SIIA Legal Defense Update – Reference Based Pricing

SIIA Supports State Litigation Challenging Hospital Pricing Practices

July 8, 2021 – The Self-Insurance Institute of America, inc. (SIIA) today announced that it has filed an Amicus brief with the Colorado State Supreme Court in support of litigation seeking to overturn a ruling by the Colorado Court of Appeals. The ruling in French v. Centura Health Corporation concluded that healthcare providers do not have to be held to the same standards of reasonableness in pricing as parties in other consumer transactions, and specifically, that the term “all charges” in hospital service agreements unambiguously refers to the chargemaster rates.

The brief can be accessed here. This is the latest litigation action that is part of SIIA’s ongoing legal defense campaign to protect and promote the self-insurance/captive insurance marketplace.

Litigation Details

SIIA joined the Colorado appeal of a patient, Ms. French, who was sued by a hospital that had initially given her an estimate of $1,336.90 for a necessary back surgery, only to later bill her $303,709.48 because it had misread her insurance card and she had agreed to pay “all charges” billed by the hospital. Ms. French’s employer-provided self-insurance plan used reference-based pricing and paid $73,597.35, but the hospital sued Ms. French for the difference. The jury determined “all charges” meant only reasonable charges, and that the amount paid by Ms. French’s plan was essentially correct. However, the court of appeals reversed the trial court, creating a new rule of law that because health care is “complex,” “all charges,” means the chargemaster rate of $303,709.48, even though the agreement did not mention the chargemaster and the hospital kept it secret.

After successfully petitioning the Colorado Supreme Court to hear the case, SIIA joined Ms. French to seek reversal of the court of appeals opinion. In the opening briefs, Ms. French focused on the legal rationale why her agreement to pay “all charges” did not incorporate the chargemaster rate. SIIA addressed the lower court’s policy arguments and explained that the court of appeals rule would essentially eliminate reference-based pricing in Colorado, which is one of the best tools payers have to combat the leverage the chargemaster gives providers to set artificially high prices. Consumer groups also joined the case and filed their own brief to explain the impact on patients. Once fully briefed, the case, captioned French v. Centura Health Corporation, 20SC565, will be set for argument, with a decision likely to follow in 8-12 months.