Last-Minute Loophole Could Undermine Texas Law Against Surprise Medical Bills

Texas’ bipartisan effort to shield patients from surprise medical bills could be weaker than lawmakers intended when it takes effect Jan. 1.

Earlier this year, lawmakers from both parties came together on legislation to protect people in state-regulated health plans from getting outrageous bills for out-of-network care. The new law, known as Senate Bill 1264, creates an arbitration process for insurers and providers to negotiate fair prices in those cases. The intention of the law is to establish those fair prices without ever involving patients.

But that protection is at risk of becoming “irrelevant,” consumer advocates in Texas say.

“The financial struggle that legislators were trying to remove us from ― trying to protect us from ― patients might be right back in the middle of that situation,” said Stacey Pogue, a senior policy analyst with the Center for Public Policy Priorities.

State agencies are writing the rules to implement and enforce the new law. Some of those rules, which will be discussed publicly in early December, will let hospitals and other care providers send patients bills in nonemergency situations, such as scheduled surgeries.

One state agency hashing out how the law will work is the Texas Medical Board, which is run by physicians and regulates other doctors in the state. Pogue said the board has proposed a rule that would expand the use of a narrow exception in the law. SB1264 created an exception for patients who knowingly want to receive nonemergency care from a doctor who is out of their health plan’s network. In those cases, patients would sign a waiver with the expectation of paying those out-of-network costs.

The board’s proposed rule takes that narrow exemption ― intended to be used only when patients want a particular out-of-network doctor ― and instead would require all out-of-network providers in nonemergency situations to give patients that waiver.

In practice, advocates say, the rule could essentially require out-of-network providers — like anesthesiologists and pathologists — to give patients a confusing form that waives their right to the new law’s protection. The form would allow the patients to be balance-billed.

“Now it’s a loophole,” Pogue said. “It’s a loophole in the [law] where legislators wanted to give a protection ― a win-win. And now some patients are going to get a lose-lose.”

According to the Texas Medical Board, the proposed rules “require an out-of-network provider to provide written notice and disclosure to a patient no less than 10 business days prior to the date of a nonemergency procedure.”

“The patient must have five business days to consider whether to accept, and may not agree prior to three business days after the notice was provided,” Jarrett Schneider, a board spokesman, said in a statement. “This allows for a cooling-off period so the patient has adequate time to decide whether to proceed if there are, in fact, out-of-network charges.”

Pogue said the rule also forces patients to choose between “two terrible outcomes” ― either paying more for providers they didn’t choose or forgoing a needed medical procedure.

The proposed rules are expected to be discussed during the board’s meeting early next month and could possibly be adopted at that time.

“It creates a path for any provider that wants to continue to send out-of-network bills [and] continue to balance-bill,” Pogue said. “It creates a pathway where they can do that.”

Schneider maintains that this is not the intent of the proposed rule.

“The Board’s proposed rules do not waive any rights a patient has under Senate Bill 1264 or any statute,” he said in a statement. “The Board has put forward proposed rules that it believes provide patients with enough advance notice to make a reasoned, economic decision in regards to the care they are receiving.”

Jamie Dudensing, CEO of the Texas Association of Health Plans, said in a statement that he believes the proposed rule “misinterprets the law’s intent” and makes surprise-billing protections weaker than they were before the law passed.

“Senate Bill 1264 has been praised as the strongest surprise billing law in the country — now we are in danger of making it almost completely irrelevant,” Dudensing said. “Instead of allowing for rare exceptions to surprise billing protections, the proposed rule would mandate the exception, resulting in patients losing all surprise billing protections in nonemergency situations.”

Blake Hutson, the associate director for the AARP of Texas, said he’s most concerned that the rules are vague about how the waiver would work. He said the state has created a unique exception in an effort to give people more freedom in choosing doctors, but it has come with a lot of confusion.

“Other states that have addressed the surprise medical bill issues haven’t created an exception for nonemergency, out-of-network physicians like we did,” Hutson said.

Among Hutson’s concerns are that the proposed rules do not make it clear that providers should mostly rely on the arbitration process set up under the new law to figure out payments. Instead, it requires them to use the proposed form, which various advocates say is hard to understand.

Hutson said the proposed waiver form also doesn’t make it clear that patients don’t have to sign it. And, he said, there’s no clear process for what happens if patients refuse to sign the waiver. Hutson said the medical board should create a way to ensure people can still receive care even if they refuse to be balance-billed.

“This is totally fixable,” Hutson said.

Advocates say they are worried that many of these concerns won’t be dealt with during the rulemaking process, though, and instead will have to be addressed during the next state legislative session in 2021.

State Sen. Kelly Hancock, a Republican from North Richland Hills, sponsored SB1264. He said “a rulemaking process that does not protect all patients … is not something we will be willing to accept.” Hancock said the intent of the legislation was to protect every Texan with state-regulated health insurance from getting balance-billed by any provider.

“We are trusting the process, but we are also verifying the process to make sure we get the end result we are looking for,” Hancock said. “And, frankly, what I think those who support the legislation voted for.”

State Rep. Tom Oliverson, a Republican from Cypress who co-sponsored the bill, said he’s not as concerned as others about the proposed rules. He said the waiver process included in the bill was supposed to be something that was rarely used and he thinks the board’s final rules will honor that.

Oliverson, who is an anesthesiologist in Texas, said he doesn’t anticipate providers will abuse the waiver system.

“It was designed to be something that was seldom used, but we are not going to let it become a pathway to avoid the law,” Oliverson said. “And if it gets abused, we will come back in 2021 and get rid of it.”

Hancock said it is fairly unusual for bills to go through a rulemaking process this bumpy. He said he thinks this is happening because the stakes for this process are high for many entities who may have been relying on surprise billing as a source of income.

“We have no intentions of seeing the efforts and the intentions of legislators being ignored ― just because associations want to get things their way,” he said.

Pogue said this situation is particularly disheartening because it was a bipartisan effort in Texas, a rare phenomenon.

“I haven’t seen a bill with a scope this big ― that could be this meaningful for the financial security of a family — pass in the 12 years I have been doing this,” Pogue said.

Hutson said SB1264 was “painfully created” and lawmakers took the time to find a compromise with both insurers and providers, which is no easy task.

“There’s a lot of money in health care ― and so the different interests are going to use whatever they can to collect money on the backs of consumers wherever they can, unfortunately,” Hutson said. “It’s frustrating.”

This story is part of a partnership that includes KUT, NPR and Kaiser Health News.