Health Insurance: More Tricks of the Trade
By David Belk M.D.
I recently saw a patient who I thought needed a CT scan of his head. In the last section (see diagnostic tests
) I showed that head CTs go for $300-$350 if you’re an insurance company. This patient has insurance so it shouldn’t have been a problem. My receptionist called his insurance to get the proper authorization and I even spoke with them myself to make sure it went through; it did. The next day, the patient called my office to say that he couldn’t get the test because he couldn’t afford it. The radiology department wanted $500 up front and then said that they would bill him for the remaining $700. That’s $1,200! He has insurance, they approved the procedure, and still, he has to pay $1,200.
My receptionist called around to ask how much the private imaging companies would charge a patient without insurance for a head CT. She was quoted $690 by Nor-Cal imaging (a perfectly good imaging company that takes very good X-rays) but if the patient paid cash up front so they didn’t have to bill him, it was $414. This for a test that would cost him $1,200 if he used his insurance. What a deal! It’s not the first time I’ve heard a story like that and it’s getting more and more common.
Another patient of mine had routine blood work done before an appointment. I ordered a lipid panel, a metabolic panel, a blood count and a thyroid test. If you check the reimbursement rates given in the last section, this should have been about $75 worth of tests. A local lab even offers these same tests to cash patients for $95 without a doctor’s order (as you can see).
You can imagine how shocked she was (as was I) when she received the following bill:
As you can see from the top line of numbers, the lab billed her $782.44 or about ten times the expected payment (not unusual for a hospital lab). The discount is only $367.45 leaving her with a $414.69 bill for about $75 worth of labs. She’s currently trying to contest the bill because she thinks that it’s ridiculous (it is). In the meantime, the hospital where she had these blood tests is running out of patience and they want their money.
So what’s going on?
They have insurance. The bills are going through the insurance companies. Why do these tests cost them so much more than an insurance company would usually pay? Insurance companies don’t negotiate—at least not with groups as small as the lab at this hospital. They set a reimbursement rate, which is usually pretty close to what Medicare pays, and we (or the hospital) smiles and says “thank you.” After all, if we’re doing it for Medicare for $75, we’ll probably do it for United Health Care (or any other insurance company) for $80. Why would anyone say “no”?
Maybe United Health Care and Blue Shield are just being generous. But probably not—United Health Care is consistently one of my lowest payers. For example, they pay me $65 and Blue Shield (the insurance provider in the first example) pays me $73 for an office visit. For the same visit, Medicare pays me $79 (that’s right, most private insurers pay me less than Medicare). So why are they being so nice to hospitals?
I can think of at least two reasons an insurance company might price services so outrageously high on certain policies. First, that would punish anyone who buys inexpensive insurance with a high deductible (both of these patients did). Second, they keep you from finding out how much (little) medical service really cost. Patients with high deductibles pay for most of their own medical care. The insurance companies make sure that these patients see a much higher price than the “real” price that they could pay. Just as with generic prescription drugs, insurance companies, not providers determine the price of everything. They can hide their real costs, and punish you for not buying a more expensive plan.
And it doesn’t just change the way patients behave. If an occasional patient has a policy that pays at or near the maximum price charged by the hospital, the hospital is motivated to keep their outrageously high prices. This helps to keep medical care unaffordable to private payers. If these inflated reimbursement rates are only on policies that have very high deductibles, the insurance company will rarely get stuck with the bill. Even at these outrageous prices, most people with private insurance will never need more than $1,500 of medical care in a year. On occasion, someone with one of these policies will have a serious illness and the insurance will have to pay big, but the insurance companies more than make up for these loses with the increase in premiums they get by maintaining their smokescreen.
What this means is that insurance companies have enormous control over the medical industry. They set all rates of reimbursement for all medical services no matter how trivial. These rates vary greatly from policy to policy even for the same service from the same provider. You’ve seen many ways they can use this power to control (and profit from) the entire industry.
Where else do they use this control? Here are some more examples:
A healthcare provider—hospital, lab, physician, whoever—provides a medical service and informs the patient’s insurance company. If all goes well, the insurance company responds (agrees that we did actually provide that service). The response is called an “explanation of benefits (EOB).” The EOB explains what service we are paid for, how much we will be paid, who pays (the patient or the insurance) and what was denied or not allowed. Maybe there’ll also be a check, but not only will the amount be less what was billed (remember the amount billed is almost always inflated), it will usually be less than what the insurance allows.
Sometimes a fee is “not covered.” This might mean that the patient is on the hook for the entire amount (without even the discount). Sometimes a fee is “not allowed.” This might mean that provider won’t get anything and can’t even bill the patient. I can only assume that the first denial is to punish patients who ask for the wrong service and the second is to punish providers who offer the wrong service. Also, services that are not covered or not allowed vary not just for different insurance companies but for different policies from the same company.
Usually, though, the EOB is a complex explanation of the rules of the game we will have to play to get the money the insurance company has agreed we are owed. Here’s where we start to get into the strange language of insurance. If there is a “deductible,” that means the patient hasn’t had enough medical costs this year to start getting insurance, and I need to go the patient for the full amount (after the discount or “adjustment,” of course).
For example, if you have a $2000 deductible on your policy, the first $2000 of medical cost is on you each year. Some policies have exceptions on their deductibles in that they offer full coverage for physical exams and other preventive services even before the deductible is met. I should also explain here that the amount you pay for any medical service before you meet your deductible, in theory, should be the same as what the insurance company would pay for that service after you meet it (in other words, you get their discount for buying their policy).
If the EOB for this patient for this service for this insurance policy says they’ve already met their deductible, then we can get into copays and co-insurance: A copayment is a fixed amount (determined, of course by your policy) that you pay up front before you receive a service. This amount will often vary from service to service. For example, an office visit to your primary physician might have a ten dollar copay but a specialist might cost you fifteen dollars and an ER visit fifty dollars. These amounts are usually on your insurance card.
Co-insurance is usually a fixed percentage of what the insurance company determines that the service is worth. For example, if your co-insurance is 20% then, for a $75 office visit, you would owe fifteen dollars. You would be billed for your co-insurance by your provider after they bill the insurance because, only then does your provider know how much you owe.
Now, I think each insurance company gives me the same amount for the same service, but depending on the plan, I might need to do any number of different things, under any number of different terms, to cobble together that amount. And, by the way, the definitions of the words used on the EOBs aren’t even the same for all insurance policies. Each EOB gives its own glossary to explain its own terms.
This doesn’t just mean it’s very hard for me to get paid (it is). It’s very hard for me to know what I’m getting paid, and just as hard for the patient to know what he’s paying. And I control all of my own billing. Imagine how much an entire industry could hide in a system that’s so confusing. And imagine why they might want to.
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