An Unpleasant Surprise

September 3, 2020

Photo by Alabama Extension licensed under CC BY 1.0

Surprise medical bills have become a major issue for Americans, but federal legislation to protect consumers continues to stall. Is Congress getting closer to halting this practice?

Listen to the full episode below, read the transcript or scroll down for more information.

The Basics: The Scope of the Problem

Surprise bills can occur when patients with insurance unknowingly receive care from an out-of-network provider while at an in-network facility (such as a bill from an anesthesiologist for a scheduled surgery).

That provider is not bound by a set rate negotiated with an insurer and may charge more for a service than the insurer is willing to pay, and patients can end up on the hook for the difference.

It is difficult to capture the full extent of the problem, but research shows that surprise bills, also called balance bills, occur often, and have only been increasing in frequency and size over the past few years. 

0 %
of hospital and ER visits may come with an unexpected charge¹
$ 0
average size of a surprise bill for a hospital visit¹
0 %
of Americans fear surprise bills²
0 %
of Americans support surprise bill protections³

¹Eric C. Sun, Michelle M. Mello, Jasmin Moshfegh, et al. “Assessment of Out-of-Network Billing for Privately Insured Patients Receiving Care in In-Network Hospitals” JAMA Internal Medicine, 2019.
²Ashley Kirzinger, Bryan Wu, Cailey Muñana, and Mollyann Brodie Follow. “Kaiser Health Tracking Poll – Late Summer 2018: The Election, Pre-Existing Conditions, and Surprises on Medical Bills.” Kaiser Family Foundation, 2018. 
³Lunna Lopes, Audrey Kearney, Liz Hamel, Mollyann Brodie. “Data Note: Public Worries About And Experience With Surprise Medical Bills.” Kaiser Family Foundation, 2020.

The Source: Who's To Blame?


Hospitals employ some physicians directly, but many also contract with speciality physician groups of surgical assistants, anesthesiologists, radiologists, emergency medicine doctors and pathologists who may not be in the same insurance networks as the hospital. This is why most surprise bills occur. Research shows that private equity firms also play an important role, buying up speciality physician groups and using surprise billing as a core part of their business model.


Insurers often take a lot of heat for the price of health care, but they play a more limited role in surprise billing. They can create narrow networks that leave hospitals or doctors out and open the door to balance billing. Insurers also do a poor job of maintaining accurate in-network provider directories, which means patients may think they’re choosing an in-network doctor when they are not.


While surprise bills from hospitals are less common than from physicians, they do occur when, for instance, a hospital is not in a patient’s network, but the patient is rushed there because of an emergency.


Air and ground ambulances rides are another source of surprise bills. One analysis showed that air ambulances resulted in median potential surprise bills of almost $21,700.

The Fixes: The Legislation Landscape

Federal Proposals

Over the past two years, Congress has considered at least four bipartisan bills to protect patients from surprise charges, but all four have stalled. The proposals offer different approaches to determine how much insurers will pay out-of-network providers. These bills typically address the problem by adopting a payment standard, arbitration process or a hybrid of the two.

Payment Standard

Insurers reimburse providers for out-of-network bills based on a set amount. Most bills propose using established in-network rates.


This process requires an insurer and provider to submit payment offers to a neutral party who makes the final call. 


This approach combines the payment standard with arbitration to resolve disputes. An insurer pays a set amount, and if the provider disagrees, it can initiate arbitration.

State Laws

With federal solutions at a standstill, 30 states have passed varying levels of protections from surprise billing. As of July, 2020, 16 states have more comprehensive protections, which ensure that insured patients are only responsible for paying in-network costs, even when receiving care from out-of-network providers or emergency services at an out-of-network facility. Georgia was the latest state to pass such a law in July 2020. The other 14 states offer far more limited protections.

But even states with comprehensive protections cannot protect all patients from surprise medical bills. States are not able to regulate job-based coverage that falls under a federal law known as the Employee Retirement Income Security Act, which applies to most employer sponsored insurance. These patients remain vulnerable to surprise medical bills until Congress takes action to ban the practice.

Click on the map below for an interactive map from the Commonwealth Fund that details each state’s protections.

Source: Maanasa Kona, “State Balance-Billing Protections,” Commonwealth Fund, last updated July 20, 2020. 

The Sticking Point: Will Congress Pass Protections?

Despite strong bipartisan support for protecting patients from surprise bills, disagreement comes over how much physician groups should charge and how much insurers should pay. Essentially, resolving this issue may mean Congress has to pick sides.  

As a result, stakeholders such as hospitals and private equity-backed physician groups, in particular, have pushed back on federal legislation, arguing that banning surprise billing will cripple their bottom line. These equity-backed physician groups have powerful lobbying groups, and in 2019, spent at least $5 million to persuade lawmakers to halt the legislation. 

The pandemic has increased the risk that patients will unknowingly receive care from an out-of-network provider or at an out-of-network facility. The Trump administration tried to limit surprise bills for those in need of COVID-19 treatment by banning hospitals and providers that receive money from its Provider Relief Fund from sending balance bills to patients. But this approach leaves significant gaps and has had mixed success.

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Episode Resources

Select Research on Surprise Bills:

Assessment of Out-of-Network Billing for Privately Insured Patients Receiving Care in In-Network Hospitals (Eric C. Sun, Michelle M. Mello, Jasmin Moshfegh, et al; JAMA Internal Medicine; 8/12/2019)

Out-of-Network Bills for Privately Insured Patients Undergoing Elective Surgery With In-Network Primary Surgeons and Facilities (Karan R. Chhabra, Kyle H. Sheetz, Ushapoorna Nuliyalu, et al; JAMA; 2/11/2020)

Doctors Push Back As Congress Takes Aim At Surprise Medical Bills (Rachana Pradhan; NPR; 2/12/2020)

Incorrect Provider Directories Associated With Out-Of-Network Mental Health Care And Outpatient Surprise Bills
(Susan H. Busch and Kelly A. Kyanko; Health Affairs; 6/1/2020)

Update on Federal Surprise Billing Legislation: New Bills Contain Key Differences (Jack Hoadley, Beth Fuchs, Kevin Lucia; Commonwealth Fund; 2/20/2020)

States Can Prevent Surprise Bills for Patients Seeking Coronavirus Care (Jack Hoadley, Maanasa Kona, Kevin Lucia; Commonwealth Fund; 4/29/2020)

The Provider Relief Fund: How Well Does it Protect Patients from Surprise Medical Bills for COVID-19 Related Services? (Jack Hoadley; CHIRblog; 5/15;2020)

Episode Credits


Nicholas Bagley, Professor of Law at the University of Michigan Law School in Ann Arbor

Music composed by Ty Citerman, with additional music from Blue Dot Sessions

This episode was reported and produced by Victoria Stern. It was mixed by Ryan Levi.

Additional thanks to:

Katie Keith, Glenn Melnick, Loren Adler, Karan Chhabra, the Tradeoffs Advisory Board…

…and our stellar staff!