Dispute Resolution Outcomes for Surprise Bills in Texas

Abstract

This study examines Texas independent dispute resolution payment outcomes for clinicians and compares them with arbitration benchmarks.

A commercially insured patient who unknowingly receives out-of-network care in an emergency or at an in-network facility may face a “surprise bill” for the balance between the clinician’s charge and the insurer’s out-of-network allowed amount. Texas prohibited surprise bills for out-of-network emergency services and nonemergency ancillary services at in-network facilities among fully insured health plan enrollees, effective January 1, 2020.¹ Under this law, patients pay in-network cost sharing and health plans and out-of-network clinicians or emergency facilities resolve payment disagreements through an independent dispute resolution (IDR) process. The law provides different processes for facility and clinician services, and this study focuses on clinicians.

The Texas IDR process begins with a teleconference to attempt settlement. If unsuccessful, the case escalates to arbitration. Each party offers a final payment amount. The arbiter must select one of these offers after considering 10 factors, including the 80th percentile of charges and the median of insurers’ in-network payments for the same service(s) in the geographic area. The Texas Department of Insurance uses payment benchmarks from the independent nonprofit FAIR Health and certifies individuals with health care contract law experience as arbiters.

We assessed Texas IDR payment outcomes for clinicians and compared them with arbitration benchmarks.

Methods

Texas IDR cases occurring from January 2020 through March 2021 from multiple insurers, comprising more than half of fully insured covered lives in Texas, were analyzed. The insurers provided service-level (Current Procedural Terminology code) data for this study, including the type of service, charge, initial allowed amount, final allowed amount, local median in-network allowed amount, and 80th percentile of charges per FAIR Health’s database, as well as whether the case was settled or arbitrated. Allowed amounts include the direct plan payments to physicians and patient cost-sharing amounts.

We calculated the ratio of IDR final allowed amounts to FAIR Health’s median in-network allowed amounts and the 80th percentile of charges for each service. We computed the median and IQR of these ratios across all services and separately for settlements and arbitrations. Analyses were performed in Stata version 15 (StataCorp). The Supplement provides additional data and methodology details.

Results

The study sample included 47 280 service-level observations from 32 294 unique IDR cases involving clinicians. Services were predominantly emergency medicine (80%) and anesthesia (12%).

Disputed services in the sample had mean charges ($2306) above the mean FAIR Health 80th percentile of charges benchmark ($1944) and mean initial allowed amounts ($192) below the mean FAIR Health median in-network allowed amount benchmark ($634) (Figure 1). The mean IDR allowed amount outcome ($635) aligned closely with the FAIR Health median in-network allowed amount benchmark. Overall, 74% of disputed services were settled through teleconference; mean charges, initial allowed amounts, arbitration benchmarks, and IDR outcomes were relatively similar across settled and arbitrated cases.

Figure 1. Initial Charges and Allowed Amounts, FAIR Health Independent Dispute Resolution (IDR) Benchmarks, and IDR Final Allowed Amounts for IDR Cases.

The median ratio of IDR final allowed amounts to FAIR Health median in-network allowed amounts was 1.06 (IQR, 0.89-1.25) and the ratio to the 80th percentile of charges was 0.37 (IQR, 0.30-0.46) (Figure 2). The median ratios of IDR final allowed amounts to FAIR Health median in-network allowed amounts were modestly higher for arbitrations (1.12 [IQR, 0.97-1.28]) than for settlements (1.03 [IQR, 0.84-1.24]).

Figure 2. Ratios of Independent Dispute Resolution (IDR) Final Allowed Amounts to FAIR Health Benchmarks.

The line inside the box indicates the median; the top line of the box is the upper quartile; the bottom line of the box is the lower quartile; and the whiskers extend to the 5th and 95th percentiles of the distribution.

Discussion

The median final allowed amounts from Texas’ IDR process were modestly higher than the FAIR Health median in-network allowed amount benchmark but were well below the benchmark of the 80th percentile of charges. Final allowed amounts resulting from IDR in Texas were lower than in New York and New Jersey, where arbiters are not shown median in-network prices, and previous research found that mean awards reflected the 80th percentile of charges benchmark.^2,3

Beginning in January 2022, the federal No Surprises Act prohibited surprise billing and established IDR. Initial regulatory guidance instructs arbiters to anchor decisions to median in-network prices, although ongoing lawsuits filed by hospital and physician groups seek to block its implementation. Texas IDR outcomes suggest that arbiters may anchor to a median in-network price benchmark, even if they are not instructed on how to weigh various factors.

Study limitations include the short time after policy implementation and that the sample may not be generalizable to other insurers.

Section Editors: Jody W. Zylke, MD, Deputy Editor; Kristin Walter, MD, Associate Editor.

Supplement.

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