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The Big Lie: Out-of-Network Benefits

Updated: Nov 8, 2020

I recently happened upon a publication entitled, "In Network vs. Out of Network Care - Fair Health Know Your Source Publications." A topic that is often top of mind having worked in Rev Cycle and Health Insurance sales. Do you ever ponder how OON care is explained and pitched in print to employees during open enrollment meetings and just in general? Here is a typical narrative (compliments of BCBs of Michigan):

PPO plans

Here's an example of how in-network and out-of-network benefits compare in PPO plans.

  • In-network: You go to a doctor and the total charge is $250. You get a discount of $75 because you went to an in-network doctor and our negotiated rate with them is lower. We pay $140. You pay what’s left, which is $35.

  • Out-of-network: You go to a doctor and the total charge is $250. You won’t get a discount because the doctor is out-of-network. We still pay $140, but you’ll be responsible for what’s left, which is $110. We call this balance billing.

According to FAIRHealth, payments to Out-of-Network providers are calculated as follows:

"[When you go out-of-network], your insurer will base their share of the cost on the allowed amount for that service. This is the most money that they consider to be a fair and reasonable cost, based on what other providers in the area charge. It is not necessarily the same as your plan’s contracted rate."

Here is the Big Lie concerning OON payments to providers and why you, the consumer, should care. As a licensed health insurance broker, I have been privy to things like group loss ratio reports and more. I have witnessed a trend that is quite disconcerting to me, and it is impacting the care and delivery of needed medical care by millions of consumers on a daily basis.

The payments to OON providers can be as low as 1.4% of billed charges (compared to 27% of billed charges for in-network). This is a blatant misrepresentation of plan benefits as the carriers are passing the burden completely onto the patient/claimant/plan beneficiary. I have adjudicated claims on behalf of some the top specialties and witnessed payments as little as $500 for procedures like intricate spinal surgery and more. Using the BCBSMI example above, the estimated payment to the OON provider would likely hover around $10, leaving you the patient responsible for your higher OON deductible, co-insurance, and the difference between the allowed amount and the billed amount (as correctly highlighted in the FAIRHealth article above). How is this "fair and reasonable?" There isn't a UCR calculator in sight that would justify these dismal payments. Additionally, the provider in this example would likely have fought with the carrier for six months for payment.

Needless to say, this behavior can generate unwarranted out-of-pocket exposure for plan participants. Trust me, I hear from them often. The pointed finger is aimed squarely at the carriers. In other words, your plan, whether self-insured or fully-insured, is too often reimbursing OON practitioners at rates that are significantly below the contracted In-Network rate. It begs the question as to whether your policy really offers OON coverage at all. Just because the shiny brochure says so doesn't mean it is so. PPO policyholders should be aware. You might as well opt for the less expensive HMO policy.

Large self-insured employers should take notice. Your Third-Party Administrator is not always working to the benefit of the plan beneficiary. Your employees are being robbed of quality medical care and an audit may actually reveal self-dealing (see Hi-Lex vs. BCBS). The carriers are nicely walled off from transparency. So, while you may witness a drawdown of plan assets of say $20,000 to pay an OON provider charge of $50,000 - how do you know if that money made it to the provider? Here's a little secret. They may, in fact, pay that amount (leaving a paper trail), but are you ever put on notice when the carrier recoups that payment? Does that money make it back to the plan? Do you have any idea how commonplace this practice is?

Patients need to realize their rights under the “Patient Protection” portion of PPACA. Additionally, ERISA outlines several rights seldom considered by patients or providers that may bolster their efforts at obtaining fair payment, especially for the OON provider.

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