Surprise Billing proposals: What’s the difference between Benchmarking vs. Arbitration?

As far as surprise billing legislation goes, there are two popular front runners in Congress: Benchmarking – which is also referred to as “Rate-Setting” and Arbitration.

• In this article, we’ll try to explain the differences between benchmarking vs. arbitration.

What even is Arbitration?

Arbitration would settle payment disputes for out of network emergency bills by asking a third party to decide what payment a provider should receive.

• Arbitration would allow providers to negotiate for more favorable rates and argue their side. In contrast, arbitration would also allow for insurers to request lower payment rates.
• It works like this: Say that you went to the emergency room for something serious (hopefully not, but bear with me), but a provider that saw you at the hospital was out of network with your insurance provider.
• Rather than bill you at the out of network rate, the provider and your insurer would negotiate through this third party arbitration process and leave you out of it altogether.

Providers prefer arbitration. The American Hospital Association recently released a statement in favor of an arbitration clause. In the statement, the AHA arguing that any “rate-setting” measures taken by Congress would give insurers more leverage over providers. AKA, no benchmarking PLZ.

• They go on to say that this policy would remove any incentive for insurers to contract with providers in the first place (since Congress would now be arbitrarily setting reimbursement rates).

Okay, so what about Benchmarking?

Unsurprisingly, in direct contrast to providers, insurers want Congress to cap surprise billing payments at some agreed-upon rate. This policy is called “Benchmarking.”

How benchmarking works: Say that you went to the emergency room AGAIN for something serious (sheesh, pull yourself together). The provider is, again, out of network with your insurance.

Rather than bill you at the providers’ out of network rate, the insurer would pay the provider at some sort of already agreed-upon “regional” reimbursement rate for the out of network service you received.

• So if you got some pain meds from an out of network doc, the insurance company would pay the provider at the median reimbursement rate for the region (or something similar – you get the idea).

Whether that payment rate is at a fixed percentage of Medicare (e.g., “we’ll give physicians/hospitals 200% what Medicare pays for the out-of-network portion of the bill”) or the median in-network rate adjusted for region, it would be a bigger win for insurers to get Benchmarking through Congress.

A big part of healthcare is negotiating contracts between payors and providers. It’s a constant tug of war.

• Providers feel as if any sort of benchmarking, rate setting measure would strip them of their power to negotiate for what they consider to be fair reimbursement.

Everyone wants to see patients protected from out of network bills. But we’re still struggling a bit to get to the finish line.

Thanks for reading.

Follow me on Twitter.

Save yourself some time by subscribing to our all-in-one newsletter. Subscribers get the first edition – every Monday night.

About the Healthy Muse.

The Healthy Muse was created to educate people on the healthcare system. It’s one weekly e-mail updating you on all the major election news, broader trends, big stories, and policy updates. Learn more about our vision here.

Get smarter and sign up below today.