Benchmark Rate or Arbitration: Which is a Better Approach to End Surprise Billing?

By Leslie Small

In the time since the Senate Health, Education, Labor and Pensions Committee advanced a measure that would protect patients from unexpected medical bills, the debate surrounding the issue has gotten considerably more complicated — with lawmakers caught in the crosshairs of an escalating tug-of-war among health care industry groups.

Most surprise-billing proposals would hold consumers harmless by prohibiting balance billing and basing patients' out-of-pocket costs on in-network cost-sharing requirements for services provided at an in-network facility, explains a recent issue brief from the American Academy of Actuaries. The point of contention, though, is how to determine what providers get paid in those situations.

Some proposals would set payment benchmarks that are based, for instance, on median in-network provider rates or some percentage of Medicare rates, the brief says. Others would use a dispute resolution process like arbitration — either instead of or in addition to setting payment benchmarks.

The American Academy of Actuaries counsels that the best way to assess the different solutions is to determine whether they help address the underlying "market failures" that led to the problem in the first place.

Those market failures occur because "these providers aren't ones that patients actually can choose from; it's not a true kind of competitive environment," says Cori Uccello, a senior fellow at the academy.

In its issue brief, the academy argues that an arbitration approach doesn't address that market failure, since providers would still be able to set high prices in order to put them in a better bargaining position.

A benchmark-rate approach, however, would in theory put a price on services that's "more reflective of the in-network price, which is the result more of the negotiation between providers and insurers," Uccello says.

From Health Plan Weekly