By Holly Hayes Texas House Bill 2256 was signed into law on June 19, 2009 and is effective immediately. The bill provides a procedure for mediation of out-of-network health benefit claim disputes. The law now gives patients the option to mediate when they are “balance-billed” by their insurance company for services provided by out-of-network facility-based physicians like radiologists, pathologists, and neonatologists. Balance billing occurs when a physician bills a patient for the difference between what the physician charges for a service and what an insurer pays the physician for that service. When a physician is not in-network for an insurer, there is no contracted payment rate that the physician has agreed to accept from the insurer so the insurer can pay what is deemed appropriate and the patient is billed for the difference. The Problem Patients are not always informed when a facility-based physician is out-of-network. Even though services are provided at an in-network facility, patients may be responsible for out-of-network charges for facility-based physicians. For example, a mother gives birth in the hospital and the next day a neonatologist visits the baby before both are discharged home. If the neonatologist is not part of the hospital preferred provider plan, the mother will be billed for the balance of the amount not covered by insurance. It is unlikely the mother would even consider that the neonatologist visiting her baby – in the hospital – is not included in the hospital’s preferred provider plan.   Facility-based physicians may not be part of a hospital’s preferred provider plan for a variety of reasons. In testimony for the House Insurance Committee on House Bill 2256 on March 24, 2009, William Hinchey MD, Past President of the Texas Medical Association (TMA), outlined some of the possibilities. Some health plans refuse to acknowledge facility-based provider services as reimbursable services. Sometimes a health plan will sign an exclusive arrangement with a national provider that operates in a different city from the hospital. Reductions in fee schedules, absent negotiation with the facility-based physician, leave the physician with no recourse but to withdraw from the preferred provider plan.   The Solution   HB 2256 gives patients the option to mediate when they are balance-billed. The law allows enrolled members of a preferred provider plan – or a Texas employee health benefit plan that is not a Health Maintenance Organization (HMO) – to request mediation for an out-of-network claim settlement if two criteria are met. First, the enrolled was responsible for a payment greater than $1,000 to a facility-based physician after deductibles, co-payments and coinsurance. Second, the facility-based physician provided the service in a hospital that was contracted with the health plan administrator or in a preferred provider hospital.   The new law has implications for healthcare facilities. Healthcare facilities providing facility-based physician services that are out-of-network to a patient are required to notify the patient of the mandatory mediation procedure. Providers are also required to give patients a list of all facility-based physicians who have privileges at the facility and inform patients that these physicians could bill them for amounts not paid by their insurer.   HB 2256 has implications for insurance companies as well. The law requires the insurance commission to adopt rules for an insurer to submit documentation to the Texas Department of Insurance (TDI). Insurers must submit the methods used to compute out-of-network reimbursements and the effect these methods could have on the insured’s out-of-pocket costs.   If a patient requests mediation for an out-of-network claim settlement, a mediator agreed upon by all parties (or appointed by the chief administrative law judge by random assignment) would conduct the mediation. Each party would have an opportunity to state their position. The mediation would consider three issues. First, whether the amount charged by the facility-based physician was excessive. Second, whether the amount paid by the insurer for the service was the usual and customary rate (UCR) or unreasonably low. Third, whether the amount for which the enrolled is to be responsible is excessive. In conclusion, HB 2256 now gives patients the option to mediate when they are balance-billed by a facility-based physician. In addition, the bill requires healthcare providers to take steps to inform patients that they may be responsible for facility-based physician fees. Insurance companies will be required to provide information on how physician reimbursement is determined and any effects this may have on a patient. As a result of HB 2256, patients should now be better informed and will have the option of mediating if they are balance-billed. Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at: holly@karlbayer.com.  

  On June 19, 2009, Texas House Bill 1083 was signed into law.The new provision, effective immediately, prevents courts from ordering mediation in cases subject to the Federal Arbitration Act (excepting cases where the parties have agreed otherwise).The bill, which passed both the House and the Senate without amendment, applies to all actions commencing on or after June 19th. What does this mean for future Texas cases involving the FAA?Fewer reversals, for one.H.B. 1083 codifies In re Heritage Building Systems, Inc., 185 S.W.3d 539 (Tex. App.—Beaumont 2006, no pet.).Though the FAA applied to the claims in that case, the trial court ordered the parties to mediate, citing Texas’s policy in favor of settlement.The appellate court reversed, determining that mediation would result in additional time and expense, and thus frustrate the expectations of the parties and the federal mandate that a case be ordered “to proceed to arbitration in accordance with the terms of the agreement.”Id. at 542 (quoting 9 U.S.C. § 4).(Note that though this new law is only prospective – as it should be – because of In re Heritage, the same rule will apply to pending cases.)This law has the same effect as the holding in In re Heritage, but is applicable state-wide. But the new law will also (likely) result in more litigation.The language of H.B. 1083 is sweeping, covering any action subject to the FAA.Reality is more nuanced, however.Courts regularly deal with cases where some claims are subject to the FAA and others are not.See, e.g., United States v. Medica-Rents Co., 2006 WL 3635416 (N.D. Tex. 2006) (referring the remaining attorneys’ fees question to mediation).What is a court to do when the law requires that mediation be barred as to the entire action?Truth be told, it is unlikely that courts will adopt this wholesale – though literal – interpretation.Rather, one would expect that courts will interpret “action” to mean “claims” or “part of an action.”Such an interpretation would make the law consistent with both the FAA and Texas’s pro-mediation policies. Though the courts’ treatment of this law remains to be seen, we expect that courts will attempt to harmonize this state law – which, interestingly, codifies federal preemption principles – with the FAA and related state policies.  

On May 21, 2009 the Loree Reinsurance and Arbitration Law Forum and Disputing announced the formation of a LinkedIn Commercial and Industry Arbitration and Mediation Group. We are pleased to share with you that the group has since grown to 154 members. Discussions have been lively, the group is internationally and professionally diverse, and group members have access to several ADR blogs, as well as articles posted by other group members. It is an excellent networking and learning opportunity for anyone interested in commercial and industry ADR. We welcome new members. Persons who should consider joining this group include arbitrators; mediators; in-house and outside counsel; law professors; dispute-resolution consultants; members of ADR organizations; business entity representatives and principals whose day-to-day responsibilities include dispute resolution; and law students and other students of commercial and industry ADR. If you are already a member of LinkedIn, please click here to apply for membership in the Group. If you are not a LinkedIn member, click here, and you will be guided through the process of creating a LindedIn profile. Joining LinkedIn is free, as is joining the group. We hope you’ll join us and participate in the interesting discussions! Technorati Tags: arbitration, ADR, law, Linkedin,

[Ed. note: This case is a bit old, but an important one. It somehow got lost in the pile of papers sitting on my desk. Thanks to San Antonio arbitrator and mediator Don Philbin for bringing this case to our attention back in April. ] The United States District Court for the Northern District of Texas held that an arbitration clause in Blockbuster’s Online User Agreement is illusory, thus, unenforceable and denied Blockbuster’s motion to compel arbitration in a class-action privacy suit. In Harris v. Blockbuster, Inc., No. 3:09-cv-217-M (N.D. Tex. Apr. 15, 2009), Harris is a customer of Blockbuster’s Online movie rental service. Blockbuster’s “Terms and Conditions” provision in the User Agreement includes an arbitration clause that states that “[a]ll claims, disputes or controversies . . . will be referred to and determined by binding arbitration.” The agreement also purports to waive the right to commence a class-action suit. In order to join the movie rental service, customers were required to click on a box certifying that they had read and agreed to Blockbuster’s Terms and Conditions. The User Agreement also includes the following clause: Blockbuster may at any time, and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting. You agree to review these Terms and Conditions of Use periodically and your continued use of this Site following such modifications will indicate your acceptance of these modified Terms and Conditions of Use. If you do not agree to any modification of these Terms and Conditions of Use, you must immediately stop using this Site. On the other hand, Blockbuster has an agreement with Facebook, in which Facebook displays Blockbuster’s customers movie rental choices in the customers’ Facebook profile and then broadcasts the rental choice to the customers’ Facebook “friends.” Harris filed a class-action lawsuit claiming that the release of the movie rental records by Blockbuster violates the Video Privacy Protection Act, which prohibits a videotape service from providing personal identifiable information without the customer’s consent. The Act provides for liquidated damages of $2,500 for each violation. Blockbuster filed a motion to compel arbitration. Addressing the plaintiffs allegations that the arbitration provision is unenforceable because it is illusory (not supported by consideration), the court highlighted the legal standard articulated by the Fifth Circuit in Morrison v. Amway Corp. 517 F.3d 248 (5th Cir. 2008); The Morrison court held that the provision was illusory because “[t]here is no express exemption of the arbitration provisions from Amway’s ability to unilaterally modify all rules, and the only express limitation on that unilateral right is published notice. While it is inferable that an amendment thus unilaterally made by Amway to the arbitration provision would not become effective until published, there is nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication. After discussing Morrison at length, the court held that Blockbuster’s arbitration agreement is illusory because Blockbuster has sole discretion to unilaterally amend the arbitration provision and the arbitration agreement contains no clause limiting the application of the amendment to disputes occurring after the date of the amendment. Finally, because the court concluded that the arbitration provision is illusory, the court did not discuss the issue of unconscionability. Accordingly, the court denied Blockbuster’s motion to compel arbitration. Technorati Tags: arbitration, ADR, law, Harris v. Blockbuster