final and binding decision. The arbitrator must notify the parties and the commissioner of his or her decision and the reasoning for the decision. In making the decision, the arbitrator is to consider the circumstances and complexity of the case. The arbitrator’s analysis is to include, but presumably is not limited to, the provider’s level of training, education, experience, and specialization or subspecialization, as well as the previously contracted rate, if the provider had a contract with the carrier that terminated or expired within one year prior to the dispute.

The arbitrator’s decision is final and binding on both parties—neither the OON Law nor the regulations provide for an appeal. If the arbitrator’s decision requires the carrier to make an additional payment, the claims must be re-adjudicated within 30 calendar days, and the carrier must notify the patient of any change to his or her deductible, coinsurance and/or copayment calculations. If the arbitrator’s decision does not result in the carrier making additional payment, the carrier must notify the patient of the outcome and advise the patient that the provider is prohibited from billing the patient directly except for required deductible, coinsurance and/or copayment obligations, and must reimburse the patient for any overpayment the patient has made to the provider. Finally, the losing party is required to pay the arbitrator’s expenses and fees.

Conclusion

It should be noted that the OON Law will not apply to health plans over which the state of Colorado has no regulatory authority. In particular, self-funded plans—which cover a large proportion of Coloradans—are regulated at the federal level by ERISA and are not affected by the new OON Law. Additionally, the protections in the OON Law do not apply to a patient who voluntarily chooses to use an out-of-network provider or facility instead of an in-network provider or facility.

Other states that have enacted surprise billing laws and an associated arbitration provision, particularly New York and New Jersey, have seen thousands of claims arbitrated in the few years since those laws were enacted. Hopefully, Colorado’s arbitration procedure will prove to be a quick and cost-effective way for a facility or provider to seek increased reimbursement for complex out-of-network patient care.