There are a lot of things that are responsible for rising healthcare costs and we all know the major offenders include the drug companies and hospitals. Well, if House Bill 562 passes, you can add the state government to that list of the worst offenders. The short title of this bill is “Health Care Reimbursement Contracts/AOBs.”

The problem isn’t the title though, it’s what’s inside:

An insurer or a third-party payor shall accept and honor a completed assignment of benefits agreement that assigns the insured's reimbursement benefits to a health care provider. The assignment of benefits agreement must be validly executed by the insured. This subsection applies only if there is no reimbursement contract between a health care provider and an insurer or a third-party payor.

What it means

In its simplest interpretation, this is a meager attempt to streamline the process of insurance payments when a patient sees an out-of-network healthcare provider.

Because the insurer has no contract with the provider (the definition of “out-of-network”) and they do with their member, they send a check to the member, who then uses it to pay the provider.

“Assignment of Benefits” (AOB) means that the patient can “assign” their benefits to the provider, so the check goes directly to them. It sounds simple, but Blue Cross NC, the state’s largest insurer estimates this change would cost our state $729 million to over $2.2 billion in additional healthcare costs annually.

In practice, it doesn’t really solve anything for the patient and will destroy insurance provider networks – one of the few tools insurers have to control costs.

The patient is still going to write a check

Because the provider is out-of-network, they can charge whatever they want. That check from the insurer may not cover the whole bill.

So, what happens next is that the surprise bills start coming – to the patient! The patient is still on the hook for whatever the balance of the bill is – the difference between what the out-of-network provider charges and what the insurer pays.

HB 562 doesn’t help the patient at all. In fact, it hurts them.

The patient will end up paying more

When patients receive an out-of-network bill, they have the right to negotiate. Without AOB, the patient has a lot of leverage. Let’s say a provider bills a patient for $10,000, and the insurer sends a check to the patient for $5,000.

In this scenario the patient can call the provider and say, “Hey, you billed me $10,000, but my insurer thinks what you did was worth $5,000. Would you be willing to accept that?”

Sometimes the provider will accept it, sometimes the patient and provider will meet in the middle. But the important thing is that the provider doesn’t get paid a dime until they come to an agreement.

With AOB, the insurer sends the check directly to the provider who immediately pockets $5,000. This leaves them free to go after the patient for the balance. They have no motivation to negotiate, because they have nothing to lose.

As bad as that is – the long-term consequences are even worse.

Destroying networks

One of the most important things insurers do is negotiate prices for their members with in-network providers. In return for reasonable prices, insurers send their members to the providers in their network. This is one of the few checks the US system has on the prices charged by providers.

But with AOB, the healthcare providers are going to get paid whether they are in-network or out-of-network. This leaves them free to stay away from insurer networks and charge whatever they want, passing along balance bills to patients.

Because they would have nothing to lose by staying out-of-network, it gives providers a massive advantage when negotiating prices with insurers. This will lead to higher prices which leads to higher premiums. Blue Cross NC estimates premiums could increase over $90 per member per month - that’s over $1000 per year per member.

HB 562 is the the most costly bill for insured North Carolinians we have seen come out of this NC General Assembly session.

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