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Study Examines Arbitration Decisions over Out-of-Network Medical Bills Based on NJ Arbitration Cases

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A study published in this month’s edition of Health Affairs examined arbitration decisions over out-of-network medical bills based on the experiences from New Jersey arbitration cases.

In 2018 New Jersey implemented a final-offer arbitration system to resolve payment disputes between insurers and out-of-network providers over surprise medical bills. Similar proposals are being considered by Congress and other states.

In this article researchers examined how arbitration decisions compare with other relevant provider payment amounts by linking administrative data from New Jersey arbitration cases to Medicare and commercial insurance claims data. They found that decisions track closely with one of the metrics that arbitrators are shown—the eightieth percentile of provider charges—with the median decision being 5.7 times prevailing in-network rates for the same services. It is not a foregone conclusion that arbitrators will select winning offers based on proximity to this target, although the authors findings suggest that it is a strong anchor. The amount that providers can expect to receive through the arbitration process also affects their bargaining leverage with insurers, which could affect in-network negotiated rates more broadly.

Therefore, the authors conclude, basing arbitration decisions or a payment standard on unilaterally set provider-billed charges appears likely to increase health care costs relative to other surprise billing solutions and perversely incentivizes providers to inflate their charges over time.

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