Out‐of‐Network “Surprise Billing” in Massachusetts: Estimating the Prevalence and Financial Impact
Authors: Huang Yue , Nasuti Laura , Auerbach David 
Published: September 2021

Research Objective

To examine the type of services that are prone to “surprise billing” and the potential increased spending for patients and payers.

Study Design

Out‐of‐network billing occurs when patients receive services from providers that do not have a negotiated rate with the patient's insurer. While patients sometimes choose such providers knowingly (e.g., a preferred out‐of‐network mental health provider), out‐of‐network billing often occurs in scenarios outside of patients' control ‐ e.g., an out‐of‐network anesthesiologist participating in a surgery at an in‐network facility without patient knowledge ‐known as “surprise billing.” [Organization blinded] investigated “surprise billing” trends using the state's all‐payer claims database.

Population Studied

Patients insured by three large commercial payers in Massachusetts from 2015 to 2017 that had out‐of‐network indicators in their claims. These members represent over 15% of the state's commercially‐insured lives.

Principal Findings

Among 657,140 commercially insured patients in 2017, we identified 68,342 distinct “surprise” claims, representing 30,332 Massachusetts residents (4.6%) during 44,689 healthcare encounters, in which patients most likely received care from out‐of‐network providers that they did not choose. Among these encounters, 10,590 (23.7%) were ambulance services, and 34,099 (76.3%) were professional services, primarily from ERAP providers (emergency, radiology, anesthesiology, or pathology). Among “surprise” professional services, 29.3% of encounters occurred within the emergency department (ED). Among the payers examined, 7.2 percent of ED visits in 2017 resulted in at least one “surprise” claim. The hospital outpatient department was the setting where most “surprise” professional encounters occurred, accounting for 82.6% of non‐ED out‐of‐network radiology claims, 71.2% of such pathology claims, and 65.5% of such anesthesiology claims.

While claims data cannot substantiate whether a patient received a “balance bill” for any given encounter (when a patient is billed for the difference between the insurer's payment and the provider's charges on an out‐of‐network bill), we observed the potential for balance billing in more than 90% of “surprise” professional services claims. The average balance potentially billed to patients for these claims was $167 per claim but varied widely, ranging from $5 at the 5th percentile to $749 at the 95th percentile.

Across a range of “surprise” procedures and ambulance services, average spending on out‐of‐network claims far exceeded average spending on in‐network claims. In addition, charges and payer‐paid amounts appeared to rise substantially over time. For example, for a moderate severity ED evaluation and monitoring (E&M) visit, the out‐of‐network charge grew 11% from $294 in 2015 to $325 in 2017.

Conclusions

Out‐of‐network claims for ambulance and ERAP services continue to occur in the Massachusetts commercial market, potentially leading to higher premiums and burdening patients with unforeseen and large balance bills.

Implications for Policy or Practice

With recent federal and state legislative action to limit the practice of “surprise billing,” it is crucial to understand the practice's implications on payers, patients, and overall market functioning.