out-of-network

By ANNA WILDE MATHEWS

Wall Street Journal

Patients beware: Your out-of-pocket expense for healthcare may increase. Learn about what many large insurers are doing when it comes to paying for doctors and hospitals that are not in a plans network. It could prove to be very costly to the average consumer. All the more need to obtain and advocate who can help negotiate your medical bills

Consumers know they will have to pay out of their pockets if they use medical providers outside their insurers’ networks. But because of a little-noticed change, they may find themselves with even bigger bills than they expect.

Several major insurers are now using rates based on Medicare fees to calculate payments for out-of-network providers. Those amounts are often a lot lower than what doctors and hospitals actually charge.

The upshot: Providers may bill patients for the difference. What’s more, that bill comes on top of whatever patients owe in deductibles or co-payments.

New York entertainment attorney Mark D. Sendroff says he knew he’d get a bill when he went to an out-of-network surgeon for a shoulder operation last summer. But he was shocked when his AetnaHealthinsurance plan paid only around $1,000 of the surgeon’s approximately $30,000 charge — and part of the payment was his deductible. “It was absolutely crazy,” he says.

Mr. Sendroff thought the plan was going to pay his doctor based on a “usual and customary” rate that’s supposed to represent a typical charge for his area. Instead, the insurer pegged the doctor’s reimbursement to 110% of the fee paid by Medicare. Mr. Sendroff appealed the decision, and after he contacted the New York attorney general’s office, Aetna agreed to pay more, he says.

Aetna says some of its plans began basing out-of-network payments on Medicare rates in late 2009, and typically they pay a percentage above the government program’s fees. In New York, the company says it warned insurance brokers the new system might generate bigger out-of-pockets, and mentioned the issue in a summary for potential customers. Aetna declined to comment on Mr. Sendroff’s case, citing privacy rules, but said $30,000 was “well above the average charge” for such surgeries.

Health Care Service, the nonprofit parent of Blue Cross and Blue Shield plans in Illinois and Texas among other states, began phasing in Medicare-based fees last year. Cigna says employers are increasingly opting for plans that pay a set percentage above Medicare.

Insurers say Medicare is a reasonable basis for reimbursement. An Aetna spokeswoman says the Medicare based payments are a “more consistent way of paying and keeping the premium down.” Health Care Service says the Medicare method helps “increase transparency for providers and members.”

For patients, the safest financial path is to use insurers’ networks. When this isn’t possible, they need to do their homework before getting treatment by talking to their providers and insurers. It’s best to get billing codes for each service and run them past the health plan, says Ida Schnipper of Health Champion, a patient-advocacy firm.

Patients also should watch for unexpected out-of-network providers. For instance, an in-network hospital might have out-of-network anesthesiologists. If they do get stuck with a charge they didn’t see coming, they can appeal to the insurer and also try turning to a state regulator for help. Providers also sometimes negotiate discounts with patients.

Starting in August, consumers can turn to a new usual-and-customary medical charge database operated by Fair Health, which will be available at fairhealthconsumer.org. Currently, the site only has dental fees. The nonprofit says it expects a growing number of insurers to use its data.

Another in the continuing series of reports about routine underpayment of health care for out of network coverage by the insurance industry. Consumers need an Advocate to help reduce health care bills.

By David S. Hilzenrath
Washington Post Staff Writer
Wednesday, June 24, 2009

Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released today by the staff of the Senate Commerce Committee.

The report is part of multi-pronged assault today on the trustworthiness of private insurers by Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.). It comes at a time when the insurance industry is battling efforts to offer consumers a public alternative to private health plans.

At a hearing this afternoon, Rockefeller’s panel is slated to air allegations by a former industry insider that insurers have put profits before people’s health.

The report released this morning alleges that insurers have systematically underpaid for so-called out-of-network care. The issue has been brought to light in past litigation and investigations, including a probe by New York Attorney General Andrew Cuomo.

Cuomo described it last year as “a scheme by health insurers to defraud consumers by manipulating reimbursement rates.” A dozen insurers have reached settlements with Cuomo agreeing to change their practices.

Many Americans pay higher premiums for the freedom to go outside an insurer’s network of doctors and hospitals. When they do, insurers typically pay a percentage of what they call the “usual and customary” rates for the services. How insurers determined the usual rates had long been opaque to consumers and difficult if not impossible for them to challenge.

As it turns out, insurers typically used numbers from Ingenix Inc., which was a wholly owned subsidiary of the big insurer UnitedHealth Group. As such, Ingenix had an incentive to produce benchmarks that low-balled usual and customary rates and shifted costs from insurers to their customers, the report said.

Making matters worse, Ingenix got all of its data from the same insurers that bought its benchmark information, the report said. Insurers that contributed data to Ingenix often “scrubbed” their data to remove high charges, and Ingenix further manipulated the numbers, removing valid high charges from its calculations, the report said.

Cuomo found that insurers systematically under-reimbursed New York consumers by up to 28 percent, the report said. Earlier this month, New York’s Department of Insurance issued a regulation prohibiting insurance companies in New York from obtaining data on usual and customary charges from anyone with a conflict of interest.

In March testimony to Rockefeller’s committee, UnitedHealth Group’s chief executive expressed regret that there was a conflict of interest inherent in his company’s relationship with Ingenix, the report said.

But chief executive Stephen J. Hemsley also said UnitedHealth stands by “the integrity of the Ingenix data” and the way UnitedHealth “used the data to make reimbursement decisions.” He said the company worked with Cuomo to transfer its databases to an independent, nonprofit entity.

Ingenix bought one of its original databases in 1998 from the Health Insurance Association of America, a precursor to the industry’s main trade association and lobbying group.

Out-of-Network Rates

Senate Report Finds Insurers Wrongfully Charged Consumers Billions