Not all surprises are welcome, least of all surprise medical charges—when patients are billed for services they had expected their insurer would cover.

Negotiations to end surprise billing have been at an impasse for nearly a year. Discussions between the White House and congressional leaders over another coronavirus bill offer an opportunity to finally end this practice that defrauds millions of patients every year.

The lobbying battle lines are well defined. On one side stand the private equity firms that have bought medical staffing agencies and medical specialty practices. They want government to force non-contracting parties to settle disputes through binding arbitration. Opposing them are lobbyists for insurers and employers, who want government to set payment rates for out-of-network care.

Each side wants Congress to impose the costs of protecting patients on the other. And since the status quo is generally producing sizable profits for the health care industry, neither side seems interested in compromise. 

To break the impasse, the Trump administration is reportedly proposing to protect patients by banning balance billing for any medical services provided at an in-network hospital, a point on which both sides agree.

The difference is that the proposal stops there. Instead of the government adopting a solution that serves the interests of either private equity firms or insurers, it relies on the parties involved—insurers, doctors and hospitals—to sort out appropriate payment amounts without government involvement. 

Congress should ban balance billing at in-network hospitals, which would prevent patients from being billed more than the network cost-sharing amounts stipulated in their insurance contracts.

Balance bills are unfair to patients who seek care from network physicians at network facilities because their insurance contracts limit network cost-sharing amounts at those facilities. Patients reasonably rely on representations from their insurer, medical providers and hospital that they are protected by these limits on out-of-pocket spending at network facilities. And that is usually true.

But in a growing number of instances, patients who received care at a network hospital get a surprise bill, sometimes for tens of thousands of dollars, from a doctor who was not part of their insurance network.

A new study finds that the specialists who are most likely to send out-of-network bills are those who practice in six areas, including emergency physicians, pathologists and anesthesiologists. The common feature of those specialties is that patients generally don’t choose these doctors. Patients, for example, select their surgeons, but not their anesthesiologists. The study found that the plurality of these doctors balance-billed less than 10 percent of the time. But some balance-bill patients more than 90 percent of the time.

Surprise bills are most common in hospital emergency departments. TeamHealth, a private equity firm that provides medical staff for hospital emergency rooms, says that it issues surprise medical bills as a “source of contract negotiating leverage” to extract higher payments from insurers. 

The administration’s proposal would prevent emergency and ancillary physicians from balance-billing patients at in-network hospitals. This should reduce their negotiating leverage, and that of the private equity firms that own their practices, with insurance companies and lead to lower prices. That should translate into lower premiums. 

One reported stumbling block facing the administration’s proposal is the Congressional Budget Office’s view that it would increase the negotiating leverage of ancillary specialists and hospitals. CBO reportedly believes the proposal would lead to higher premiums.

The American Medical Association, which represents doctors, doubts CBO’s logic. It opposes the administration’s proposal in part because it doesn’t believe it would create a financial advantage for doctors. Instead, it would require doctors, hospitals and insurers to negotiate a rate. 

Although we need to know more about the details of the administration’s proposal, a simple ban on balance billing at network facilities is notionally sound and far preferable to those advanced by dueling lobbying groups. 

Most specialists don’t ambush patients with surprise bills. Many hospitals don’t permit it. Hospital administrators, doctors and insurers have, for the most part, negotiated prices in a way that avoids balance bills. During the course of work we conducted in Indiana, where the state largely prohibited balance billing for non-emergent care at network hospitals just this year, a large hospital system CEO impressed that he does not allow balance billing in his hospitals. This is proof that private sector negotiation can solve this problem. 

The medical specialists who exploit patients with surprise bills are in the minority, but they do great damage. Congress should protect patients against this fraudulent practice by banning balance billing and leave the rate-setting to the private sector.