Expert Guidance to Navigate EMTALA, out of network charges for emergency situations and ERISA in the California Jurisdiction where Knox-Keene Applies to HMOs

In an emergency, a patient is usually transported to the nearest emergency room. Under EMTALA and the Affordable Care Act, insurers are required to cover out-of-network emergency care as if it was in-network care, which means and insured’s total of the deductible and coinsurance can’t be higher than the regular in-network amounts.[i]   This is usually called the Usual Customary and Reasonable (UCR) charged amount.  However, if the out-of-network emergency room does not have a contract with your insurer, and it is not obligated to accept their payment as payment in full. If the insurer pays less than the out-of-network emergency room bills, the emergency room can send you a balance bill for the difference. In California, the Knox-Keene Act has been modified to be compatible with the Affordable Care Act. See our post regarding California HMOs and the Knox-Keen Act.  Nonetheless, ERISA self-insured plans have contested various aspects of what must be paid and how third-party-administrators are obligated to administer their plans for in-network, out-of-network, and for beneficiaries with disabilities.

ERISA Does Not, According to the Court of Appeals, Preempt Knox-Keene Reimbursement of Out of Network Providers

In Coast Plaza Doctors Hospital v. Blue Cross of California, et al., (Ct.App. 2 Dist., May 11, 2009, #B205892), the Court of Appeal ruled that a California law requiring health care service plans to reimburse providers for the cost of emergency care is not preempted by the federal Employee Retirement Income Security Act (ERISA).[ii]

When Coast Plaza filed a lawsuit to be reimbursed for the services, the payers defended on the ground that Coast Plaza’s claim was preempted by ERISA. The payers made this argument despite the fact that Section 1371.4 of the Knox-Keene Act re quires health care service plans to reimburse providers for the cost of emergency services rendered to the plans’ enrollees. Indeed, the California Supreme Court held earlier this year that providers must seek reimbursement directly from the plan and cannot “balance bill” the patient. Nonetheless, the trial court ruled that Coast Plaza’s claim for payment under Section 1371.4 was preempted by ERISA. The Court of Appeal reversed the trial court’s ruling and agreed with Coast Plaza’s argument that health care service plans cannot rely on ERISA preemption to escape their obligation under California law to reimburse providers for emergency care. The Court of Appeal determined that Section 1371.4 was designed to regulate insurance in California, and therefore is “saved” from preemption by ERISA. Thus, Coast Plaza’s lawsuit against Blue Cross can proceed under California law. The ruling in Coast Plaza is expected to greatly assist non-contracted providers in their ongoing struggle to receive fair and adequate reimbursement from health plans whose members receive emergency care and post-stabilization care. However, the larger legal battle over the scope of ERISA preemption will no doubt continue, as there are a number of other complex questions involving ERISA that were not answered in Coast Plaza.[iii]

ERISA Preempts Knox Keene Act Regarding Bonuses to Prospective Insureds, According to U.S. Department of Labor

Although ERISA does not appear to preempt Knox-Keene regarding out of network payment, it does preempt with respect to providing incentives to potential insureds to become insured by an ERISA plan.  On September 29, 1994, and October 11, 1994, the California Department of Corporations (DOC) stated that any enrollment bonus to putative insureds violates Knox-Keene’s regulations. Those regulations, contained in the California Code of Regulations Title 10, Section 1300.46, state that:

‘No person subject to the provisions of [Knox-Keene] shall offer or otherwise distribute any bonus or gratuity to potential subscribers to induce enrollment or to existing subscribers for the purpose of inducement to enrollment.’

Section 514 of title I of ERISA[iv] provides, [pertinent section]:

‘Except as provided in subsection (b) of this section, the provisions of this title and title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 4(a) and not exempt under section 4(b).’

The Federal Division of Coverage Office of Regulations and Interpretations continued, ‘Thus, section 514(a) of ERISA broadly preempts all state laws insofar as they “relate to” employee benefit plans covered by Title I of ERISA, subject only to certain exceptions as expressly provided in section 514(b) of ERISA.’[v]

Third Party Administrators of Employer Self-Funded Plans – Knox-Keene is Preempted by ERISA with Respect to Plan Administration

In Drummond v. McDonald an appeals court held that McDonald’s role as administrator of an ERISA plan means that it

“…processes claims and performs other administrative functions. Administration of the plan is necessarily inseparable from the plan itself. An ERISA plan includes those plans which provide benefits through the purchase of insurance (§ 1002 (1)). Plans funded by insurance continue to be ERISA plans exempt from state causes of action. (Dependahl v. Falstaff Brewing Corp. (8th Cir. 1981) 653 F.2d 1208.).[vi]

The court cited these cases in its decision: “Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85 [77 L. Ed. 2d 490, 103 S. Ct. 2890]; Russell v. Mass. Mut. Life Ins. Co. (9th Cir. 1983) 722 F.2d 482, 488, cert. granted October 1, 1984; Blau v. Del Monte Corp. (9th Cir. 1984) 748 F.2d 1348, 1357; California Chamber of Commerce v. Simpson (C.D. Cal. 1985) 601 F. Supp. 104, 107-108; Provience v. Valley Clerks Trust Fund (1984) 163 Cal. App. 3d 249 [209 Cal. Rptr. 276].)”[vii]

EMTALA Does Not Appear to Preempt the Knox-Keene Act Regarding Out-of-Network Payments to Providers and is Compatible with It

Knox-Keene as noted was amended to comply with provisions of the Affordable Care Act. Specifically, “Non-grandfathered plans that provide benefits for services in the emergency department of a hospital also must comply with a number of rules, including: • A prohibition on prior authorization requirements for emergency services, even if the services are rendered by an out-of-network provider;” Health plans have adopted these policies.[viii]

The Federal  Emergency Medical Treatment and Active Labor Act (“EMTALA”) (Pub. L. 99-272) of 1986 defines a medical emergency as “a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in . . . placing the health of the individual . . . in serious jeopardy.” [ix] 42 U.S.C. § 1395dd(e)(1)(A)(i). EMTALA requires every hospital that receives federal funding to treat any patient with an emergency condition in such a way that, upon the patient’s release, no further deterioration of his or her condition is likely.  No hospital may release a patient with an emergency medical condition without first determining that the patient has been stabilized, even if the hospital properly admitted the patient.  Under EMTALA, patients requesting emergency treatment can only be discharged under their own informed consent or when their condition requires the services of another hospital better equipped to treat the patient’s concerns.”

According to plaintiff’s attorneys, EMTALA violations may be punished by:

  • Termination of the hospital or physician’s Medicare provider agreement
  • Fines of up to $50,000 for hospitals and physicians
  • The hospital may be sued in a personal injury claim

Failure to stabilize a patient can lead to fines of up to $50,000, and may subject both the physician and the hospital to claims of medical malpractice.

A defendant attorney may need to demonstrate that the Standard of Care was met under EMTALA. This may also require an examination of clinical decision support hospital safety practices and procedures, the National Patient Safety Goals Standards provided for by the Joint commission and other factors.  At times the Electronic Medical Record audit trail or Electronic Health Record Audit log may be relevant in determining what care was provided and what medical decisions were made during the patient’s emergency care.

California Standards Regarding the Collection of Out of Network Cost Sharing Amounts Owed by Patient

Section 10112.8 was added to the Insurance Code, and sub part 10112.8(e) provides:

(1) A non contracting individual health professional may advance to collections only the in-network cost-sharing amount, as determined by the insurer pursuant to subdivision (a) or the out-of-network cost-sharing amount owed pursuant to subdivision (c), that the insured has failed to pay.[x]

California AB-1611 was enacted which prohibits health care providers from charging more than usual customary and reasonable amounts for patients who are out-of-network:“SECTION 1.

 Section 1317.11 is added to the Health and Safety Code, to read:


 (a) (1) A hospital that has a legal obligation, whether imposed by statute or by contract, to the extent of that contractual obligation, to any third-party payor, including, but not limited to, a health maintenance organization, health care service plan, nonprofit hospital service plan, insurer, or preferred hospital organization, a county, or an employer to provide emergency care, as defined in Section 1317.1, for a patient, shall not charge more than the reasonable and customary value of the hospital services, as defined in paragraph (2) or the average contracted rate for the same or similar hospital services in the general geographic region in which the services were rendered. For the purposes of this section, “average contracted rate” means the average of the contracted commercial rates paid by the health plan or delegated entity for the same or similar emergency services in the geographic region.

(2) For purposes of this section, “reasonable and customary value of the hospital services” means the payment of the reasonable and customary value for the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration all of the following:

(A) The provider’s training, qualifications, and length of time in practice.

(B) The nature of the services provided.

(C) The fees usually charged by or paid to the provider, including rates paid by both commercial and governmental payers.

(D) Prevailing provider rates charged and paid by both commercial and governmental payers in the general geographic area in which the services were rendered.

(E) Other relevant aspects of the economics of the medical provider’s practice.

(F) Any unusual circumstances in the case.

(b) Notwithstanding this section, the liability of a third-party payor that is licensed by the Insurance Commissioner or the Director of the Department of Managed Health Care and has a contractual obligation to provide or indemnify emergency medical services under a contract that covers a subscriber, or an enrollee shall be determined in accordance with the terms of that contract and shall remain under the sole jurisdiction of that licensing agency.

(c) A third-party payor shall not be liable for payment for emergency services if the third-party payor reasonably determines that the emergency services and care were never performed, provided that a third-party payor may deny reimbursement to a hospital for a medical screening examination in cases in which the plan enrollee did not require emergency services and care and the enrollee reasonably should have known that an emergency did not exist.

(d) If dissatisfied, either the hospital or the third-party payor may pursue any right, remedy, or penalty established under any other applicable law.

(e) This section does not apply to a Medi-Cal managed health care services plan or any other entity that enters into a contract with the State Department of Health Care Services pursuant to Chapter 7 (commencing with Section 14000) of Chapter 8 (commencing with Section 14200) of, and Chapter 8.75 (commencing with Section 14591) of, Part 3 of Division 9 of the Welfare and Institutions Code.

(f) This section does not apply to services provided by a licensed physician and surgeon, nurse practitioner, or physician assistant.”[xi]

Place of Service and Billing Standards Matter for Out-of-Network Emergency Charges

Emergency place of service medical services may be represented by emergency evaluation and management CPT codes and or revenue codes.  If a patient is treated, stabilized and discharged from the emergency room to home, typically physician fees, diagnosis imaging fees and other care such as local anesthesia may be applicable.  If a patient is admitted from an emergency room to a hospital, inpatient Diagnosis Related Groupings (DRG) codes will likely be relevant for the facility fee and supplies in evaluating the usual customary and reasonable charges as well as professional fees for physicians.  If a patient is admitted from an emergency room to an ambulatory surgical center, facility fees and Ambulatory Procedure Codes (APCs) may be relevant.  Out of network charges may include drug charges or pharmaceutical charges as well, which have their own descriptive taxonomy using NDC codes, RxNorm, NCPDP, GPI for drug charges Standards.

A medical billing expert witness can be helpful to assist in deciphering the relevant coding and billing standards as well as usual customary and reasonable charges.

About Michael F. Arrigo

Michael F. Arrigo is an expert in medical coding and medical billing and out of network charges. He assists clients regarding medical policies of commercial health plans and regarding Medicare guidance in the form of local coverage determinations and national coverage determinations in medical billing and medical billing fraud cases. He works with clients regarding HIPAA Privacy and Security of protected health information and serves as a forensic expert witness regarding electronic health records.  He was recently interviewed by CBS KNX 1070 news radio regarding EMTALA and out-of-network emergency billing in California.

[i] Getting emergency care. “In an emergency, you should get care from the closest hospital that can help you. That hospital will treat you regardless of whether you have insurance. Your insurance company can’t charge you more for getting emergency room services at an out-of-network hospital.”

[ii] Nelson Hardiman – Healthcare Lawyers – Appeals Court Rules 

[iii] See Health Law Perspectives, June 2009

[iv] ERISA Employee Retirement Income Security Act of 1974 (ERISA) – Also called the Pension Reform Act, this act regulates the majority of private pension and welfare group benefit plans in the U.S. It sets forth requirements governing, among many areas, participation, crediting of service, vesting, communication and disclosure, funding, and fiduciary conduct. ERISA exempts most large self-funded plans from state regulation.

[v] See U.S. Department of Labor Advisory Opinion 1996-06A

[vi] Drummond v. McDonald Corp. (1985) :California Court

[vii] Id.

[viii] United Healthcare Policy Regarding Emergency and Urgent Care. 

[ix] Moses v. Providence Hosp. and Medical Centers, Inc., 561 F ….

[x] California AB-72.  See California State Assembly Bill No. 72 Chapter 492 

[xi] See California Legislation

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Medical Billing Expert Witness California

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