“We are going after a practice that has generated billions of dollars for hospitals, so this is high-level,” said Assemblyman David Chiu (D-San Francisco). “This certainly does not mean we're done.”

Chiu said he and his team would keep working on amendments to the bill that address the concerns of hospitals while maintaining protections for patients.

Hospitals focused their opposition on a provision of the bill that would have limited what they can charge insurers for out-of-network emergency services, criticizing it as an unnecessary form of rate setting.

“Balance billing,” better known as surprise billing, occurs when a patient receives care from a doctor or hospital — or another provider — outside of her insurance plan's network, and then the doctor or hospital bills the patient for the amount insurance didn't cover. These bills can soar into the tens of thousands of dollars.

In the absence of federal laws, many states have tried to formulate solutions to balance billing, but health policy experts suggest this issue would be best addressed by the federal government.

Congress is discussing different approaches but not without facing fierce opposition and lobbying from two influential groups: health insurers and providers, including doctors and hospitals.

Last week, the Senate Health, Education, Labor and Pensions Committee passed the Lower Health Care Costs Act, which would require insurers to pay providers no more than the median in-network rate in a geographic region for emergency and nonemergency care. But the American Hospital Association deemed the payment arrangement unworkable.

Getting buy-in from hospitals and other providers will not be easy.

“The system exists in a way that allows a subset of providers to stay out-of-network and charge very high rates,” said Christen Linke Young, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy. “They're basically exploiting the system.”

Chiu's bill would have prohibited out-of-network hospitals from sending surprise bills to privately insured emergency patients. Instead, hospitals would have to work directly with health plans on billing, leaving the patients responsible only for their in-network copayments, coinsurance and deductibles.

The bill also would have limited the amount hospitals could charge insurers for each service, and the amounts would have varied by region.

That's the part hospitals opposed.

“We've said from the beginning that we are supportive of protecting patients. Unfortunately, the proponents of the bill inserted a completely unrelated provision regarding rate setting,” said Jan Emerson-Shea, a spokeswoman for the California Hospital Association.

Emerson-Shea said that if the state sets prices, health plans would have little incentive to negotiate contracts with hospitals. If this provision were removed, the hospital association would support Chiu's bill, she said.

“That provision doesn't need to be in the bill if the bill is really about protecting patients,” she said.

Chiu disagrees. Protecting patients from high costs and capping what insurers pay hospitals are “inextricably related,” Chiu said.

If this provision were removed, patients might still face high costs in the form of rising insurance premiums as insurers try to recoup their costs, Chiu said.

“It is useless to protect patients from receiving a bill on the front end if hospitals can turn around and price gouge consumers on the back end. It's like closing your front door and leaving the back door wide open,” he said.

In California, a 2009 state Supreme Court ruling protects some patients against surprise billing for emergency care, and a state law that took effect in 2017 protects some who receive nonemergency care.

But millions remain vulnerable to surprise bills, largely because California's protections don't cover all insurance plans.

Chiu's bill was designed to close some of the loopholes. “It is disappointing it couldn't get done this year” because more Californians will get hit with exorbitant balance bills in the meantime, he said.

The measure was prompted by the peculiar billing practices at Zuckerberg San Francisco General Hospital, located in his district.

Unlike most large hospitals, San Francisco General does not contract with private insurers. An investigation by Vox found that the hospital considered patients with private insurance out-of-network for emergency care and was slapping many of them with whopping bills. The hospital has since announced it has stopped balance billing patients.

This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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